On Tuesday, Governor Gavin Newsom signed Assembly Bill 2288 and its counterpart Senate Bill 92 into law, which amend California’s Private Attorneys General Act (PAGA). While the amendments are expansive in nature, eight major changes under this new version of PAGA are detailed below:
- New PAGA standing requirements: Under these recent changes, to have standing to bring a PAGA representative action, an aggrieved employee must now: (1) have personally suffered the alleged Labor Code violations by their employer upon which the PAGA claim is based; and (2) must have suffered these violations within one year.
- New cure provisions: The new changes to PAGA significantly expand its previous “cure” provisions. The new bill permits an employer to cure various wage statement violations in a number of different manners. In addition, it explicitly permits a cure of claims for unpaid wages.
- New caps on penalties: The changes to PAGA afford employers multiple safe harbors when they take “all reasonable steps” to comply with the Labor Code’s requirements. First, if the employer has taken all “reasonable steps” to comply with the law prior to receiving a PAGA notice or request for personnel records, available penalties are capped at 15 percent. Second, if the employer takes the necessary reasonable steps to cure the alleged violation within 60 days after receipt of a PAGA notice, penalties available are capped at 30 percent. Third, if the employer does cure the violations as provided here, then no penalties shall accrue for those violations. If the violation is otherwise cured, penalties are capped at $15 per employee per pay period. “All reasonable steps” as defined in the Labor Code is not an exclusive list that examines the totality of the circumstances, but can include actions such as payroll audits, providing trainings on Labor Code and Wage Order compliance, and taking corrective action regarding supervisors, among others. Finally, the new statutes explicitly authorize a court to reduce the penalties if they would be unjust, arbitrary, oppressive, or confiscatory.
- Reduction in certain penalties: Under the previous version of PAGA, a higher $200 penalty for “subsequent violations” for many Labor Code provisions was potentially available for aggrieved employees to recover, which became substantial over the pendency of the lawsuit. Under the newly enacted law, however, this “subsequent violation penalty” has been explained in the statute and explicitly cabined to cases whether either an agency or court has “issued a finding or determination to the employer that its policy or practice giving rise to the violation was unlawful” within five years preceding the alleged violation or where the employer engaged in “malicious, fraudulent, or oppressive” conduct. Additionally, penalties for certain wage statement violations are now limited to $25 per employee per pay period in cases where the employee could promptly and easily determine the accurate information from the wage statement.
- Relief for employers paying weekly: Under the new statute, the penalties available are reduced by half for employers who pay weekly instead of weekly or bi-monthly. This eliminates the prior penalty for paying weekly.
- Changes to PAGA manageability requirements: Recent California Supreme Court decisions significantly curtailed the ability of trial courts to manage PAGA claims. The new law affirms the trial court’s vested discretion to limit the scope of evidence that can be presented, or the scope of the claim itself to ensure it can be effectively tried in court.
- Elimination of certain derivative penalties: Under the previous version of the PAGA statute, the law was unsettled whether employees could recover penalties for certain derivative claims. An example of such a claim is to allege that an employer failed to provide an employee with premium pay for a missed meal break, and as a result, their wage statement was now also incorrect because it failed to include this premium payment as a line item. Under the new PAGA statute, unless the employer willfully or intentionally fails to pay an employee all wages owed or provide an accurate wage statement, the aggrieved employees cannot recover double penalties for these violations.
- Employees will recover greater share of penalties: With this new legislative change, any civil penalties recovered by aggrieved employees are now distributed in a 65 percent/35 percent split, where 65 percent would be distributed to the Labor and Workforce Development Agency, and 35 percent are to be distributed to the aggrieved employees. This change replaces the previous 75 percent/25 percent split.
The enactment of these significant changes is seen as a major success and compromise between business and labor groups within the Golden State, which forecloses a previously pending ballot measure aimed to repeal PAGA altogether in the November 2024 election. During the signing ceremony, Governor Newsom was quoted as stating “[t]his reform is decades in the making – and it’s a big win for both workers and business. It streamlines the current system, improves worker protections, and makes it easier for business to operate. I want to thank labor and business groups for coming together to hammer out this deal, and our legislative partners for getting these bills to my desk.”
Importantly, these amendments apply to any civil actions brought on or after June 19, 2024, unless the allegedly aggrieved employee submitted a letter evidencing their intent to bring a PAGA action before this date.
If you have any questions about the impact of these changes on your business operations or on any ongoing litigation that your company is experiencing, please contact the authors of this post.