By Steven Barge-Siever, Esq., Vice President Property and Casualty, WGIS

In California, extortion is defined as “1) obtaining property or other consideration from another…induced by a 2) wrongful use of force or fear, or 3) under color of official right.” In many cases, Private Attorneys General Act (PAGA) litigation has fallen nothing short of extortion in which attorneys are paid handsomely by using the fear of protracted litigation in furtherance of PAGA. With the three legs of the extortion stool supporting PAGA, there is little recourse for companies.

Western Growers Insurance Services (WGIS) has assembled a few ounces of prevention to take a pound of power away from PAGA attorneys.

As noted in Western Growers Senior Vice President and General Counsel Jason Resnick’s column last month—properly titled “Shakedown Lawsuits: It’s Not a Matter If Your Company Will Be Sued”—PAGA attorneys continue to rely heavily on 1) forcing a choice between litigating to the bitter end (attorneys may think twice next time) or 2) settling after analyzing the uncertain costs and benefits of litigation. While prevailing over a frivolous lawsuit is certainly appealing, the associated costs may result in a bittersweet victory. By reverse-engineering PAGA’s financial incentives, WGIS provides a straightforward risk management framework to remove money and fear from the equation, effectively removing leverage from PAGA attorneys.

Prevention

The first phase is forward-looking prevention. PAGA claims are almost always tied to discrepancies in wage and hour reporting/recording, which can be improved using mobile time-keeping applications. The Connected Worker technology platform is a predictive analytical tool that prevents worker injury. Connected Worker’s mobile functionality lends itself to real-time syncing, including clocking in and out, mandatory breaks in the field, etc.

This information is cloud-based for simplified monitoring and retrieval, and it can be reviewed at any moment across the company. By creating accurate wage and hour documentation, a firm reduces loss for nearly all PAGA claims. Additionally, the digitized data will efficiently reduce billable hours as your attorney will not have to comb through years of paper records.

Indemnifying Defense Costs

While preventative risk management streamlines internal due diligence and reduces costs, it does not stop attorneys from filing baseless lawsuits. WGIS’ proprietary PAGA litigation coverage rounds out a PAGA risk management strategy for WG members. Depending on company size and risk appetite, WGIS recommends PAGA coverage in one of the following forms:

1.  Less Than 400 Employees – Employment Practices Liability Inclusive of PAGA Defense Costs

     WGIS can secure $100,000 of coverage within Employment Practices Liability (or EPL) limits. This limit may be sufficient given the lower costs of discovery in conjunction with Connected Worker efficiencies. It also leaves no money on the table for plaintiff attorneys to capture.

2.  Over 400 Employees – Standalone Wage & Hour including PAGA Claims

     If you are a larger company, Bermuda insurers (through Lloyds of London) offer limits of $5,000,000 or more for WG members.

Through Connected Worker, and its related functionalities, the risk of loss severity and costs are proactively reduced. Therefore, the PAGA attorney has lost the leverage that accompanies litigation costs and delays.

When a claim gets to discovery, insurance documentation will be requested, and PAGA attorneys may be disappointed to uncover the insurance recoveries are limited to defense cost and cannot be appropriated. They will also understand you have $100,000 (or more) to play with and will not settle effortlessly.

In short, this risk management structure reverses the power structure PAGA attorneys have become so fond of. Instead of you conducting a cost-benefit analysis, the plaintiff attorney must choose whether to fight to the bitter end with a lower chance of prevailing and a higher chance of you fighting back without spending your own capital.

While PAGA repeal is being pursued and remains the best long-term solution to stop extortionary claims, it will take time and its outcome is uncertain. Let WGIS help you proactively battle PAGA extortion! For more information, feel free to reach out to me directly at [email protected] or (734) 945-0928.