07/02/2024 | News release | Distributed by Public on 07/02/2024 08:01
On July 1, 2024, California Governor Gavin Newsom signed two bills, Senate Bill 92 and Assembly Bill 2288, that amend the state's Labor Code Private Attorneys General Act (PAGA), which deputizes private parties to enforce the Labor Code on behalf of the state.
In mid-June, the governor announced a deal had been reached with the legislature and business groups to reform PAGA. According to the agreement, business groups would withdraw a ballot measure to repeal PAGA if the two bills were signed.
As detailed below, highlights from the amendments include important changes to: (1) PAGA's early evaluation and cure options; (2) PAGA's standing requirements; (3) PAGA's penalties; and (4) a court's tools to ensure that PAGA actions remain manageable. The amendments apply to PAGA actions filed on or after June 19, 2024, unless the underlying PAGA notice was submitted to the Labor Workforce Development Agency (LWDA) and the employer prior to June 19, 2024.
The amendments include a new procedure for employers to address and cure alleged Labor Code violations after an employer is served with a PAGA action complaint.
At the time of any initial appearance in the case, an employer may request an early evaluation conference and stay of the court proceeding. The employer must submit a confidential statement explaining which alleged Labor Code violations it disputes and which, if any, alleged Labor Code violations it intends to cure. The PAGA plaintiff, in turn, must submit a confidential statement explaining the factual basis for the alleged Labor Code violations, the amount of penalties claimed for each violation, the basis for accepting or not accepting any cure proposal presented by the employer, and any demand for settlement of the case in its entirety. A neutral evaluator will conduct a confidential early evaluation conference to explore the strengths and weaknesses of the plaintiff's claims, whether any cure proposal by the employer should be adopted, and whether the plaintiff's claims can be settled. If the neutral evaluator accepts an employer's cure proposal and the employer subsequently proves the cure has been made, the potential PAGA penalties that may be recovered for the alleged violation are significantly reduced (discussed further below).
In addition, starting October 1, 2024, employers with fewer than 100 employees have expanded options to cure alleged Labor Code violations upon receiving a PAGA notice. In addition to the early evaluation conference discussed above, employers with fewer than 100 employees may preempt the filing of a PAGA action in whole or part by curing the Labor Code violations alleged in the PAGA notice.
Some of the most significant changes under the amendments affect PAGA's penalty structure. The new legislation seeks to strike a balance between enforcement and fairness, with an emphasis on reducing penalties for technical violations or where the employer can demonstrate good faith efforts at complying with the Labor Code.
Except for certain non-profit legal aid agencies, PAGA plaintiffs will face stricter standing requirements. Previously, a plaintiff could pursue PAGA claims even if they did not personally experience each of the alleged Labor Code violations asserted in the lawsuit; rather, the plaintiff had to experience only one of the alleged Labor Code violations to have standing to assert all the other claims. Under the amendments, the plaintiff must personally experience each of the Labor Code violations alleged in the lawsuit. Moreover, the plaintiff must have personally experienced the Labor Code violation within the one-year period prior to the PAGA notice. The impact of the amendment is to essentially bring state court PAGA standing standards more in line with the federal PAGA standing standards.
For example, previously, a plaintiff who experienced only meal period violations could assert and pursue PAGA claims not only for meal period violations but also for alleged rest break violations, unpaid overtime, and other Labor Code violations unrelated to meal periods. Under the amendments, if the plaintiff experienced only meal period violations, the plaintiff may pursue only PAGA claims related to meal periods.
PAGA cases can be complex and unwieldy, especially when the case involves multiple alleged Labor Code violations and numerous employees with differing working conditions. To address this issue and ensure that PAGA claims remain manageable, the amendments build upon the California Supreme Court's decision in Estrada v. Royalty Carpet Mills and expressly grant California courts the discretion to limit the scope of PAGA claims and evidence presented at trial. Courts may also consolidate or coordinate different PAGA actions that involve overlapping violations against the same employer.
The amendments incentivize and reward employers for making good faith efforts at complying with the Labor Code. Employers should regularly review their wage and hour policies and practices, which include auditing all payroll and timekeeping practices, to be able to reduce potential PAGA penalties should inadvertent compliance issues arise. Moreover, an employer should promptly review any PAGA notices it receives to determine whether to utilize PAGA's newly expanded cure and early evaluation options. Doing so can substantially reduce the potential risk and exposure posed by the PAGA action. Please contact a Jackson Lewis attorney with any questions.