Ep. 577 PAGA Lawsuits: The Employment Risk Catching California Businesses Off Guard

In this episode, Rancho Mesa's Alyssa Burley and Account Executive Kevin Howard talk about PAGA claims and their risk to California businesses.

Show Notes: Subscribe to Rancho Mesa's Newsletter⁠⁠⁠

Director/Host: ⁠⁠⁠⁠Alyssa Burley⁠⁠⁠⁠

Guest: ⁠⁠⁠⁠Kevin Howard⁠⁠⁠⁠

Producer/Editor: ⁠⁠⁠Jadyn Brandt

Music: "Home" by JHS Pedals, “Breaking News Intro” by nem0production

© Copyright 2025. Rancho Mesa Insurance Services, Inc. All rights reserved.

Transcript

Alyssa Burley: You're listening to Rancho Mesa StudioOne podcast, where each week we break down complex insurance and safety topics to help your business thrive. I'm your host, Alyssa Burley, and I'm joined by Kevin Howard, partner with Rancho Mesa. He specializes in providing insurance and risk management solutions to artisan contractors. And today, we're going to be talking about PAGA lawsuits. Kevin, welcome to the show.

Kevin Howard: Thank you so much for having me. Looking forward to this one. It's important.

AB: Of course. Now, you recently wrote an article about PAGA claims being a risk that is catching California business owners off guard. Will you explain PAGA lawsuits and why they have become such a major source of litigation in recent years?

KH: Absolutely. PAGA stands for the Private Attorney General Act. It's an act where the employee can act on behalf of the state and basically sue their employer for wage and hour loss. So we're talking about lunch breaks or incorrectly, you know, looking at overtime, payroll issues. The increase in the frequency, so the amount of lawsuits per year went from a handful in 2004 to 9,000 in 2024 and 10,000, and this is just California in 2025.

I've personally been involved in two of these PAGA lawsuits with clients. They're stressful, heartbreaking, and it's a big deal. It'd be the biggest thing that would be going on in your company for that entire year. And we're not even talking about the soft cost of, you know, the main decision makers and the owners out there listening having to stop everything and deal with this major lawsuit.

You know, I will say that one of the PAGA lawsuits I went through was it was heartbreaking. My client as a business owner who's been employing, you know, all of the young talent out of high school to jump into the field. And they've, you know, worked there for years. And then all of a sudden this lawsuit comes in where everybody under the sun for the last couple of years is part of this class action lawsuit. And it emotionally was really damaging and very costly.

AB: Yeah. So what does the worst case scenario look like for an employer who's facing a PAGA claim?

KH: Well, it's a nightmare. Let's just start there. I mean, it's like I opened with the worst case scenario would be if a single employee gets an attorney and that attorney has the ability to create a class action lawsuit that could bring in former employees, current employees, and then the testing begins. They're going in and looking at time cards. And if you're not prepared, if you're not ready to rock and roll, it could, again, could become a major nightmare and very costly.

AB: So it could just be an honest mistake where you've made a mistake with payroll or time cards or something like that. And now all of your records are being reviewed. And you could really get in trouble for every single instance where a mistake was made. Is that correct?

KH: Yeah. I'm not a payroll expert. As a matter of fact, we have Coastal Payroll coming in on February 20th. And anybody listening, you know, it's a really good chance to come in and really learn from the pros, but there are so many mistakes that are probably made even by companies that pay attention to this every day. I mean, on one side of the continuum, you have the classic, “hey guys, write in when you are going to lunch, check in, check out,” handwritten when you clocked, you know, like, it gets pretty loose, especially in some of the trades where, you know, it's not like, “hey, let me take off my gloves and go clock out.”

You know, there's a lot going on. There's travel involved. And if you're not paying attention to the tee of how it should be done, you're probably exposed right now.

AB: Yeah.

KH: And sadly, if 100 companies were tested to see if they're in perfect compliance, who knows how many would pass.

AB: Yeah. So what steps should employers take to protect themselves from PAGA exposures, including utilizing their insurance advisor?

KH: Yeah, I think the obvious ones are working with your insurance advisor, at least having an EPLI policy in place that has a wage and hour limit, a sublimit. There's no EPLI policies right now are offering the full million for wage an hour. They're offering a sublimit for defense only. So to break that down, you can get $100, $200,000, maybe of counsel afforded to you after a deductible.

Step two, get prepared now if you're listening. Come to this Coastal Payroll February 20th PAGA workshop. They're going to be talking about exactly what you should do, how you can protect yourself, how you can go through and do an audit. Train your supervisors once you know how this is going down. Train everybody. Talk about it. Make it a big deal. Have a grand reopening of how you're conducting timekeeping and payroll. And I just think it should be a big priority.

AB: Yeah. So do an internal audit. Make sure that your policies and procedures are being followed. You don't want to be doing anything on purpose that’s wrong, right? But we all are people and we do make mistakes so just making sure that everything is up to code. And then, you know, come to the workshop and try to educate yourself on what those exposures are and do everything you can to prevent a claim. So, Kevin if listeners have questions about their PAGA risk, what's the best way to get in touch with you?

KH: Can I just take a timeout? I just want to give you major kudos if this makes the cut for the podcast. You have a cold. You sound great.

AB: Appreciate it.

KH: And you continue to rock this thing and, you know, really proud to be part of StudioOne. If you want to get a hold of me, LinkedIn, Find me on there. Or you can email me khoward@RanchoMesa.com.

AB: All right. Well, Kevin, thank you for joining me in StudioOne.

KH: Thank you.

KH: Thanks for tuning in to our latest episode produced by StudioOne. If you enjoyed what you heard, please share this episode and subscribe. For more insights like this, visit us at RanchoMesa.com and subscribe to our weekly newsletter.