Seyfarth Synopsis: Governor Newsom announced that a deal has been made to reform PAGA and take the PAGA initiative off the ballot in November. The Governor’s announcement provides some highlights of what the reform package will include; however, the language of the proposed bill is expected in the coming days.

Tuesday, Governor Newsom announced that legislative leaders and business and labor group had reached an agreement on reforms to PAGA. The Governor’s announcement described the agreed proposal as reforming PAGA’s penalty structure, reducing and streamlining PAGA litigation, improving measures for injunctive relief and standing, and strengthening state enforcement. The Governor’s press release summarizes the key points of the proposed bill to reform PAGA as including the following terms:

Reform Penalty Structure

• Encourages compliance with labor laws by capping penalties on employers who quickly take steps to fix policies and practices, and make workers whole, after receiving a PAGA notice, as well as on employers that act responsibly to take steps proactively to comply with the labor code before even receiving a PAGA notice.
• Creates new, higher penalties on employers who act maliciously, fraudulently or oppressively in violating labor laws.
• Ensures that more of the penalty money goes to employees by increasing the amount allocated to employees from 25% to 35%.

Reducing and Streamlining Litigation

• Expands which Labor Code sections can be cured to reduce the need for litigation and make employees whole quickly.
• Protects small employers by providing a more robust right to cure process through the Labor and Workforce Development Agency (LWDA) to reduce litigation and costs.
• Codifies that a court may limit both the scope of claims presented at trial to ensure cases can be managed effectively.

Improving Measures For Injunctive Relief and Standing

• Allows courts to provide injunctive relief to compel businesses to implement changes in the workplace to remedy labor law violations.
• Requires the employee to personally experience the alleged violations brought in a claim.

Strengthening State Enforcement

• Give the Department of Industrial Relations (DIR) the ability to expedite hiring and fill vacancies to ensure effective and timely enforcement of employee labor claims.

The text of the bill has not been released but will need to be introduced in the legislature, passed, and signed by the Governor before June 27, or the California Employee Civil Action Law and PAGA Repeal Initiative will remain on the November ballot.

Once the bill is made public in the coming days, employers will be in a better position to understand the potential impact of the most significant PAGA reform since its inception. Of course, we will provide further updates and analysis once the details of the proposal are made available.