California’s Private Attorneys General Act (“PAGA”) was passed in 2007 and has operated primarily as a means to provide massive revenue to the state and to Plaintiffs’ attorneys.  Over the past decade or so, the statute has been the predominant vehicle for shakedown lawsuits against employers.   Virtually every year, certain business-minded legislators introduce bills to reform PAGA and curb litigation abuse, but every year, the majority party kills the bills, precluding any meaningful change.  This year, business groups managed to qualify a measure to repeal PAGA for the November ballot.  This move got the legislature’s attention and finally prompted material discussions on PAGA reform.  Last week, negotiations culminated in a deal to make several changes to PAGA in exchange for the PAGA ballot initiative being pulled from the November ballot.  The changes are reflected in two legislative bills, AB 2288 and SB 92, both of which are expected to be signed into law as urgency legislation (meaning they will take effect immediately) this week.  Here are the key changes to PAGA:

The Employee Bringing the Lawsuit Must Have Personally Suffered the Alleged Violations

There is a fundamental principle of litigation called “standing,” which generally means the person bringing a lawsuit (the plaintiff) must have been injured by the alleged violation being sued upon.  In the PAGA context, however, an exception was judicially created by a court decision called Huff v. Securitas in 2018, which shockingly held that a plaintiff may sue on behalf of other employees for alleged wage and hour violations the plaintiff did not even personally experience, so long as the plaintiff suffered at least one of the alleged violations.   PAGA is now being amended to change this.  Under the amended law, the plaintiff must have personally suffered every wage and hour violation being sued upon, within the applicable one-year statute of limitations period applicable to the claim.

Employers Who Pay Weekly Will No Longer Be Penalized for Providing Pay More Frequently Than Twice Per Month

PAGA provides for monetary penalties for wage and hour violations on a “per pay period” basis.  This means that employers who pay biweekly or semi-monthly face less penalty exposure than employers who pay on a weekly basis.  Of course, there is no meaningful justification for this differential treatment.  The PAGA amendments address this by providing for a 50% reduction in total penalties for an employer who pays weekly as opposed to biweekly or semi-monthly.

Limits on “Stacking” of Multiple Penalties for the Same Underlying Pay Violation

In its current form, plaintiffs’ attorneys commonly seek multiple stacked penalties for a single alleged pay violation.  For example, if the underlying violation is the failure to provide compliant meal breaks, a plaintiffs’ attorney will seek one PAGA penalty for violating California’s meal break statutes, Labor Code sections 512 and 226.7, but will also seek derivative penalties each pay period for (1) failure to provide accurate wage statements that show an additional hour of pay earned and owed for the missed meal breaks, under Labor Code 226 (2) failure to timely pay all wages owed during employment under Labor Code 201-203 and 210, (3) failure to pay all wages owed on termination of employment under Labor Code 203, and (4) failure to keep accurate records of hours worked, including the start and stop times of meal breaks, under Labor Code 1174.  By stacking penalties in this manner, the plaintiffs’ attorney effectively seeks to increase the monetary penalty by a factor of five for the single underlying violation of not providing a compliant meal break. 

The PAGA amendments address this to a degree by disallowing stacked penalties for late payment of wages (Labor Code 201-203, 210) and inaccurate wage statements (Labor Code 226) on top of the penalties for the underlying unpaid wage violation – unless the late payment violation was “willful or intentional” and/or the wage statement violation was “knowing or intentional.”  Proving that a violation was or was not “willful,” “knowing,” or “intentional” is a fact-based inquiry that focuses on whether the employer in good faith believed that it had correctly paid all wages owed and correctly reported all earned wages on pay stubs.  As such, the ability to preclude stacking of penalties will vary depending on the specific case.  However, this amendment is a significant one that is favorable for employers. 

Increase in Recovery Payable to the Employee as Opposed to the State

In its current form, PAGA provides that 75% of all penalties recovered are payable to the State of California and only 25% are payable to the employees who allegedly suffered the injuries.  The PAGA amendments change the percentages slightly such that 65% is payable to the State and 35% is payable to the affected employees.

Addition of Injunctive Relief as a Remedy

In its current form, PAGA only allows for imposition of monetary penalties (as well as attorneys’ fees and costs to a prevailing plaintiff).  The amendments additionally allow a plaintiff to seek injunctive relief against an employer (i.e., an order requiring an employer to change its wage and hour policies or practices).

Several New Avenues for Reducing Monetary Penalties

PAGA currently provides for penalties of $100 per pay period per affected employee for each “initial” violation and $200 per pay period per affected employee for each “subsequent” violation.  Courts have discretion to reduce the amount of penalties awarded if imposition of the maximum penalties would be unjust.  Additionally, several courts have held that there can be no “subsequent” violation unless and until a court or agency has determined that the employer already violated the law at issue at least one initial time.  Despite these rulings, plaintiffs’ attorneys typically argue that the initial violation means the initial pay period and that subsequent violations mean each subsequent pay period in which the violation occurred.  The PAGA amendments change this framework to make clearer that the per-pay-period penalty generally is $100 per employee, except that:

  • For certain wage statement violations, the per-pay-period penalty is a reduced $25 per employee;
  • If the alleged violation results from an isolated, non-recurring event that lasted no more than the lesser of 30 days or 4 pay periods, the per-pay-period penalty is $50 per employee; and
  • The penalty is $200 per pay period only if (1) the court determines that the employer’s violation was “fraudulent, malicious, or oppressive” (terms which are not defined) or (2) within the past 5 years, the Labor Workforce Development Agency (“LWDA”) or a court previously found that the employer’s policy or practice at issue was unlawful.

The amendments also add an interesting penalty-reduction feature for employers who can demonstrate that they have taken “all reasonable steps to be in compliance” prior to receiving a LWDA notice of alleged violations or a request for personnel records/pay records from the employee.  If the employer took reasonable steps to be in compliance, penalties are capped at 15% of the total potential penalties for the violation.  For purposes of this provision, “all reasonable steps” may include, but are not limited to, any of the following: conducting periodic payroll audits and taking action in response to the results of the audit, disseminating lawful written policies, training supervisors on applicable Labor Code and wage order compliance, or taking appropriate corrective action with regard to supervisors.  Whether the employer’s conduct was reasonable shall be evaluated by the totality of the circumstances and take into consideration the size and resources available to the employer, and the nature, severity, and duration of the alleged violations. The existence of a violation, despite the steps taken, is insufficient to establish that an employer failed to take all reasonable steps.

For employers who cannot take advantage of the foregoing penalty-reduction feature, they can still potentially reduce their penalty exposure to no more than 30% of the total potential penalties by taking reasonable steps within 60 days after receiving a LWDA notice to ensure prospective compliance with the laws alleged to have been violated.

Finally, employers who have taken all reasonable steps to comply under one of the foregoing options and who cure the alleged violations can avoid penalties.  Employers who cure an alleged wage statement violation can avoid penalties entirely for that violation.  For other violations the employer cures, the penalties may be capped at $15 per pay period per employee.  Unfortunately, “curing” an alleged violation is no small task, particularly for larger employers.  “Cure” means that the employer corrects the violation alleged by the aggrieved employee, is in compliance with the underlying statutes specified in the notice required by this part, and each aggrieved employee is made whole. An employee who is owed wages is made whole when the employee has received an amount sufficient to recover any owed unpaid wages due under the underlying statutes specified in the notice dating back three years from the date of the notice, plus 7 percent interest, any liquidated damages as required by statute, and reasonable attorney’s fees and costs to be determined by the LWDA or the court.  If the alleged violation involves inaccurate or incomplete wage statements/pay stubs, the employer can cure the alleged violation by issuing corrected wage statements to all affected employees for each pay period in the three-year period preceding the date of the LWDA notice of the alleged violation.  However, if the wage statement violation involves the mere failure to correctly identify the employer’s name and address, this alleged violation can be cured more simply by providing written notice to the employee in summary form.   Importantly, employers cannot avail themselves of the “right to cure” provisions of the statute more than once in a twelve-month period for the same violations.

Avenues to Seek Court or LWDA Assistance in Resolving PAGA Disputes

The PAGA amendments also build in some new mechanisms for employers to seek early assistance to resolve PAGA disputes.  Larger employers with at least 100 employees who are served with a PAGA lawsuit can file a request for an early neutral evaluation conference to discuss potential violations, cures, and settlement.  Smaller employers with fewer than 100 employees can seek the assistance of the LWDA in curing the alleged violations to avoid a lawsuit.

Court Discretion to Limit Scope of PAGA Actions

The PAGA amendments codify existing caselaw holding that courts have discretion to manage PAGA lawsuits by limiting the evidence and/or limiting the scope of the claim to ensure it can be effectively/manageably tried.

Retroactivity

Unfortunately, the amendments to PAGA will not operate retroactively to pending PAGA lawsuits or LWDA notices that were filed before June 19, 2024.  The amendments only apply to new LWDA notices/PAGA lawsuits filed on or after that date.

At bottom, the long-awaited PAGA reforms are a welcome development that will provide some much-needed relief for employers in the Golden State, but there remains sufficient incentive for plaintiffs’ attorneys to continue pursuing PAGA lawsuits against California employers.  Employers with operations in California should continue auditing their wage and hour practices to try to ensure compliance with California law in order to mitigate PAGA exposure.

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Photo of Robin E. Largent Robin E. Largent

Robin Largent has been advising and defending employers for over twenty years, primarily in California state and federal courts.  Robin’s practice focuses on the defense of wage and hour class and representative (PAGA) actions.  Robin’s practice also focuses heavily on compliance and advice…

Robin Largent has been advising and defending employers for over twenty years, primarily in California state and federal courts.  Robin’s practice focuses on the defense of wage and hour class and representative (PAGA) actions.  Robin’s practice also focuses heavily on compliance and advice on best practices to prevent and mitigate the risks of employment litigation.  Robin also regularly defends employers ranging from small, locally owned businesses to large national corporations in single plaintiff employment litigation involving claims for discrimination, harassment, retaliation, breach of contract, and wrongful termination.  Robin has substantial appellate experience and success handling appeals, writ petitions, and amicus briefs in both state and federal courts on issues such as class certification (particularly in the wage and hour arena), manageability and due process concerns associated with class action trials, novel issues of interpretation of wage and hour laws, exempt/non-exempt misclassification issues, meal and rest break compliance, trade secret/unfair competition matters, and the scope of federal court jurisdiction under the Class Action Fairness Act.  Finally, Robin is well-known for her former role as Editor and primary author of the California Labor and Employment Law Blog for close to a decade.