The Private Attorneys General Act (PAGA) is a familiar term for employers of all sizes in California. The full complexity of the law may not be understood by all, but it is well-known as a mechanism for bringing claims on behalf of others and the state for penalties, particularly for violations of pay rules and regulations. These claims tend to be costly, generally not arbitrable, and not covered by EPLI insurance.

While a repeal of PAGA was expected to be on the ballot in November, that initiative has been withdrawn and a deal has been reached to reform PAGA. On July 1, Governor Newsom signed SB-92 and AB-2288 which bring many common-sense reforms to PAGA, allow for a reduction of the penalties, and encourage cure and remediation over litigation.

Most of these reforms apply to new PAGA cases filed after June 19, 2024 (and in effect, new LWDA Notices after that date):

Changes to cure provisions

There is a separate process for small and large employers. Those with less than 100 employees in the PAGA period can submit a confidential proposal to the LWDA to cure alleged violations and engage in a back-and-forth as to the same.

For employers with at least 100 employees in the PAGA period, the employer can request an early evaluation conference, including requesting a stay of court proceedings and a statement regarding whether the employer intends to try to cure. There will be a neutral evaluator assigned by the court to work through a process to try to help resolve the matter. Notice and cure provisions can only be used once in a 12-month period for the same type of violations.

If the employer takes all reasonable steps to remedy any alleged violation within 60 days after it is served with a PAGA Notice, any associated penalties are capped at 30% of the penalty rate. Additionally, the Labor Code sections which are subject to cure have been expanded to avoid litigation.

"All reasonable steps” may include, but are not limited to, engaging in the following:

• conduct an audit of the alleged violations and take action in response to the results of the audit;
• provide lawful written policies as to the alleged violations; and
• train supervisors on compliance.

Changes to standing

Previously anyone suffering a PAGA violation could bring a case for anyone else suffering any other type of PAGA violation - no similarity was required. Now, an aggrieved employee is only one who has "personally suffer[ed] each of the violations alleged." This is a big win in limiting the scope of a PAGA case.

Changes to penalties

• Reduced $50 penalty per pay period per aggrieved employee for isolated violations (when an employer can show it is isolated and nonrecurring – the lessor of 30 consecutive days or four consecutive pay periods.)
• Weekly pay period penalties are reduced by half to address the inequality of "per pay period" penalty amounts when an employer does not have biweekly or semi-monthly pay periods. (For instance, many service technicians are paid weekly and a $100 violation would mean $400 per month per aggrieved employee, which is now reduced to $200 per month - as it would be for semi-monthly pay periods).
• No derivative penalties for 201, 202, 203 violations for unpaid wages at separation when the violations are neither willful nor intentional.

Changes to the percentage split between LWDA and employees

Employees will now receive 35% of the penalty or net settlement, and the LWDA will receive 65%, compared to the previous 25/75 split.

Codifying the "manageability" requirement of PAGA

Employers were previously using manageability arguments to limit the scope of PAGA claims as unwieldy and unmanageable. That has now been codified - superior courts have discretion to manage these claims including limiting evidence presented at trial and "limit the scope of any claim filed...to ensure that the claim can be effectively tried."

Injunctive relief is an expanded remedy

The law permits, but does not require, an employee to seek injunctive relief under PAGA.

Incentivizing audits

Perhaps the biggest takeaway for anyone not currently facing a PAGA action is that if an employer is found to take “all reasonable steps” to maintain compliance with the California Labor Code before a PAGA claim is brought, PAGA penalties for violations will be limited to 15% of the applicable penalty amount.

This new PAGA will likely lead to a new line of cases interpreting these provisions and exercising the discretion authorized therein, but overall, the reform appears to be focused on curbing some of the abuse of PAGA by enacting common-sense changes to the application of the law.