Earlier this week, Governor Newsom and California legislative leaders announced sweeping changes to the Private Attorneys General Act (known as PAGA). PAGA is the controversial legislation passed over twenty years ago, which enables an employee to step in the shoes of the Labor Commissioner and sue her/her/their employer for, among others, wage and hour violations. For California employers confronted with a PAGA claim, PAGA penalties have been onerous and the defense against PAGA claims was often time-consuming and costly.
While the Governor, legislative leaders, and industry and labor leaders have agreed to reforms, the legislation regarding the changes has not yet passed. The legislation is anticipated to be enacted by June 27th. Once the legislation reflecting the agreement is passed and signed into law by the Governor, proponents of the PAGA ballot initiative eligible for the November 2024 ballot have agreed to withdraw their measure.
Here’s a summary of the reforms:
Reform penalty structure
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Will cap penalties for employers who quickly take steps to fix policies and practices, and make workers whole, after receiving a PAGA notice, and for employers that act responsibly to take steps proactively to comply with the labor code before even receiving a PAGA notice.
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Will create new, higher penalties for employers who act maliciously, fraudulently or oppressively in violating labor laws.
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If PAGA penalties are recovered through litigation, will require the amount to be allocated to employees to increase from 25% to 35%.
Reducing and streamlining litigation
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Will expand the types of violations that can be cured to reduce the need for litigation and make employees whole quickly.
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Will provide a more robust right to cure process through the Labor and Workforce Development Agency (LWDA) to reduce litigation and costs.
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Will allow a court to limit the scope of claims presented at trial to ensure cases can be managed effectively.
Improving measures for injunctive relief and standing
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Will allow courts to provide injunctive relief to compel businesses to implement changes in the workplace.
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Will requires the employee to personally experience the alleged violations brought in a claim.
Strengthening state enforcement
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Will take steps to increase enforcement through the California the Department of Industrial Relations (DIR).
What Does this Mean for California Employers?
While the details of the announced reforms have yet to be enacted, the announced reforms suggest that at least in future PAGA actions, California employers may have more options available to resolve PAGA litigation more cost efficiently. The announced reforms also suggest an intent to reduce the impact of PAGA penalties on employers who are in compliance with California’s Labor Code requirements or who fix issues as soon as possible upon receipt of a PAGA notice. In light of the announced reforms, California employers should consider an audit of their pay practices, time keeping practices, meal and rest break practices as well as their classification of positions as exempt from overtime requirements. A review of these practices earlier rather than later will help identify problems before they result in a PAGA lawsuit.
Berliner Cohen, LLP advises and represents employers on emloyment law matters within the state of California. For questions about PAGA or other matters, reach out to our experienced Labor & Employment Department at 408.286.5800.