On July 1, 2024, Governor Gavin Newsom signed Private Attorneys General Act (“PAGA”) reform bills AB2288 and SB92 into law, enacting the most significant reform of the law in its 20-year history. The purpose of the new law, which applies to all PAGA actions filed on June 19, 2024 or later, is to provide relief to employers by curtailing frivolous litigation and excessive penalties.
Of its most significant changes, the new law introduces a more stringent standing requirement for plaintiffs who bring PAGA claims. Previously, plaintiffs needed to only demonstrate personal experience of any applicable Labor Code violation in order to bring actions for all other Labor Code violations on behalf of other employees. Now, plaintiffs must prove they personally experienced each of the Labor Code violations pursued.
The new law also introduces a modified penalty structure with reduced penalties for employers who demonstrate good faith compliance. In contrast with prior law that did not provide penalty caps, penalties are now limited to 15% of the maximum potential penalty for employers who demonstrate that they took all reasonable steps for compliance before receiving the PAGA notice, and 30% for employers who demonstrate that they took all reasonable steps for compliance within 60 days of receiving a PAGA notice. Reasonable steps may include conducting an audit of the violations, disseminating lawful written policies regarding the violations, training supervisors on compliance, or taking corrective action with regard to supervisors. Reasonable steps will be evaluated by the totality of the circumstances, and if it is found that an employer took reasonable steps, a violation uncovered at a later time will not establish that the steps taken were not reasonable.
The new law also limits aggravated penalties to violations caused by an employer’s malicious, fraudulent, or oppressive conduct, or to employers that a court or agency found had violated the same Labor Code provision within the last five years. Additionally, penalties for technical or isolated violations are reduced, with a cap of $25 per employee per pay period for wage statement violations that cause no harm, and $50 per employee per pay period for violations that occur for less than 30 days or four consecutive pay periods.
Lastly, immediately after receiving the Labor & Workforce Development Agency (“LWDA”) notice , smaller employers have the opportunity to engage in a conference between the parties by presenting the LWDA with a cure plan. Larger employers may similarly participate in an early settlement process in court, which would place a stay on court proceedings until completion.
Although the PAGA reform is a huge victory for California employers, the law remains largely untested and may continue to evolve through statutory interpretation in future cases.
Please contact an NFC team member if you have any questions or seek further assistance.
