Last year, we reported on the reforms to the Private Attorney General Act (PAGA) that Governor Gavin Newsom signed into law on July 1, 2024. The reform legislation was pushed through to avoid a ballot vote on a measure seeking to repeal PAGA entirely in the 2024 election. The legislation was aimed at providing some relief to employers from the flood of meritless PAGA claims and provide mechanisms for early resolution. The legislation also gave the Department of Industrial Relations (DIR) the resources and ability to expedite hiring and to fill vacancies in the CA Labor and Workforce Development Agency (LWDA) which is the division responsible for PAGA administration and oversight. While the reforms did not appear deter the “serial filer” firms from filing a record number of cases (9,463 PAGA notices were filed in calendar year 2024 – a jump from 8,100 the prior year), we are extremely pleased to report that the LWDA and its new hires, have begun taking a much more active role in these cases at an early stage and cracking down on the worst abusers of the PAGA statutes.
When PAGA was enacted in 2004, it added nearly-automatic penalties for a huge array of Labor Code violations, but more significantly, it eliminated most of the procedural hurdles for prosecuting wage and hour claims on a representative or class basis. While PAGA surely was intended to only increase compliance with wage and hour laws, the statutory scheme quickly drew criticism because it encouraged frivolous litigation. PAGA turned wage and hour litigation into a carnival game much like shooting fish in a barrel: the only question was not whether, but how much, the plaintiffs’ lawyers would rake in, in exchange for doing very little meaningful legal work. From the employer’s perspective, the cost of defending these claims through trial, is extremely high. The employer must prove that for every shift worked by every one of the “aggrieved” employees, it complied with every wage and hour law identified in the PAGA notice, or owe a penalty of at least $100, per pay period, per employee. Essentially, PAGA imposed a standard of perfection.
Plaintiffs’ lawyers largely abandoned single-plaintiff lawsuits, and the PAGA “wage and hour mill” firm was born. These “mills” began sending out dozens of boilerplate PAGA notices per month, alleging the entire possible array of wage and hour claims. This is because, pre-reform, a PAGA representative could pursue a claim for PAGA penalties for their peers even if they, personally, did not suffer the same violations. Pre-reform, there was also no incentive for larger employers to voluntarily go back and “cure” any past violations, because they’d still be subject to the same PAGA penalties. Consequently, most of these cases resulted in protracted and costly litigation. Even employers who decide to fight and win these cases cannot recover their legal fees and costs from the plaintiffs or their firms – so there was no real deterrent to these “mills” filing frivolous lawsuits. However, most of these cases never actually go to trial because employers are typically forced (either due to economics or court orders into early mediation. Employers who do not settle PAGA cases risk having to pay astronomical Plaintiffs’ attorneys fees if it is found at trial that even one violation occurred. Many employers, with no meaningful economical alternative and in the hopes of buying certainty, will pay a five, six- or even seven-figure settlement (of which the plaintiffs’ lawyers typically take home 1/3 of the total settlement, and the actual employees take home only a few dollars each).
As the above demonstrates, PAGA was clearly broken, and it was unclear whether Governor Newsom’s legislation would be a band-aid or lead to real change. Shortly after the PAGA reforms, the LWDA announced how it would begin administering PAGA notices going forward, and began filling vacancies in the department. For the last half of the year, my colleagues and I noticed no reduction in PAGA notices being filed, but have been able to utilize the new “cure” procedures to quickly and effectively resolve some of these matters for our employer-clients. More employers appear willing to cure violations that are discovered after a PAGA notice has been served, because there is an incentive to do so. Even more encouraging is the fact that many of our clients are taking proactive steps, such as self-audits guided by counsel, to avoid becoming a target of a PAGA notice in the first place.
Perhaps the best news of all is that the LWDA has begun cracking down on frivolous claims. In the past few months, the LWDA has been sending letters to the law firms that have been the worst PAGA abusers, rebuking them for sending out dozens of boilerplate letters (to the point that they contain the same obvious typos, the same employee headcounts, and mis-gender their own client, because they can’t be bothered to edit the template). Employers who were recipients of the frivolous PAGA notices, have had the satisfaction of receiving copies of these letters from the LWDA demanding that the lawyers shape up. An excerpt from one of these letters shows that the LWDA means business: “Based on a demonstrated pattern of conduct evidencing abuse of the prelitigation administrative processes administered by LWDA, you hereby are directed to file amended PAGA notices in each pending matter listed in the index included with this letter consistent with the instructions provided. Failure to correct this behavior moving forward may result referral to the State Bar.” On March 6, 2025, one of the most notorious mills who had received such a reprimand from the LWDA, voluntarily withdraw their PAGA notice against our client and averred that they will not be pursuing PAGA penalties on behalf of their client.
While PAGA claims are not going to go away entirely, we are gratified to see that the LWDA is holding the lawyers to a minimum standard of doing their due diligence and asserting only claims that have some factual support. As a reminder, employers only have a short window of time after receiving a PAGA notice to take advantage of the new cure options. Employers who receive a PAGA notice should immediately contact their legal counsel to make sure to promptly evaluate whether an early cure is a viable option or whether the PAGA notice warrants alerting the LWDA that this is yet another frivolous claim.
