A Summary of the 2024 Reformed Private Attorneys General Act (PAGA)

In a significant legislative development, California has enacted substantial reforms to the Private Attorneys General Act (PAGA) through Assembly Bill 2288 (AB 2288) and Senate Bill 92 (SB 92), both signed into law by Governor Gavin Newsom on July 1, 2024. These amendments address longstanding criticisms of PAGA by refining standing requirements, adjusting penalty structures, and enhancing opportunities for employers to rectify violations prior to litigation.

Refined Standing Requirements

Under the revised PAGA framework, an “aggrieved employee” is now defined as an individual who has “personally suffered” each alleged violation of the Labor Code. This marks a departure from prior interpretations, such as in Huff v. Securitas Security Services USA, Inc., 23 Cal. App. 5th 745 (2018), where plaintiffs could pursue claims for violations they had not personally experienced, provided they had suffered at least one violation. The new definition restricts standing to those directly affected by each alleged infraction, thereby limiting the scope of representative claims. Notably, this standing requirement does not apply to non-profit legal aid organizations that have litigated PAGA actions for at least five years prior to January 1, 2025.

Adjusted Penalty Structures

The amendments introduce a more nuanced penalty framework:

• Reduced Penalties for Isolated Violations: For violations stemming from isolated, nonrecurring events lasting no more than 30 consecutive days or four consecutive pay periods, the civil penalty is reduced to $50 per aggrieved employee per pay period.
• Criteria for Enhanced Penalties: The heightened penalty of $200 per aggrieved employee per pay period is now limited to situations where, within the preceding five years, the employer was found by the Labor and Workforce Development Agency (LWDA) or a court to have engaged in unlawful practices, or where the employer’s conduct is deemed malicious, fraudulent, or oppressive.
• Wage Statement Violations: Penalties for certain wage statement violations are capped at $25 per aggrieved employee per pay period if the employee can promptly and easily determine the required information from the wage statement alone.

Opportunities to Cure Violations

The reforms expand avenues for employers to address and rectify alleged violations:

• Pre-Notice Compliance Efforts: Employers who proactively take reasonable steps to comply with the Labor Code before receiving a PAGA notice may have penalties capped at 15% of the maximum amount. Such steps include conducting periodic payroll audits, disseminating lawful written policies, training supervisors, and implementing corrective actions.
• Post-Notice Cure Provisions: Upon receiving a PAGA notice, employers have 60 days to take all reasonable steps to achieve compliance, which can result in penalties being capped at 30% of the maximum amount. Effective October 1, 2024, employers with fewer than 100 employees may submit a confidential proposal to the LWDA to cure alleged violations within 33 days of receiving a PAGA notice. The LWDA may set a conference to evaluate the sufficiency of the proposed cure, and upon completion, the employer must provide a sworn notification of compliance.

Early Evaluation Conference

The amendments also introduce an Early Evaluation Conference mechanism:

• Purpose and Process: Upon being served with a PAGA lawsuit, employers can request an early evaluation conference with a neutral evaluator to assess the strengths and weaknesses of the claims and defenses, determine whether alleged violations have occurred and been cured, and explore the possibility of early resolution. This process is designed to facilitate prompt and fair settlements, potentially reducing litigation costs and fostering compliance.

Reallocation of Penalty Proceeds

The distribution of recovered penalties has been adjusted:

• Increased Share for Employees: For PAGA notices filed on or after June 19, 2024, aggrieved employees will receive 35% of recovered penalties, an increase from the previous 25%, with the remaining 65% allocated to the state.

Implications for Employers and Employees

These reforms aim to balance the enforcement of labor laws with the interests of employers and employees. By refining standing requirements and providing mechanisms for employers to cure violations, the amendments seek to reduce frivolous litigation while ensuring that employees’ rights are protected. Employers are encouraged to proactively review and update their compliance practices to align with the new provisions, thereby mitigating potential liabilities under PAGA.

Please note that the information provided on this website is for general information purposes only and is not to be construed nor relied upon as legal advice nor the formation of an attorney-client relationship. For a free consultation with Attorney Thomas M. Lee, please contact us.