Unionized employers in the construction industry can potentially receive some well-needed relief from California’s Labor Code Private Attorneys General Act of 2004 (Labor Code Section 2698 et seq.), known as “PAGA,” in light of the Governor signing AB 1654. Unionized employers in California must review their collective bargaining agreements and evaluate whether they can take advantage of AB 1654.

In light of recent decisions which have made it more difficult to bring class action lawsuits against employers for wage and hour issues, especially if the employer utilizes arbitration agreements, and the procedural hurdles in bringing and certifying a class action, plaintiff’s lawyers are turning to non-class representative PAGA claims at an increased rate. In California, small compliance issues can grow into significant liabilities for civil penalties under PAGA.

Why? PAGA provides for the imposition of potentially harsh civil penalties in the event of a statutory violation. If no civil penalty for a particular Labor Code violation is specifically provided, the statute establishes the following civil penalty:

“If, at the time of the alleged violation, the person employs one or more employees, the civil penalty is one hundred dollars ($100) for each aggrieved employee per pay period for the initial violation and two hundred dollars ($200) for each aggrieved employee per pay period for each subsequent violation.”

A PAGA claim is commonly referred to as a “representative” action and, unfortunately, case law provides a plaintiff need not meet the class action certification requirements before proceeding with a representative PAGA claim. Significantly, 75% of the civil penalties recovered is distributed to the State of California, while the remaining 25% goes to the “aggrieved” employees. An employee who prevails in a PAGA action is also entitled to an award of reasonable attorney’s fees and costs.

AB 1654 provides an exception to PAGA regarding employees in the construction industry. “Employee in the construction industry” is defined as “an employee performing work associated with construction, including work involving alteration, demolition, building, excavation, renovation, remodeling, maintenance, improvement, repair work, and any other work as described by Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code, and other similar or related occupations or trades.”

In order to qualify for the construction industry exception to PAGA, employees must be subject to a valid collective bargaining agreement that expressly provides: (1) for the wages, hours of work, and working conditions of employees; (2) for premium wage rates for all overtime hours worked; and (3) for the employee to receive a regular hourly rate of not less than 30 percent more than the state minimum wage.

In addition, the collective bargaining agreement must do all of the following: (1) prohibits all of the violations of the Labor Code that would be redressable by PAGA, and provides for a grievance and binding arbitration procedure to redress those violations; (2) expressly waives the requirements of PAGA in clear and unambiguous terms; and (3) authorizes the arbitrator to award any and all remedies otherwise available under the Labor Code, provided that nothing in the new law authorizes the award of penalties under PAGA that would be payable to the Labor and Workforce Development Agency.

It is important unionized employers in California take advantage of this new law to see if it is appropriate or possible to negotiate language into their union contracts which could meet the new law’s exception requirements.