California's Shakedown Law

The Private Attorneys General Act (PAGA)

In the Golden State, where dreams are big and regulations even bigger, one law stands out as a nightmare for small business owners and tech giants alike: the Private Attorneys General Act (PAGA). Enacted in 2004 to empower workers to sue over labor violations, PAGA has morphed into a litigation machine that lines the pockets of trial lawyers and the state treasury while squeezing family-owned restaurants, hotels, shift-based businesses, and tech companies dry. The result; sky-high settlements, forced closures, job losses, and those inflated menu prices—or software subscriptions—you pay every day. As we enter 2026, even after supposed "reforms," PAGA remains a predatory force, proving once again why California leads the nation in business exodus and consumer costs.

The Birth of a Beast: PAGA's Origins and Twisted Evolution

PAGA was sold as a fix for underfunded state labor enforcement. It lets "aggrieved employees" sue employers for Labor Code violations like missed breaks or inaccurate pay stubs, acting as "private attorneys general." Penalties stack up fast—$100 per employee per pay period for initial violations, doubling for repeats—and 75% goes to the state, with just 25% to workers (bumped to 35% in 2024 reforms). But in practice, it's become a gold rush for plaintiff attorneys who rake in fees often exceeding what employees recover.

Filings have skyrocketed: From a handful in the early years to over 10,000 notices in 2025, the highest on record, with no signs of slowing into 2026. The table below illustrates this dramatic growth in PAGA notices filed with the Labor and Workforce Development Agency (LWDA), highlighting key spikes tied to court rulings and economic factors.

Year	PAGA Notices Filed	Key Notes
2006	11	Early adoption.
2013	1,606	Pre-Iskanian baseline.
2014	4,530	182% jump post-Iskanian (PAGA not arbitrable).
2018	5,732	Rise after Epic Systems (upheld arbitration).
2021	6,502	Peak during pandemic.
2022	5,817	Dip post-Viking River (limited representative claims).
2023	7,780	Record high at the time, rebound after Adolph (restored representative claims).
2024	9,464	22% increase despite impending reforms.
2025	10,126	All-time high, post-reform surge.

Critics, including business groups, call it "rife with abuse," fueling frivolous suits over technicalities rather than real harm.

Where the Money Goes: Pennies for Workers, Jackpots for Lawyers and the State

Average settlements hit around $1.1 million to $1.375 million, but workers get peanuts—around $1,000 to $1,300 each—while lawyers pocket $368,000 to $464,000 on average. The state? It hauled in over $88 million in one fiscal year alone, with total PAGA settlements exceeding $10 billion since 2013. The table below breaks down a typical settlement distribution, showing how little trickles down to employees.

Component	Average Amount	% of Settlement (Approx.)
Total Settlement	$1.375M	100%
Attorneys' Fees	$464K	34%
Named Plaintiff	$9K	<1%
Aggrieved Employees (per person)	$1K	<1% (shared)
State (LWDA)	~$750K (75% of penalties)	55% (penalties portion)

This lopsided split underscores PAGA's critics: It's a shakedown where the house (lawyers and state) always wins.

Predatory Practices: How Lawyers Hunt for Claims

Plaintiff firms don't wait for complaints—they solicit them. Ads on Google, social media, and billboards urge workers to report "violations," turning minor oversights into mega-lawsuits. This "ambulance chasing" has been slammed by employer advocates as lawyer-driven profiteering. In hospitality and tech, where shifts are unpredictable, staff turnover is high, and employees are often self-driven workaholics, these tactics thrive. A single disgruntled employee can contact a PAGA-specializing firm, and before you know it, a multi-million dollar suit is filed—even for technicalities like electronic timekeeping glitches.

Ground Zero: Family-Owned Restaurants and Hotels Under Siege

No industry bears the brunt like hospitality. Restaurants and hotels top PAGA targets due to hourly workers, variable hours, and common allegations like unpaid overtime or missed meals. Family-run spots, lacking big legal teams, are especially vulnerable. Take Naples Restaurant Group: A PAGA settlement covered claims for wage violations, with the bulk going to fees and the state. Or Eureka Restaurant Group, hit with a PAGA suit over similar issues.

Wingstop operator Far West Restaurant Group shelled out $667,000 tied to labor claims. Headlines blared that Burger King was forced to pay $1.9 million in citations, when in reality it was a small franchisee. These aren't mega-chains; they're often mom-and-pop operations where owners work alongside staff.

Tech Titans in the Crosshairs: From Startups to Giants

Tech companies of all sizes are also hard hit, particularly in Silicon Valley where employees are often self-driven workaholics pushing long hours voluntarily. But if one becomes disgruntled, it's easy to contact a PAGA law firm, leading to multi-million dollar suits over issues like misclassification or timekeeping errors. Most major Silicon Valley firms have faced such wage lawsuits, contributing to the exodus.

Examples abound: One tech company settled a PAGA case for $15.5 million in 2025. These suits, combined with strict labor laws, high costs, and regulations, are driving vital businesses out of California: Oracle's $200 billion exit, Tesla slashing 4,000 jobs. PAGA's fear factor disadvantages compliant companies, fueling the headquarters relocations that hollow out California's tech ecosystem.

The Hidden Tax: How PAGA Fuels Sky-High Prices

PAGA doesn't just hurt businesses—it hits your wallet. Settlements, penalties, and defense costs add up, forcing owners to raise prices or cut jobs. "The financial implications are significant," notes one analysis, including hefty attorney fees and administrative burdens. For a small restaurant, a $1 million hit means hiking burger prices by $2 or trimming portions. For tech, it means higher service fees or slower innovation. Multiply across thousands of suits, and it's a statewide inflation driver.

Reforms: Lip Service or Real Relief?

2024 amendments promised change: Narrower standing, penalty caps (15-30% for compliant employers), and cure periods. A 2025 report hailed "promising results," with faster resolutions and more worker cash. But PAGA isn't slowing: Filings rose to record levels in 2025, and 2026 warnings urge "reasonable steps" to cap exposure. For family businesses and tech startups, it's still a minefield—reforms reward big firms with HR teams, leaving small ones exposed.

The Verdict: Time to Scrap PAGA

PAGA exemplifies California's regulatory overreach: A law meant to protect workers now destroys jobs and dreams. Family restaurants close, tech innovators flee, hotels hike rates, and shift workers suffer indirect hits. It's no wonder Maine vetoed a similar bill after eyeing California's mess. Until full repeal, expect more "For Sale" signs, empty offices, and pricier everything. California businesses—and consumers—deserve better.

With the California political race for Governor heating up, only one candidate has identified PAGA as being in need of repeal or reform - Steve Hilton.

Sources:

History and Enactment of PAGA

1. Private Attorneys General Act - Wikipedia Published: Ongoing Link: https://en.wikipedia.org/wiki/Private_Attorneys_General_Act Covers PAGA's enactment via SB 796 in 2003, sponsors, and legislative intent.

2. PAGA: A decade of victories - Advocate Magazine Published: September 2014 Link: https://www.advocatemagazine.com/article/2014-september-2/paga-a-decade-of-victories Discusses the 10-year anniversary, origins, and role in employee rights.

3. California Employee Civil Action Law and PAGA Repeal Initiative (2024) - Ballotpedia Published: Ongoing Link: https://ballotpedia.org/California_Employee_Civil_Action_Law_and_PAGA_Repeal_Initiative_(2024) Details enactment history, including SB 796 introduction and passage.

4. California's two-decade battle over PAGA labor law still rages - CalMatters Published: May 17, 2023 Link: https://calmatters.org/commentary/2023/05/labor-law-paga-still-rages Explores the unique law's origins and ongoing controversies.

Filings and Statistics by Year

5. The Data Is In—California Class Action and PAGA Filings to Hit New Highs - Ogletree Published: January 12, 2024 Link: https://ogletree.com/insights-resources/blog-posts/the-data-is-in-california-class-action-and-paga-filings-to-hit-new-highs Provides 2023 data showing record filings and trends.

6. PAGA Lawsuit Data - CABIA Published: Ongoing Link: https://cabia.org/research-data/paga-summary Tracker for claims filed by year and law firms.

7. DMCAR Trend #9 – California Remains Ground Zero For Representative Litigation Under The PAGA – Class Action Defense - Duane Morris Blogs Published: January 24, 2025 Link: https://blogs.duanemorris.com/classactiondefense/2025/01/24/dmcar-trend-9-california-remains-ground-zero-for-representative-litigation-under-the-paga 2024 data from DIR showing over 9,464 notices.

8. PAGA Is Not Slowing Down: What “Reasonable Steps” Must Look Like for California Employers Heading Into 2026 Published: January 2, 2026 Link: https://www.californiaemploymentlawreport.com/2026/01/paga-is-not-slowing-down-what-reasonable-steps-must-look-like-for-california-employers-heading-into-2026 Notes 2025 as record year with 10,126 notices.

9. Trend #6 – PAGA Filings Reached An All-Time High – Class Action Defense Published: January 22, 2024 Link: https://blogs.duanemorris.com/classactiondefense/2024/01/22/trend-6-paga-filings-reached-an-all-time-high Highlights 2023 as all-time high for PAGA claims.

Settlement Data and Distributions

10. Private Attorneys General Act (PAGA) Frequently Asked Questions | LWDA Published: Ongoing Link: https://www.labor.ca.gov/resources/paga/paga-faqs Explains penalty splits: 75% to state, 25% to employees.

11. PAGA Has Failed Californians - Unless You're A Plaintiff's Lawyer That is Published: April 8, 2021 Link: https://calemploymentlawupdate.proskauer.com/2021/04/paga-has-failed-californians-unless-youre-a-plaintiffs-lawyer-that-is Average costs, awards, and attorney fees data.

12. A New Day in the Life of a PAGA Action: What Do PAGA Settlements Look Like? What Will We Find When Analyzing the Information Gathered From PAGA Filings? | Ankura Published: November 13, 2025 Link: https://ankura.com/insights/a-new-day-in-the-life-of-a-paga-action-what-do-paga-settlements-look-like-what-will-we-find-when-analyzing-the-information-gathered-from-paga-filings Database of settlements from 2019-present, average $1.375M total.

13. Private Attorneys General Act - Advocacy - California Chamber of Commerce Published: Ongoing Link: https://advocacy.calchamber.com/policy/issues/private-attorneys-general-act Compares worker recoveries: $1,264 in PAGA vs. $3,956 state-enforced.

Impacts on Hospitality (Restaurants and Hotels)

14. One Year Later: What California Operators Need to Know About PAGA Reform - Harri Published: June 27, 2025 Link: https://resources.harri.com/blog/one-year-later-what-california-operators-need-to-know-about-paga-reform Discusses penalty caps and hospitality-specific risks.

15. PAGA Reform and What It Means for CA Operators - Restaurant365 Published: Ongoing Link: https://www.restaurant365.com/blog/how-restaurant-operators-sustainably-protect-grow-their-businesses Explains reforms' leverage for restaurant operators.

16. CA Hospitality Series: The Hydra, PAGA is the Modern Day 9-Headed Monster for Restaurants | Fisher Phillips Published: August 13, 2024 Link: https://www.fisherphillips.com/en/news-insights/ca-hospitality-series-the-hydra-paga-is-the-modern-day-9-headed-monster-for-restaurants.html Analyzes PAGA's consequences on restaurants.

17. PAGA - California Restaurant Association Published: Ongoing Link: https://www.calrest.org/paga Details 2024 reforms and industry lobbying.

18. A Restaurant Operator's Guide to Understanding PAGA - ForteSG Published: Ongoing Link: https://fortesg.com/blog/a-restaurant-operators-guide-to-understanding-paga Penalty ranges for restaurants ($50-$100 per employee per period).

Impacts on Tech Companies and Silicon Valley Exodus

19. Blue state's billionaire exodus about to get much worse in 2026, insider warns - Fox News Published: January 8, 2026 Link: https://www.foxnews.com/politics/blue-states-billionaire-exodus-about-get-much-worse-2026-warns-insider Discusses taxes and regulations driving tech exits.

20. Silicon Valley's Surprising Exodus: Why They're Fleeing CA | by Makowski | Jan, 2026 Published: January 2026 Link: https://medium.com/@makowski794_75398/silicon-valleys-surprising-exodus-why-they-re-fleeing-ca-cd4481fa5ef1 Economic implications of tech exodus.

21. How tech billionaires spurred an exodus of rich people from California - The Washington Post Published: January 19, 2026 Link: https://www.washingtonpost.com/technology/2026/01/19/california-wealth-tax-exodus Campaign against billionaire tax fueling exits.

22. The Great California Exodus: Why Businesses Are Packing Up and Leaving - Oreate AI Blog Published: January 15, 2026 Link: https://www.oreateai.com/blog/the-great-california-exodus-why-businesses-are-packing-up-and-leaving/5cf7d13a72c4f7c2c6c64c3294a1bc0a High taxes, regulations, and costs driving businesses out.

23. California's tech exodus: Entrepreneur warns of a deeper political crisis as tax losses 'hit $200 billion' | World News - The Times of India Published: December 27, 2025 Link: https://timesofindia.indiatimes.com/world/us/californias-tech-exodus-entrepreneur-warns-of-a-deeper-political-crisis-as-tax-losses-hit-200-billion/articleshow/126195833.cms Billions in lost tax revenue from tech departures.

2024 PAGA Reforms and Effects

24. PAGA Reform 2024: Early Evidence Suggests Positive Impacts for Employees and Employers - California Restaurant Association Published: November 20, 2025 Link: https://www.calrest.org/news/paga-reform-2024-early-evidence-suggests-positive-impacts-employees-and-employers Early positive results, including manageable litigation.

25. The Evolving PAGA Landscape: 2024 Reforms, “Headless” Claims, and What's Next for Employers | News & Resources | Dorsey Published: October 10, 2025 Link: https://www.dorsey.com/newsresources/publications/articles/2025/10/evolving-paga-landscape Reforms' ongoing effects and court cases.

26. New Report Shows PAGA Reforms Already Delivering Promising Results for California Employers - Advocacy Published: November 19, 2025 Link: https://advocacy.calchamber.com/2025/11/19/new-report-shows-paga-reforms-already-delivering-promising-results-for-california-employers Increased employee shares and resolution processes.

27. PAGA 2.0: The Practical Effects of the 2024 Amendments Published: July 29, 2024 Link: https://www.sfbar.org/blog/paga-2-0-the-practical-effects-of-the-2024-amendments Details penalty allocations and employee shares.

28. “New PAGA” Brings Guarded Optimism to California Employers | Littler Published: July 3, 2024 Link: https://www.littler.com/news-analysis/asap/new-paga-brings-guarded-optimism-california-employers Overview of reforms signed July 1, 2024.

Candidates Against PAGA in 2026 Gubernatorial Election

29. 2026 California gubernatorial election - Wikipedia Published: Ongoing Link: https://en.wikipedia.org/wiki/2026_California_gubernatorial_election Overview of candidates and race.

30. Who's running for California governor in 2026? A look at the crowded field Published: Ongoing Link: https://www.sacbee.com/news/politics-government/capitol-alert/article314391387.html Lists candidates, including Republicans critical of regulations.

31. Who is running for California governor? See list of candidates for 2026 election - ABC7 Published: Ongoing Link: https://abc7.com/post/running-california-governor-katie-porter-antonio-villaraigosa-xavier-becerra-among-candidates-2026-election/17380502 Candidate list, noting Steve Hilton's stance against PAGA.

32. Business Coalition Urges Legislature To Reject Senate Bill 310 - Advocacy Published: January 23, 2026 Link: https://advocacy.calchamber.com/2026/01/23/business-coalition-urges-legislature-to-reject-senate-bill-310 Ties to ongoing PAGA debates in 2026 context.