As California employers know too well, the Private Attorneys General Act of 2004 (PAGA) allows employees to sue their employers on behalf of the State of California to collect civil penalties for Labor Code violations. Although PAGA was designed to alleviate the burden of overworked governmental agencies who oversaw California’s Labor Code compliance, PAGA has been subject to abuse in recent years by unscrupulous plaintiffs’ attorneys.

Now, twenty years later, in an effort to balance the interests of the State, workers, and employers, Governor Gavin Newsom signed into law on July 1, 2024 a legislative amendment that completely overhauls the PAGA statute and removes the much-anticipated “Fair Pay and Employer Accountability Act” from the November 2024 ballot. While the PAGA amendment does not fully eviscerate PAGA, as many employers may have hoped, it does provide much-needed protections for employers and substantial benefits to those who diligently comply with the Labor Code. Among the key takeaways for employers are the following:

• Retroactivity – The PAGA amendment will not apply to any PAGA notice received, or PAGA action commenced, before June 19, 2024. Thus, if you have an existing PAGA action or received a PAGA notice before June 19, 2024, these new changes will not apply to that matter.
• Standing – To bring a PAGA claim now, employees must have personally suffered the same Labor Code violation as the employees they claim are aggrieved. Previously, an aggrieved employee was allowed to bring claims for Labor Code violations he or she had never suffered, leading to unmanageable and overly expansive lawsuits.
• Penalties Capped For Diligent Corrections – Employers who have taken reasonable steps to be in compliance with the Labor Code before a PAGA notice is received will see a substantial reduction in the amount of penalties recoverable. Likewise, employers who take swift action after a PAGA notice is received will see a similar, albeit lesser, reduction in the penalties available.
• Right To Cure – Depending upon the number of employees within the relevant time frame, the new legislation creates a new right to cure process which is aimed at allowing employers to correct past violations and reducing the likelihood of expensive and protracted litigation.
• Clarity on Initial/Subsequent Violation Penalties – The default civil penalty for most PAGA claims is now $100 per each aggrieved employee per pay period and the draconian “subsequent” penalty of $200 is only applicable in two scenarios: (1) when, within the last 5 years, the LWDA or any court found an employer violated the same labor code provision; and (2) when a court determines the employer’s conduct in this instance was malicious, fraudulent, or oppressive. Furthermore, employers who pay weekly (versus bi-weekly or bi-monthly) will now only be liable for 50% of the penalties.
• Manageability – PAGA now has an express a “manageability” requirement, something previously rejected by the California Supreme Court. After a PAGA lawsuit has been filed, employers may now petition the court to limit the evidence presented, as well as the scope of any claim to ensure that the claim can be effectively tried.

Additional changes include an increase to the amount of civil penalties paid to employees from 25% of any recovered civil penalties to 35%. Employees will also have the ability to seek injunctive relief, allowing them to require employers to adopt changes to policies and procedures, something not previously permitted under PAGA. Noticeably absent, however, is language limiting potential fee recovery by plaintiff’s attorneys. Whether the myriad changes to PAGA will dissuade the more abusive litigants out there remains to be seen, however, without further statutory changes, attorney fees will remain the driving force behind any PAGA lawsuit.

Although not a perfect solution, the changes appear to be a step in the right direction and should give employers a fighting chance in these heretofore one-sided contests. The goal still remains to avoid such a fight, if possible. The way to do that is to ensure your business undertakes routine wage and hour audits of employee records, uses the most up-to-date policies and procedures manuals, and takes proactive steps to address and correct any potential violations quickly and early.

The ink is not yet dry on this amendment and questions are sure to abound, so please do not hesitate to contact your usual counsel at Wilson Turner Kosmo if you have any questions about the above, or if you require assistance regarding an audit, or revisions to your existing policies and practices.

• Geoffrey D. La Val (glaval@wilsonturnerkosmo.com)
• Mary P. Snyder (msnyder@wilsonturnerkosmo.com)

Wilson Turner Kosmo’s Special Alerts are intended to update our valued clients on significant employment law developments as they occur. This should not be considered legal advice.