“On my desk in the Oval Office, I have a little sign that says: There is no limit to what a man can do or where he can go if he doesn’t mind who gets the credit.” – President Ronald Reagan.

Even though I hold Ronald Reagan in the greatest esteem, I am going to violate that admonition a little bit for what I think is a good purpose. Not so much to give credit, although it’s important to recognize a small band of warriors whose boldness yielded great results, but more critically to illuminate a strategic trail that has been cut through the nasty impenetrable thicket that is the California Legislature.

This is an abbreviated review of the reforms to California’s notorious Private Attorneys General Act (PAGA).

Enacted in 2004, PAGA was intended to be a more effective way to help employees resolve workplace disputes. Instead – predictably given the way the law was crafted – trial lawyers seized on this new weapon to shake down California businesses to the tune of $8 billion over the past decade. Agricultural employers were hit with at least 180 cases during this time span at an average of $875,000 per settlement.

For every legislative session in Sacramento since about 2010, business groups made the case to legislators that PAGA was being abused by trial lawyers, undercutting the intent of the Legislature to ensure that the law primarily benefit truly harmed employees. And every session, one or two very modest little bills to reform PAGA around the edges were introduced and promptly shot down in committee hearings. It became sort of a “Groundhog Day” thing in the Capitol.

Meanwhile, with every passing year, the number of abusive PAGA claims increased as more trial lawyers moved in. Settlement amounts soared as trial lawyers realized that the web of trip wires that is the California Labor Code makes it nearly impossible for an employer to take these kinds of cases to trial.

Frustration in the business community boiled over as it seemed nothing could motivate the majority in the Legislature to restrain PAGA abuses.

And yet, today, we celebrate the enactment of legislation reforming PAGA in ways we only dreamed of before.

What changed? How did two legislative bills that never would have passed a single committee hearing before this year advance in 2024 all the way to Gov. Gavin Newsom’s desk without a single vote in opposition?

It all started with a bunch of determined new car dealers who refused to accept escalating shakedown lawsuits as “the price of doing business” in California.

With the counsel of their leader, Brian Maas, President of the California New Car Dealers Association (CNCDA), the group began in 2018 (yes, six years ago!) on a different strategy: to qualify a ballot initiative to repeal and replace PAGA. The risks of going forward were high. Obtaining sufficient valid signatures from voters to qualify a ballot measure is a multimillion-dollar endeavor, not to mention the far greater financial cost required to win the subsequent campaign. (Think about the ubiquitous TV ads and mail pieces flooding your home during election season.)

Maas knew that only the threat of a ballot initiative to repeal PAGA would motivate the Legislature to take PAGA reform seriously. Setting out on this journey – and by design committing his members to dig deeper into their wallets than ever before – was anything but simple.

A relatively new law, however, meant that qualifying a ballot measure would not inevitably force Maas’s group to mount a fully funded campaign to pass it.

From the inception of the ballot initiative in 1911, once proponents of a ballot initiative submit signatures, the process advances no matter what: Either there are sufficient valid voter signatures, in which case the measure is placed on the ballot, or there aren’t, in which case it dies. But in 2014, the Legislature passed a new law allowing an initiative’s proponent to withdraw a qualified ballot measure even after voter signatures have been submitted, as long as at least 131 days remain before the election.

This reform was intended to give interest groups that turn to the initiative process and the Legislature a chance to compromise before requiring voters to decide the matter. The law has been used 11 times to produce compromise legislation that satisfied initiative backers to withdraw their qualified ballot measures.

That’s ultimately how we won the major PAGA reforms of 2024. And the “we” part of this is really important.

As Maas moved forward, he found three key business association partners to join forces with the car dealers:
Western Growers, the California Chamber of Commerce and the California Restaurant Association. Together, these four organizations, through their members and their own association resources, cobbled together the $9.5 million needed to qualify the PAGA repeal-and-replace initiative.

From there, it was game on as interests on the left – notably labor unions – sought a workable compromise that would avoid a costly fall ballot measure fight.

With additional partners coming on board for a possible legislative compromise, the business coalition went back to their wells, raising more than $3 million for a public affairs program to make PAGA reform a high priority for the Legislature.

With June 27, 2024 – the deadline to withdraw our qualified PAGA initiative from the November ballot rapidly approaching – negotiations between our coalition and labor groups quickly heated up in the early part of the month. After a final weekend of high stakes negotiations, an agreement was announced on June 18 by Gov. Newsom and legislative leaders. Later that week, legislation was introduced, and on July 1, the Governor signed PAGA reform into law.

Credit where credit is due: This would not have happened without Gov. Newsom and his staff. After negotiating a deal between labor unions and elements of the restaurant industry that motivated the latter to withdraw their minimum wage referendum from the November 2024 ballot, Gov. Newsom moved PAGA reform to the top of his list. He and his staff operated in good faith. They organized the legislative partners and brought business and labor unions to the table, ultimately driving a workable solution over the goal line.

While we did not get everything we asked for – no side ever does in a compromise – the reform package addresses the major problems with PAGA and will reduce the number and severity of lawsuits against our member companies and businesses across the state.

More importantly, this unified, sustained and well-funded campaign demonstrates what is still possible in California. Thanks to the direct democracy reforms of 1911, and the 2014 reforms to them, we are not necessarily consigned on all things to the dictates of the Legislature’s supermajority. Be assured that the merry band behind the risky and expensive strategy that resulted in PAGA reform will not disband. Indeed, we are actively looking for our next adventure.