As has been widely publicized, emergency legislation has been passed to reform the Private Attorneys General Act of 2004 (“PAGA”).
As most California employers know, PAGA allows an individual employee to collect civil penalties on behalf of the state for alleged Labor Code violations. The reform legislation consists of two bills signed into law on July 1, 2024 – AB 2288 and SB 92. The bills were designed to address what the legislature viewed as PAGA’s shortcomings, including the proliferation of “gotcha” type lawsuits for harmless and technical Labor Code violations, and the minimal benefit for employees. The bills’ authors noted that while PAGA was enacted two decades ago to improve Labor Code compliance, it has become a vehicle for abusive litigation – with little impact on employer practices and inadequate compensation for employees.
PAGA Reform
While PAGA lawsuits will remain a risk for California employers, the emergency legislation provides concrete options for limiting exposure and reducing awards. Larger employers will have the option of suspending litigation pending court supervised settlement of any penalty claims, and smaller employers will be able to seek the assistance of the Labor Commissioner in resolving claims prior to the commencement of actual litigation.
The emergency legislation authorizes substantial reductions in PAGA penalties for employers who take all reasonable steps to avoid Labor Code violations. Such steps include conducting pay audits, adopting lawful written policies, and training supervisors on Labor Code compliance.
The emergency legislation implements other reforms. It provides for the elimination of penalties altogether for employers who “cure” Labor Code violations cited in a PAGA notice by paying all those employed during the prior three year period any unpaid wages with interest, as well as any liquidated damages and attorney’s fees.
In addition, it imposes stringent standing rules, requiring an employee to actually have suffered a specific Labor Code violation in order to prosecute such claim on behalf of co-workers. It also expressly allows trial courts to impose limits on PAGA trials to ensure fair and manageable trials.
The emergency legislation applies to those lawsuits in which both the complaint and the requisite pre-complaint notice to the Labor Commissioner are filed after June 19, 2024. As such, the impact on current cases may be limited. However, during debate about the need for PAGA reform, various legislators noted that these revisions are designed to implement the true and original intent of PAGA. That history can be used to argue that certain aspects of the emergency legislation should apply to all pending PAGA claims.
To take advantage of PAGA reform, California employers must move quickly. They should aggressively audit practices and policies and concretely address any potential wage and hour issues. While such steps may be onerous, they are significantly less onerous than confronting unlimited PAGA exposure on substantive as well as mere technical violations of the Labor Code.
To read about all of the changes to PAGA, both bills can be found here: Senate Bill 92 and Assembly Bill 2288.
