On July 1, 2024, Governor Newsom signed AB 2288 into law, bringing significant reforms to California’s Private Attorneys General Act (PAGA).
The bill aims to rectify what the legislature perceived as PAGA’s deficiencies, such as the surge in ‘gotcha’ lawsuits over minor and technical Labor Code violations, and the limited advantages for employees. While PAGA lawsuits will continue to pose a risk for California employers, the recent emergency legislation offers practical strategies to mitigate exposure and minimize penalties.
KEY TAKEAWAYS FOR CA EMPLOYERS WITH THE REFORMS:
Standing Requirements: Previously, the named plaintiff in PAGA litigation could pursue penalties for any alleged Labor Code violation covered by PAGA, even if they personally experienced only a single violation. Now, the named plaintiff must have personally experienced all violations they seek to recover on a representative basis, aligning PAGA with class action principles.
PAGA Penalties:
- Default Penalty: The $100 default penalty per aggrieved employee (experiencing a Labor Code violation) per pay period for an initial violation remains. The default $200 penalty has been replaced.
- No Derivative Penalties: An employee recovering a penalty for a wage violation cannot collect additional penalties for the same underlying conduct (e.g., waiting time penalties).
- Caps on Penalties: Employers who take all reasonable steps to prospectively be in compliance after a PAGA notice may also benefit from caps on penalties. Isolated errors (occurring for less than 30 days or four consecutive pay periods) have a maximum penalty of $50. Wage statement violations now have a capped penalty of $25 if the required information is promptly discernible from the statement.
Injunctive Relief: Employers who cure an alleged violation and take “all reasonable steps to be prospectively in compliance” within 60 days of receiving a notice of a claimed PAGA violation will not be liable for any penalty.
Employer Options: Larger employers can choose to pause litigation while pursuing court-supervised settlements for penalty claims. Smaller employers have the option to seek assistance from the Labor Commissioner in resolving claims before formal litigation begins.
These reforms aim to balance employees’ rights while ensuring PAGA remains an effective tool for enforcing labor laws.
WHAT SHOULD CALIFORNIA EMPLOYERS DO NOW?
California employers should take “reasonable steps” to comply with the Labor Code before receiving a records request or PAGA notice, which may significantly reduce potential penalties under a PAGA action.
“Reasonable Steps” Include:
- Conducting periodic payroll audits and taking action in response to audit results.
- Developing and disseminating lawful written policies.
- Training supervisors/managers on applicable Labor Code and wage order compliance or take appropriate corrective action with regard to supervisors.
HOW CAN BIZHAVEN HELP?
Rely on Bizhaven to:
- Do a compliance audit, which is a crucial process within organizations to ensure compliance in the workplace.
- Develop a plan of action to take corrective measures to mitigate risk and exposure in the organization.
- Develop and implement written company policies to ensure compliance in the organization.
- Train supervisors/managers to ensure compliance of wage and hour regulations and to help avoid wage and hour claims.
