Understanding the New PAGA Reforms: Essential Insights for California Employers
On July 1, 2024, California's Private Attorneys General Act (PAGA) underwent significant reforms with the signing of AB 2288 and SB 92 into law. These changes, the first since PAGA’s original enactment, apply to any actions initiated on or after June 19, 2024, unless a notice was submitted to the Labor and Workforce Development Agency (LWDA) before that date. Here's a comprehensive overview of what these reforms mean for California employers.
Stricter Standing RequirementsThe scope of who can bring a PAGA claim has been tightened under the New PAGA. Now, only employees who have personally experienced Labor Code violations can pursue claims. Additionally, these violations must have occurred within the one-year statute of limitations period. This new requirement may limit the breadth of PAGA actions, potentially reducing the number of claims that can be brought against employers.
Revised Penalty StructureWhile the standard $100 penalty per employee, per pay period still applies, the New PAGA introduces several exceptions designed to better align penalties with the severity of the violations:
Prohibition on Penalty StackingOne of the significant changes under the New PAGA is the prohibition on "penalty stacking." In the past, employers could face multiple penalties for different but related violations stemming from the same issue. For example, if an employer failed to provide accurate wage statements, they could face penalties for the wage statement violation itself, as well as additional penalties for derivative issues like waiting time penalties or frequency of pay violations.
Under the New PAGA, this practice is restricted. Employers will not face cumulative penalties for related violations in cases where those violations are unintentional or not willful. This change is particularly important for employers, as it can significantly reduce the financial burden associated with multiple penalties for a single issue.
Expanded Cure RightsThe New PAGA also expands employers' rights to "cure" certain violations, allowing them to correct issues before facing penalties. Previously, only a limited number of violations could be cured, but the new law broadens this list to include wage statement errors, meal and rest break violations, minimum wage issues, overtime violations, and expense reimbursement claims.
How the Cure Process Works:
To cure a violation, an employer must:
Manageability ProvisionsAligning with the California Supreme Court's ruling in Estrada, the New PAGA allows courts to manage the scope of evidence and claims more effectively. Courts now have the authority to limit the evidence presented at trial and may also restrict the scope of claims to ensure they can be effectively tried. Furthermore, courts can consolidate or coordinate overlapping claims against an employer, streamlining the litigation process.
What Employers Should Do NowThe reforms introduced under the New PAGA present a crucial opportunity for employers to minimize or even eliminate penalties through proactive compliance. Understanding and implementing these changes is vital. Employers should be ready to act swiftly in response to any LWDA notice and take all necessary steps to ensure full compliance with California labor laws.
If you have questions about these reforms or need guidance on compliance strategies, contact us for advice tailored to your specific situation.
On July 1, 2024, California's Private Attorneys General Act (PAGA) underwent significant reforms with the signing of AB 2288 and SB 92 into law. These changes, the first since PAGA’s original enactment, apply to any actions initiated on or after June 19, 2024, unless a notice was submitted to the Labor and Workforce Development Agency (LWDA) before that date. Here's a comprehensive overview of what these reforms mean for California employers.
Stricter Standing RequirementsThe scope of who can bring a PAGA claim has been tightened under the New PAGA. Now, only employees who have personally experienced Labor Code violations can pursue claims. Additionally, these violations must have occurred within the one-year statute of limitations period. This new requirement may limit the breadth of PAGA actions, potentially reducing the number of claims that can be brought against employers.
Revised Penalty StructureWhile the standard $100 penalty per employee, per pay period still applies, the New PAGA introduces several exceptions designed to better align penalties with the severity of the violations:
- Reduced Penalties for Minor Wage Statement Issues: A penalty of $25 per pay period (down from $100) may apply when a wage statement error is minor—such as missing information that the employee could still easily determine, or where the employer's identity is not misleading despite an error.
- Penalties for Isolated Incidents: A $50 penalty applies for violations that are isolated, nonrecurring events, affecting a maximum of 30 consecutive days or four consecutive pay periods.
- Increased Penalties for Severe Violations: If an employer has a history of similar violations within the past five years, or if the violation is found to be malicious, fraudulent, or oppressive, the penalty can increase to $200.
Prohibition on Penalty StackingOne of the significant changes under the New PAGA is the prohibition on "penalty stacking." In the past, employers could face multiple penalties for different but related violations stemming from the same issue. For example, if an employer failed to provide accurate wage statements, they could face penalties for the wage statement violation itself, as well as additional penalties for derivative issues like waiting time penalties or frequency of pay violations.
Under the New PAGA, this practice is restricted. Employers will not face cumulative penalties for related violations in cases where those violations are unintentional or not willful. This change is particularly important for employers, as it can significantly reduce the financial burden associated with multiple penalties for a single issue.
Expanded Cure RightsThe New PAGA also expands employers' rights to "cure" certain violations, allowing them to correct issues before facing penalties. Previously, only a limited number of violations could be cured, but the new law broadens this list to include wage statement errors, meal and rest break violations, minimum wage issues, overtime violations, and expense reimbursement claims.
How the Cure Process Works:
To cure a violation, an employer must:
- Correct the issue identified in the LWDA notice.
- Make aggrieved employees whole by providing any owed unpaid wages (dating back three years from the date of the notice), plus 7% interest, and any applicable liquidated damages.
- Cover reasonable attorneys’ fees and costs if applicable.
- For wage statement violations, the employer may need to provide corrected, compliant wage statements for each pay period during which the violation occurred, dating back three years.
Manageability ProvisionsAligning with the California Supreme Court's ruling in Estrada, the New PAGA allows courts to manage the scope of evidence and claims more effectively. Courts now have the authority to limit the evidence presented at trial and may also restrict the scope of claims to ensure they can be effectively tried. Furthermore, courts can consolidate or coordinate overlapping claims against an employer, streamlining the litigation process.
What Employers Should Do NowThe reforms introduced under the New PAGA present a crucial opportunity for employers to minimize or even eliminate penalties through proactive compliance. Understanding and implementing these changes is vital. Employers should be ready to act swiftly in response to any LWDA notice and take all necessary steps to ensure full compliance with California labor laws.
If you have questions about these reforms or need guidance on compliance strategies, contact us for advice tailored to your specific situation.