In Case You Missed It: California Reforms the Private Attorneys General Act

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Patricia Tsipras

August 1, 2024

On July 1, 2024, California Governor Gavin Newsom signed two bills (AB 2288 and SB 92) to reform the California Private Attorneys General Act of 2004 (PAGA).  The reforms became effective as to PAGA claims made on or after June 19, 2024.

What is PAGA?
After recognizing a shortage of government resources to pursue enforcement of Labor Code violations, the California Legislature enacted PAGA.  PAGA created new civil penalties for Labor Code violations and allows aggrieved employees, acting as “private attorneys general,” to bring a civil action against an employer on behalf of themselves and other current or former employees to recover civil penalties for Labor Code violations that they have sustained.

Why was reform needed?
PAGA has been criticized for imposing excessive penalties and provoking often-frivolous litigation.  A ballot measure proposed for the November 2024 election sought to repeal PAGA and replace it with the Fair Pay and Employer Accountability Act.  Instead, last month, Governor Newsom signed these reform bills.

Reforms as to Standing
An aggrieved employee must now have personally suffered a Labor Code violation to seek penalties.  They also must bring their claim within one year of the violation.

Reforms as to Penalties
The most significant changes to PAGA’s existing penalty structure include:

• The general civil penalty of $100 per aggrieved employee is reduced to $50 if the violation “resulted from an isolated, nonrecurring event that did not extend beyond the lesser of 30 consecutive days or four consecutive pay periods.”
• The $200 “subsequent violations” penalty will now be limited to situations when (1) in the five years preceding a violation, the Labor and Workforce Development Agency (LWDA) or a court has issued a finding to the employer that the policy or practice underlying the violation was unlawful; or (2) a court determines that the employer’s conduct was “malicious, fraudulent, or oppressive.”
• Most violations of California’s wage statement law will now be capped at $25 per aggrieved employee per pay period if, despite the employer’s technical violation of the wage statement law, the employee can promptly and easily determine the required information from the wage statement.
• Penalties also may be capped for employers who take reasonable steps to comply with the Labor Code. Employers may benefit from a 15% cap on penalties if they take reasonable steps to comply with the Labor Code prior to receiving a PAGA notice, and they may benefit from a 30% cap if they take such steps after receiving a notice.  Reasonable steps include, but are not limited to, periodically conducting payroll audits and taking corrective action as a result of them; distributing written policies that comply with the law; and training managers on compliance with wage laws.
• Plaintiffs no longer can seek multiple penalties based on one Labor Code violation.
• Previously, penalties were assessed per pay period. Thus, employers who paid their employees on a weekly basis faced double the penalties as compared to employers who paid their employers on a biweekly basis.  Under the reformed statute, penalties will be reduced by one half for employers using a weekly pay period.
• Employers may be able to avoid penalties altogether if they cure alleged violations. “Cure” means to correct the violation, come into compliance with the law, and make each aggrieved party whole.  Making an employee “whole” entails paying all unpaid wages dating back three years plus 7% interest; paying liquidated damages, if required under the law; and paying reasonable attorney’s fees and costs.

Reforms as to Early Case Resolution
The reforms encourage early resolution of claims.  Specifically, once a PAGA lawsuit is filed in court, employers may file a request for an early evaluation conference, including a statement regarding the alleged violations that the employer is willing to correct and what alleged violations it disputes.  The plaintiff, in turn, must submit a statement that outlines, among other things, the basis of the allegations and a settlement demand.

Beginning in October 2024, employers may submit to the LWDA within 33 days of receiving a PAGA notice a proposal to cure one or more of the alleged violations.

Reforms as to Available Remedies
PAGA previously allocated recovered penalties 25% to aggrieved employees and 75% to the State.  The reformed statute now provides that 35% of the penalties will be paid to aggrieved employees and 65% to the State.

Plaintiffs also can now seek injunctive relief – an equitable remedy that either stops the employer from doing something or requires them to do something.

Reforms as to Case Manageability
The PAGA reforms authorize courts to limit evidence at PAGA trials, limit the scope of PAGA claims to ensure that they can be tried effectively, and consolidate actions alleging similar violations against the same employer.

California Employer Takeaways
Be proactive.  Conduct payroll audits and other reviews of your wage and hour policies and practices regularly.  Address any issues promptly.  Train your managers and other personnel on compliance with wage laws and on your company’s policies.  When you receive a PAGA notice, investigate the allegations promptly; take correction action, as needed; and consider taking advantage of the early resolution process.  These steps will help you to reduce, or even sometimes avoid, the assessment of penalties in a PAGA action.

The author of this article, Patricia Tsipras, is a member of the Bar of Pennsylvania.  This article is designed to provide one perspective regarding recent legal developments, and is not intended to serve as legal advice in Pennsylvania, California, or any other jurisdiction, nor does it establish an attorney-client relationship with any reader of the article where one does not exist.  Always consult an attorney with specific legal issues