Labor & Employment Law Blog

Existing Law

PAGA allows an aggrieved employee to bring a civil action to recover civil penalties that would otherwise only be recoverable by the Labor and Workforce Development Agency (“LWDA”) on behalf of the aggrieved employee and other current and former employees for certain violations of the California Labor Code.  Under PAGA 75% of civil penalties are distributed to the LWDA and 25% are distributed to the aggrieved employees.  Superior court review is required for approval of any settlement under PAGA.

Required Language in the Collective Bargaining Agreement

Under AB 1654, an employee in the construction industry is exempt from the provisions of PAGA if the employee is covered by a CBA in effect at any time before January 1, 2025 that contains the following provisions:

1. A grievance and binding arbitration procedure to redress violations that would be redressable under PAGA;
2. An express waiver of the requirements of PAGA in clear and unambiguous terms; and
3. Permission for an arbitrator to award any and all remedies otherwise available under PAGA, except for the award of penalties that would be payable to the LWDA.

Such CBAs must expressly provide for, among other things, a grievance and binding arbitration procedure to redress violations that would otherwise be remedied under PAGA and a regular hourly pay rate of not less than 30% more than the state minimum wage.

The exemption will expire on the date the CBA expires or on January 1, 2028, whichever occurs earlier.

“Employee in the Construction Industry” Defined

AB 1654 defines an employee in the construction industry as an “employee performing work associated with construction, including work involving alteration, demolition, building, excavation, renovation, remodeling, maintenance, improvement, repair work, and other work.” 

What This Means For Employers

AB 1654 allows signatory construction industry employers to direct costly PAGA actions from a court setting to the CBA grievance and arbitration mechanism.  Signatory contractors should evaluate the terms of their CBAs and consider opening bargaining with applicable unions to bargain for inclusion of the language specified in AB 1654 for the PAGA carve out to apply.