Significant amendments to California’s Private Attorneys General Act (PAGA) were enacted into law recently. This legislation, the result of negotiations among Gov. Newsom, legislators, and labor and business groups, equips employers with new and robust tools to address and defend against PAGA claims. Consequently, the initiative to repeal and replace PAGA, which was slated for the November ballot in California, has been withdrawn. The key provisions of the reform legislation are summarized below.

Standing

Personal Experience Requirement: Plaintiffs must have personally experienced the alleged Labor Code violations they are seeking to pursue on a representative basis. This abrogates a Sixth District Court of Appeal’s decision which allowed a PAGA plaintiff to recover penalties for violations affecting other employees even if the plaintiff did not suffer those same violations. An exception exists for actions brought by certain nonprofit legal aid organizations.

One-Year Limitation: Plaintiffs must have personally experienced each alleged violation within one year of filing a PAGA notice with the Labor Workforce Development Agency (LWDA).

Manageability

In a departure from a recent decision of the California Supreme Court, the new law explicitly endorses trial courts’ power to limit both the scope of PAGA claims and the evidence presented at trial to ensure manageability.

Penalties

Cure Provisions: Employers who (1) cure an alleged violation and (2) take “all reasonable steps to be prospectively in compliance” before or within 60 days of receiving a PAGA notice will not be liable for any penalty. Examples include periodic payroll audits, lawful written policies, and training supervisors.

Penalty Caps:

• Penalties will be capped at 15% of the applicable amount if an employer demonstrates reasonable compliance efforts before receiving a PAGA notice or personnel records request, and at 30% if compliance efforts are taken within 60 days after notice.
• Penalties will be capped at $15 per employee if alleged violations are cured but all reasonable steps to comply are not taken.
• Penalties for wage statement violations under Labor Code Section 226 that do not cause injury will be capped at $25 per employee per pay period.
• Penalties for isolated errors that do not extend beyond the lesser of 30 days or four consecutive pay periods will be capped at $50.

Heightened penalties ($200) will only be assessed after a court or agency issues a finding to the employer that its practice was unlawful within five years preceding the violation, or the employer is determined by a court to have acted maliciously, fraudulently, or oppressively.

Reduction for Weekly Payroll: Penalties will be reduced by 50% for employers with weekly payroll schedules.

Limits on Derivative Penalties: Employees may not receive penalties for derivative violations if they have already received penalties for failure to timely pay wages at termination or failure to timely pay wages during employment (if neither willful nor intentional), or for wage statement violations that are not knowing, intentional, or a failure to provide a wage statement.

Changes in Penalty Allocation: The share of penalties allocated to the LWDA will decrease from 75% to 65%, while the share for aggrieved employees will increase from 25% to 35%.

Injunctive Relief

PAGA plaintiffs may now seek injunctive relief, such as a court order.

Cure Provisions

All employers: Employers will be able to cure wage statement violations, failure to pay meal and rest period premiums, overtime violations, and expense reimbursement violations by correcting the alleged violations, complying with the respective statues, and making all aggrieved employee’s whole for the entirety of the statutory limitations period of three years.

Small Employers: Employers with fewer than 100 employees may submit a confidential proposal to the LWDA to cure violations within 33 days of receiving a PAGA notice.

Large Employers: Employers with more than 100 employees can request an “early evaluation conference” and a stay of discovery and responsive pleading deadlines, submitting a confidential statement detailing disputed and intended-to-cure violations.

Effective Dates

The amendments to PAGA will apply to actions brought on or after June 19, 2024, unless the plaintiff gave notice to the LWDA before that date. The early resolution provisions will become operative on October 1, 2024.

Due to the recency of the effective date, June 19, 2024, most active PAGA cases will not be affected by these amendments. However, if a lawsuit was initiated as a class action or other type of lawsuit before June 19, but the mandatory LWDA notice was not sent before June 19, there is a strong argument that the new amendments would apply to those PAGA claims. We will provide updates as they are available.