Changes to PAGA: An Overview for California Employers

07.03.2024

We provide our third installment and update related to California’s Private Attorneys General Act (“PAGA”) reform measures here, now that the bills have been signed into law.

On Monday, July 1, 2024, the Governor signed the two pending bills aimed at reforming PAGA, AB 2288 and SB 92. These changes take effect immediately and aim to provide employers with new tools and defenses against PAGA claims.

Here is a summary of the key points:

Changes to Civil Penalties

Caps on Penalties: Subject to certain exceptions, the per-pay-period penalty for a violation remains at $100. However, the legislation introduces two specific caps to significantly reduce liability for penalties if an employer takes pre-emptive actions:
- 15% Cap: If employers demonstrate they took all reasonable steps to comply with the law before receiving a PAGA notice or request for personnel records or payroll records, penalties are capped at 15%.
- Examples of reasonable steps include:
  - Conducting periodic payroll audits and taking action in response to the results of the audits,
  - Disseminating lawful written policies,
  - Training supervisors on wage order and Labor code compliance, and
  - Taking corrective actions with regard to supervisors.
- 30% Cap: If employers take all reasonable steps for compliance within 60 days of receiving a PAGA notice or request for personnel file or payroll file, penalties are capped at 30%.
Isolated Errors: Penalties are reduced to $50 per-pay-period for violations occurring for less than 30 days or four consecutive pay periods.
Technical Violations: Penalties for harmless wage statement violations are reduced to $25 per-pay-period if employees can still determine the required information despite the error.
Weekly Pay Periods: Penalties are reduced by half for employers with weekly pay periods.
No Derivative Penalties: Penalties for derivative claims are prohibited. This means employees cannot seek multiple penalties for a single violation under different sections of the Labor Code.
$200 Penalty for Subsequent Violations: A $200 per-pay-period penalty for subsequent violations is limited to cases where there has been a prior court or agency finding of a violation or if the employer’s conduct was malicious, fraudulent, or oppressive.

2. New Cure Provisions

Expanded Cure Opportunities: Employers can cure violations of Labor Code § 226 (wage statements), § 226.7 (meal/rest period premiums), § 510 (overtime), and § 2802 (expense reimbursement), some of the most frequently alleged violations under PAGA.
Small Employers: Employers with fewer than 100 employees can notify the LWDA to arrange a settlement conference with the plaintiff for early resolution.
Larger Employers: Employers with at least 100 employees can request a stay and Early Neutral Evaluation with the court. The court will assess whether the cure was sufficient to address the alleged violations.

3. Employee Must Experience Labor Code Violations

Employee must now personally experience the Labor Code violations they seek to pursue.
Clarifies that employees must have experienced the Labor Code violation within one year of filing a PAGA notice.

4. Manageability of PAGA Claims

Courts have authority to limit the scope and evidence of PAGA claims to ensure they are manageable at trial.
Courts can use various case management tools to ensure an effective trial process.

Effective Date: It is important to note that these new provisions will apply to all PAGA claims where the PAGA authorization letter was submitted to the LWDA on or after June 19, 2024. It does not apply to PAGA claims made before that date.

How We Can Help

Conducting payroll audits, preparing lawful written wage and hour policies, and training supervisors on wage and hour compliance before receiving a PAGA letter or personnel/payroll file request can reduce potential liability by 85 percent. If an employer receives a PAGA letter or document request before taking such actions—all is not lost, and liability may still be cut by 70 percent if swift action is taken in response. The attorneys at AALRR are well equipped to assist with audits, policies, and training, and if necessary, curing, mediating, and litigating PAGA violations. If you have any questions, please feel free to email or call the authors or your counsel at AALRR.