Question: I heard that a law called the “PAGA” was reformed to make it more employer friendly. What is the PAGA and what are the major changes to the law?
Answer: On July 1, 2024, Governor Newsom signed SB 92 and AB 2288 into law. Together, these statutes significantly reformed California’s Private Attorneys General Act (“PAGA”). The reformed law will apply to any actions in which the initial PAGA notice was submitted on or after June 19, 2024. Under the reformed law, employers will benefit from stricter standing requirements, reduced penalties, and increased opportunities to avoid penalties altogether.
For background, the Legislature enacted the PAGA in 2004 to create a more effective way to help workers resolve labor disputes. The PAGA authorized individual employees to “stand in the shoes of” the Attorney General to file lawsuits and recover civil penalties for violations of the California Labor Code. Significantly, the PAGA was broad enough to allow an employee to seek penalties for labor code violations suffered by other employees. An employee only needed to personally suffer one labor code violation before that employee could pursue penalties for other labor code violations suffered by other employees. In addition, the PAGA gave employee the potential to recover reasonable attorneys’ fees.
Predictably, the PAGA gave plaintiffs’ attorneys a strong incentive to sue employers. The California Chamber of Commerce recently reported that plaintiffs’ attorneys leveraged over eight billion dollars from employers in PAGA settlements in the last six years. These settlements often result in windfalls for plaintiffs’ attorneys, with little benefit to employees or the State of California. Statistics like this over the years have resulted in widespread concerns and criticisms over excessive penalties and frivolous litigation. In response to these concerns, a ballot measure was set to be on the November 2024 ballot to repeal the PAGA altogether. But in June of this year, Governor Newsom, along with other interest groups, reached a deal to reform the PAGA and avoid the ballot measure.
While the PAGA reforms are complex, the core changes to the PAGA are as follows:
First, absent some limited exceptions, an employee is now limited to seeking penalties for Labor Code violations that employee personally suffered.
Second, the civil penalties for Labor Code violations have been significantly reduced, from $100 per violation to as little as $25 per violation.
Third, employer’s now have more opportunities to “cure” violations and avoid (or significantly limit) their exposure to civil penalties. For example, the potential civil penalties may be capped at 30 percent for employers who take “reasonable steps” to comply with the Labor Code. The PAGA defines “reasonable steps” to include wage-hour training for supervisors, payroll audits, and disciplining supervisors who violate the Labor Code.
Similarly, if a PAGA lawsuit is filed, employers may now request to participate in an “early evaluation conference” with a neutral evaluator to see if the case can be settled early. Significantly, requesting this conference pauses proceedings in court—limiting potential legal fees and expenses.
Overall, the recently enacted PAGA reforms are a significant change for employers. It remains to be seen how the Courts will interpret and apply these new rules. However, what’s clear is that the PAGA reforms will likely reduce the large amount of PAGA litigation and, when brought, give employers opportunities to reduce their exposure.