A lobbying group for small and mid-sized businesses challenged California’s Labor Code Private Attorney General Act (PAGA). PAGA “allows California employees to sue their employers and pursue civil penalties on behalf of the state for violations relating not only to themselves, but also to other California employees of the same employer.” PAGA is a qui tam statute, under which employees may file a notice with their employer and with the state’s Labor and Workforce Development Agency. The agency may choose to pursue a complaint, but if not, the employee may sue. If the employee succeeds, the employer must pay fines per employee and per pay period. Twenty-five percent of the recovery goes to the employees, 75 percent to the state.
Plaintiff argued that the structure of PAGA violated the separation of powers doctrine under state law, because it allows “private citizens to seek civil penalties on the state’s behalf without the executive branch exercising sufficient prosecutorial discretion.” The district court dismissed the case and the plaintiff appealed.
The court of appeals held that an earlier California supreme court decision, Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014), was directly on point and established that PAGA did not violate the separation of powers doctrine. Even if the Iskanian decision did not apply, the court of appeals held that none of the other qui tam California statutes, all of which are essentially identical to PAGA, have been found to violate the separation of powers doctrine.
After holding that the California supreme court’s decision in Iskanian, that PAGA did not violate the separation of powers doctrine, was controlling, the court turned to its second reason for dismissal. According to the court, a statute violates the separation of powers doctrine if the statute “as a whole, viewed from a realistic and practical perspective, operate[s] to defeat or materially impair the executive branch’s exercise of its constitutional functions.” In this case, plaintiff argued that PAGA “deprive[s] the executive branch of (1) prosecutorial discretion in PAGA cases, and (2) control over PAGA prosecutions or settlements.”
The court noted that the statute required notice to the executive branch at four different points in the proceedings, that the executive is free to investigate and cite employers for violations identified in those notices, and that an employee cannot bring an action based on the same facts and theories as asserted by the executive in its own action. These types of provisions, echoed in many qui tam statutes, authorize sufficient “control” over the litigation by the executive branch and demonstrate that there is no separation of powers problem here.
In a footnote, the court stated,
We cannot help but note the irony inherent in the procedural posture of this lawsuit. Plaintiff, a private actor, insists that the Legislature has deprived the executive branch, including specifically the Attorney General, of the ability to exercise one of its core constitutional functions, by devolving those functions to private actors. To effectuate its argument, plaintiff sued the Attorney General, who, for his part, has argued vigorously that his powers are not being usurped.
Although the court did not find the attorney general’s position dispositive of the issue, it noted that another California court “has relied, at least in part, on the Attorney General taking a similar position to resolve a similar separation of powers issue.” California Business and Industrial Alliance v. Becerra, No. G059561 (Cal. Ct. App. 4th Dist. Jun 30, 2022).