Navigating California’s New PAGA: Key Changes Every Employer Needs to Know

Understanding the New PAGA: Key Reforms Explained

Since 2004, the California Private Attorneys General Act (PAGA) allowed employees to bring labor violations against employers or former employers. However, throughout these 20 years, PAGA faced many challenges as certain aspects of the law where ambiguous. Finally, on July 1, 2024, Governor Gavin Newsom signed into law two bills, Assembly Bill 2288 and Senate Bill 92, which address these challenges and ambiguities. The PAGA reform (“NEW PAGA”) takes immediate effect retroactively to PAGA civil complaints filed on or after June 19, 2024, if the required written notice to their employer and the Labor and Workforce Development Agency (“LWDA”) was submitted. In this article, we will briefly discuss the New PAGA changes and how they affect penalties and their calculations, resolution of claims, plaintiff standing, and exceptions for non-profits.

What’s New for Employers

Reduced Penalties

Prior to New PAGA, PAGA penalties were costly. Typically, $100 for each aggrieved employee per pay period for initial violations and $200 per aggrieved employee for each pay period for subsequent violations. Under New PAGA, the $100 penalty for each aggrieved employee is reduced to either $25 or $50 depending on the violation.

• The $25 penalty is for failure to include required information on a wage statement.
• The $50 penalty is for alleged violations resulting from an isolated, short-duration event.

Additionally, the $200 penalty for subsequent violations are limited to violations where: (1) within the five years of the prior violation, the LWDA or a court issued a ruling that the policy or practice was unlawful or (2) a court determines that the employer’s conduct that gave rise to the violation was malicious, fraudulent, or oppressive.  

Capped Penalties for Proactive Compliance

Another significant change to penalties is the new penalty cap. New PAGA caps an employer’s penalties who take reasonable steps to comply with the Labor Code. For instance, employers will have penalties capped at 15% if they remediate before receiving a PAGA notice and at 30% if they remediate after receiving the notice. Reasonable steps include: conducting wage and hour compliance audits, issuing lawful written policies, training supervisors on wage and hour requirements, and taking corrective action when supervisors violate wage and hour requirements.

Increase Allocation for Aggrieved Employees

Previously, out of these penalties, aggrieved employees collected 25%, while the remaining 75% went to the LWDA. New PAGA increases the allocation to employees to 35%.

No Penalties for Related Violations

Employees who recover civil penalties for underlying wage violations cannot also collect civil penalties for related claims involving failure to pay wages at termination, failure to pay wages during employment (unless willful or intentional), or failure to provide a compliant wage statement.

Early Resolution of Claims

Employers are provided an avenue to resolve PAGA claims sooner. Under New PAGA, employers may file a request for an early evaluation conference once a PAGA lawsuit is filed in court. Filing the request stays the proceeding.

Additionally, beginning October 1, 2024, employers with fewer than 100 employees may submit to the LWDA a confidential proposal to cure one or more of alleged violations within thirty (33) days of receiving a PAGA notice, and the agency may set a conference with the parties to determine if the cure is satisfactory.

New PAGA Standing for Plaintiffs

In the past, an employee who suffered a California Labor Code violation could sue under PAGA on behalf of himself and other current or former employees who suffered the same or any other kind of Labor Code violation. Under New PAGA, an aggrieved employee can only sue on behalf of themself and other current or former employees against whom a violation of the same Labor Code provision was committed. In other words, an aggrieved employee can sue on behalf of others if the violations they experienced were the same. New PAGA plaintiffs must also have experienced the violations they prosecute within the one-year statute of limitations.

With these PAGA reforms, we advise employers to take advantage of these opportunities by regularly auditing all of its wage and hour practices, and responding to PAGA notices immediately.

‍