Long-awaited changes to the Private Attorneys General Act (PAGA) bring much needed relief for California employers who take advantage of the opportunity.
The Private Attorneys General Act of 2004 allows employees to sue their employers on behalf of the state for Labor Code violations, effectively deputizing private citizens to enforce labor laws. This unique mechanism has led to a significant increase in litigation, often resulting in costly settlements and judgments for employers. PAGA lawsuits have resulted in more than $10 billion in payments from employers since 2016, with a significant chunk going to lawyers. It is widely reported that PAGA has been abused by plaintiffs’ attorneys, resulting in frivolous lawsuits that burden businesses without significantly benefiting employees.
Key Changes
The reformed PAGA legislation introduces several changes aimed at addressing these concerns while maintaining protections for workers. Here are the most notable aspects of the new law:
1. Requirement for Personal Violations
Under the new legislation, employees can only seek penalties for labor code violations they have personally experienced within the year before filing a notice. This change limits the scope of PAGA claims to individual grievances, reducing the likelihood of broad claims based on violations experienced by others.
2. Reduced Penalties
• Wage Statement Violations: Penalties for wage statement errors are reduced to $25 per pay period if the employee can easily verify the required information or is not misled about employer identity. This adjustment significantly reduces potential liabilities for employers over technical errors.
• Default Penalty Limits: For violations lacking specified penalties, the default is capped at
$100 per employee per pay period. This cap is lowered further in cases of isolated or minor infractions, potentially reducing penalties to$25 or $50 per pay period.
•Weekly Pay Cycle Penalty Reduction: Employers who pay weekly, such as farm labor contractors, now benefit from a 50 percent reduction in penalties for violations across pay periods. This change addresses the previous penalty structure that arbitrarily and disproportionately affected employers with more frequent pay schedules.
3. Penalty Reductions Through Compliance Efforts
Employers who proactively work to comply with labor laws can see their penalties reduced. Measures include:
• Conducting regular payroll and compliance audits.
• Maintaining clear and lawful written policies.
• Training management on labor law requirements.
• Correcting any identified issues promptly.
Penalties can be reduced to 15 percent if “all reasonable steps” are taken before a PAGA notice is received or to 30 percent if implemented within 60 days of receiving a notice.
4. Limitations on Penalty Stacking
Employees are restricted from accumulating multiple penalties for related infractions unless there is clear evidence of intentional wrongdoing by the employer. This change helps prevent exaggerated penalty claims, allowing for fairer outcomes.
5. Judicial Oversight and Case Management
Courts are now empowered to manage PAGA claims more effectively by:
• Adjusting penalties based on the specifics of each case.
• Limiting the scope and evidence in trials.
• Consolidating overlapping claims to
streamline proceedings.
This enhanced judicial oversight aims to prevent unwieldy litigation, granting courts and employers more control over legal processes.
Opportunities for Early Resolution
The reforms introduce procedures for early resolution, offering pathways to resolve potential violations before they escalate
to litigation.
• Small Employers (under 100 employees): Can propose resolution plans to the Labor & Workforce Development Agency (LWDA) and negotiate settlements in a structured setting.
• Large Employers (over 100 employees): Can request an evaluation meeting after a PAGA lawsuit is filed
to discuss the factual basis for claims and potential resolutions, reducing legal costs and addressing
issues early.
Encouragement to Correct Violations
Employers are incentivized to rectify labor code violations promptly. This involves complying with relevant statutes, compensating employees for any owed wages, and providing necessary documentation to correct errors.
Miscellaneous Changes
• The share of PAGA settlements that go to aggrieved employees has increased from 25 percent to 35 percent, while the LWDA’s portion has decreased from 75 percent to 65 percent.
• The new requirement for personal violation does not apply to existing nonprofit legal aid organizations, allowing these groups to continue filing PAGA claims on behalf of affected workers without being subject to the new standing requirement.
• Courts can now issue injunctive relief under PAGA, providing plaintiffs a legal tool to stop ongoing violations and enforce compliance beyond financial penalties.
Practical Strategies for Employers
To leverage these reforms, employers should take “all reasonable steps” to proactively come into compliance by taking the following measures:
• Regular Audits: Routinely evaluate payroll, wage statements and employment practices to ensure compliance with labor laws.
• Swift Remedial Action: Address and rectify any issues promptly, communicating corrections to employees as necessary.
• Active Engagement: Respond promptly to LWDA notices and requests, focusing on early resolution to avoid litigation.
• Policy Updates and Training: Ensure employment policies are current and that supervisors are trained on compliance standards.
Conclusion
Western Growers played a significant role in the FIX PAGA coalition, representing non-profits, social justice advocates, family farmers, health care providers and businesses, which worked with Gov. Gavin Newsom and legislators in enacting this historic reform into law.
PAGA reform marks a significant shift in California’s PAGA landscape, offering new opportunities for reducing litigation risks. While there is much to be proud of in terms of potentially reducing the frequency and severity of PAGA claims writ large, the new law is a compromise borne out of tough legislative negotiations and is not a panacea. While the new law will bring much needed relief for California employers, PAGA litigation in California isn’t going away anytime soon.