ATTENTION CALIFORNIA EMPLOYERS: HAVE NO FEAR – PAGA REFORM IS FINALLY HERE!

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Much to the relief of employers everywhere in California, PAGA reform has officially arrived! As a brief recap, on June 18, 2024, Governor Gavin Newsom, in partnership with legislative leaders and business groups, announced an agreement to significantly reform the Private Attorneys General Act (“PAGA”) – the most substantive overhaul in its 20-year history. On June 21, details of the proposed reform were released with the introduction of PAGA reform bills AB2288 and SB92. On June 27, the California Senate and Assembly unanimously passed both bills, ensuring a controversial initiative to repeal PAGA is removed from the November 2024 ballot. On July 1, Governor Newsom signed the bills into law prompting a collective sigh of relief from employers throughout the Golden State. 

The PAGA reform amendments became effective June 19, 2024 and apply only to PAGA actions filed on or after that date. The reform package contains several employer-friendly provisions expected to limit frivolous litigation and excessive penalties against employers by, among other things, imposing more restrictive standing requirements for plaintiffs, codifying manageability measures, and reforming the penalty structure. Key changes under the PAGA reform include:

Higher Threshold for Standing

  • Prior: Plaintiffs only had to experience a single Labor Code violation to bring an action for any other Labor Code violation.
  • Present: Plaintiffs must prove they personally experienced each of the Labor Code violation(s) for which they seek to pursue on behalf of other employees.

New Penalty Structure:

  • Prior: Employers were subject to a civil penalty of $100 for each aggrieved employee per pay period for an initial violation of the Labor Code and $200 for each subsequent violation. 
  • Present: 
    • Penalties are capped at 15% of the maximum penalty for employers who demonstrate that, prior to receiving a PAGA notice, the employer took “all reasonable steps to be in compliance” with the Labor Code provisions identified in the complaint. 
    • Penalties are capped at 30% of the maximum penalty for employers who demonstrate that, within 60 days of receiving a PAGA notice, the employer took “all reasonable steps to prospectively be in compliance with all provisions identified in the notice.”
    • PAGA’s aggravated penalty of $200 per aggrieved employee per pay period for subsequent violations only applies if a court determines either (1) the violation was caused by the employer’s malicious, fraudulent, or oppressive conduct; or (2) within the last five years, a court or agency determined that an employer’s unlawful practice or policy caused the violation of the Labor Code provision in dispute. 

New Caps on Penalties:

  • Penalties are capped at $50 per aggrieved employee per pay period for violations that occur for less than 30 days or four consecutive pay periods.
  • Penalties are capped at $25 per aggrieved employee per pay period for wage statement violations that do not cause the plaintiff harm.

Reduced Penalties for Cured Violations:

  • Employers will not have to pay a civil penalty if it had taken the required “reasonable steps” to cure the underlying violation.
  • Penalties are capped at $15 per employee per pay period if the employer did not take “reasonable steps” to cure the violation but utilized processes specified under the legislation.

No Penalties for Derivative Claims (Anti-Stacking):

  • Prior: Plaintiffs were able to seek penalties for derivative Labor Code violations, resulting in numerous penalties for a single violation.
  • Present: Penalties can no longer be awarded for derivative unpaid wage claims if the violation was neither willful nor intentional.

Reduction of Penalties for Weekly Payroll:

  • Prior: Employers with weekly payroll calendars were penalized twice as much as employers with bi-weekly payroll calendars.
  • Present: Penalties are reduced by half for employers operating on a weekly pay period.

Codified Manageability Measures:

  • Prior: In Estrada v. Royalty Carpet Mills, Inc., the California Supreme Court held that trial courts do not have the inherent authority to dismiss a PAGA claim on “manageability” grounds because the statute did not expressly discuss manageability-related issues; rather, a trial court should use case management procedures to ensure an effective and manageable trial.
  • Present: Trial courts now have the ability to determine manageability over PAGA claims and may limit the scope of any claim filed and the evidence to be presented to ensure the claim can be effectively tried. 

Injunctive Relief as a Potential Remedy:

  • Prior: The only available remedies were civil penalties and attorneys’ fees.
  • Present: Plaintiffs now may seek injunctive relief in any circumstances under which the Labor & Workforce Development Agency (“LWDA”) could seek injunctive relief. 

Expanded Opportunities to Cure:

  • Employers now have the opportunity to cure violations regarding wage statements, failure to pay meal or rest period premiums, overtime, and expense reimbursements.
  • Employers with fewer than 100 employees can notify the LWDA that they would like to cure the alleged violation(s), after which the agency will arrange a settlement conference to reach an early resolution.
  • Employers with 100 or more employees who would like to cure an alleged violation can request a stay of the proceedings and an Early Neutral Evaluation to explore the claims, proposed cures, and possibility of early settlement.

Other Amendments:

  • The distribution of penalties awarded has been revised from 75% to the LWDA and 25% to aggrieved employees, to 65% to the LWDA and 35% to the aggrieved employees.
  • The court’s discretion to adjust any penalties awarded has been codified.
  • The one-year statute of limitations period to bring a PAGA claim has been reinforced.


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