A 2004 California law that allows workers to sue their employers in the name of the state for wage and labor violations netted the state more than $88 million from businesses last year and has increased their compliance with workplace laws, according to a report released Tuesday by advocacy groups.

The Private Attorneys General Act, or PAGA, allows an employee to file a whistle-blower claim with the state about an employer who is failing to pay minimum wages, overtime or other legally required compensation, or is violating safety standards. The state can take up the case itself, or allow the employee to file suit on behalf of all affected workers, who receive 25% of any penalties against the employer plus attorneys’ fees. The rest goes to the state.

The union-backed law was enacted to increase enforcement of workplace laws. While state agencies that oversee the laws have been weakened by staffing shortages, employers have increasingly required workers to take disputes to arbitration — now mandated for two-thirds of non-union employees in California, according to a study quoted in the report — rather than suing in court.

Employers generally favor arbitration, which is quicker and less expensive than litigation, while employee advocates say the procedure is biased in favor of employers. Arbitrators’ rulings are virtually unappealable, and work contracts generally require employees to arbitrate their claims individually, rather than collectively with other workers.

The small sums involved in individual arbitration make it difficult for employees to find lawyers, prompting many of them to drop their cases. PAGA evaded that restriction by allowing employees to sue in the name of the state.

Business groups opposed the law, calling it a “job-killer” and saying it would burden employers and the courts with costly suits over minor violations. But the report by advocates of the law said it has been good for employees and for the state.

“PAGA has boosted the economy by helping California workers, especially those workers most vulnerable to workplace exploitation,” the study said. It said there has been no “flood of frivolous litigation,” but instead a series of rulings and settlements holding employers accountable for failing to pay legal wages, or to provide such essentials as workday seats for checkout clerks and cashiers.

In one recent case filed under the 2004 law, Safeway agreed to pay $12 million and provide seats for as many as 30,000 checkout clerks at its stores in California, who will also share $1.875 million of the payment. The settlement provided $4.4 million for the plaintiffs’ lawyers, and the remainder went to a state labor agency.

In the largest such case, Walmart agreed to a settlement in 2018 providing seats for its cashiers in California and paying $10.7 million to 99,000 current and former cashiers and $33 million to the state. Bank of America had previously signed a setting agreement that paid $2.4 million to its tellers and $10 million to the state.

“These penalties have helped to shift California’s corporate culture toward compliance” and have also funded increases in state enforcement staffing, the report said. It was issued by two nonprofits, the Center for Popular Democracy and the Partnership for Working Families, joined by the UCLA Labor Center, which researches labor issues.

In response, Allan Zaremberg, president and chief executive officer of the California Chamber of Commerce, called the report “self-serving” and said PAGA “has created a windfall for trial attorneys that they use to leverage employers into unfair costly settlements.”

Zaremberg also said the state Department of Industrial Relations had found last year that PAGA does not benefit employees, only their lawyers. But the state Labor Workforce and Development Agency, which includes the Department of Industrial Relations, said last week that enforcement of PAGA was “good for working people and important for law-abiding employers.”

The agency said it monitors PAGA cases for abuses to protect both employees and “employers who play by the rules.”

The law was the first of its kind in the nation. But since the Supreme Court in 2018 upheld employment contracts that required individual rather than collective arbitration, at least a half dozen states have been considering similar legislation, said Rachel Deutsch, an attorney with the Center for Popular Democracy.

The report said nearly 90% of PAGA cases involve claims of wage-related violations: minimum wages, overtime, failure to pay for all hours worked, or failure to provide the 30-minute lunch break and two 10-minute rest breaks the state requires for most workplaces.

In one such case, the report said, four landscape workers in Stockton accused their employer of cheating them of pay, denying rest breaks and making them work in extreme heat without safety measures. PAGA extended the case to their 58 coworkers and led to a settlement providing up to $8,200 for each of them, the report said.

In another case, the report said, Farmers Insurance agreed to change its employment policies and pay more than $4 million to 300 female employees to settle a PAGA suit by an attorney who said she lost her job after complaining of pay discrimination.

“PAGA changes the employment landscape by dramatically increasing the likelihood that an employer faces serious consequences from exploiting its workforce,” the report said.

That assessment was disputed by attorney Paul Grossman of the California Employment Law Council, who represents employers in PAGA cases.

Grossman said the law’s “massive penalties” allow plaintiffs’ lawyers to intimidate businesses into accepting inflated settlements, with large shares for the lawyers and relatively little for the state. Those penalties, for wage violations, are $100 per employee for the first pay period and $200 for the next period, sums that often add up to millions in multi-employee suits, Grossman said.

“This is a massive free-employment act for these plaintiffs’ mills who bring hundreds of PAGA cases,” Grossman said.

Deutsch disagreed and noted that the state screens all PAGA cases and has the power to review settlements. And the report said the state labor agency’s revenue from PAGA cases rose from $30 million in 2018 to $88 million in 2019 — totaling $200 million since fiscal year 2010-11 — while job growth and per capita income in California continue to outpace the national average.

Bob Egelko is a San Francisco Chronicle staff writer. Email: begelko@sfchronicle.com Twitter: @BobEgelko