{"id":1606,"date":"2024-06-28T08:37:00","date_gmt":"2024-06-28T12:37:00","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=1606"},"modified":"2025-07-18T12:56:49","modified_gmt":"2025-07-18T16:56:49","slug":"california-legislature-passes-paga-reform-bills","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2024\/06\/28\/california-legislature-passes-paga-reform-bills\/","title":{"rendered":"California Legislature Passes PAGA Reform Bills"},"content":{"rendered":"<p><strong><a href=\"http:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2024\/06\/PAGA.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft size-medium wp-image-1607\" src=\"http:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2024\/06\/PAGA-300x157.png\" alt=\"\" width=\"300\" height=\"157\" srcset=\"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2024\/06\/PAGA-300x157.png 300w, https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2024\/06\/PAGA-1024x536.png 1024w, https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2024\/06\/PAGA-768x402.png 768w, https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2024\/06\/PAGA.png 1200w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a>By Jennifer Riley and Gerald L. Maatman, Jr. <\/strong><\/p>\n<p><strong>Duane Morris Takeaways<\/strong>: <em>PAGA reform is here.\u00a0 On June 27, 2024, the California Legislature signed off on two bills (AB 2298 and SB 92) resulting in significant reforms to California\u2019s Private Attorneys General Act (\u201cPAGA\u201d). Governor Newsom previously announced the deal between business and labor groups, which also means the referendum to repeal PAGA will <strong>not <\/strong>appear on the November ballot.\u00a0 Once signed into law by the Governor, the new reforms will bring sweeping changes to the PAGA.\u00a0 These changes aim to curtail many of the criticisms that have been levied at the PAGA from both groups.\u00a0 The changes apply to PAGA actions in which the PAGA notice was filed on or after June 19, 2024 and it is anticipated that the changes will also have an immediate impact on litigation strategy in pending PAGA actions filed before that date as well.\u00a0\u00a0\u00a0\u00a0\u00a0 <\/em><\/p>\n<p><strong>California Legislature Approves PAGA Reform Bills<\/strong><\/p>\n<p>After Governor Newsom announced on June 18, 2024, that labor and business interests had inked a deal significantly altering the PAGA, the California Legislature quickly moved to approve two bills (AB 2288 and Senate Bill 92).\u00a0 Proponents of the initiative to repeal PAGA had agreed to withdraw the referendum if the bills were passed within the deadline to withdraw the referendum.\u00a0 The bills were approved just in the nick of time \u2014 on June 27, 2024, which was both the deadline to withdraw the the PAGA referendum and the date the two bills were passed.\u00a0 These changes include reforms to the penalty structure, new defenses for employers, standing requirements limiting the scope of PAGA actions, and a new \u201ccure\u201d process for both small and large employers, among other changes that will significantly impact litigation strategy for PAGA claims (and likely spawn new legal questions as the law is tested in the field and the courts.)\u00a0 The reforms do not alter the requirement that a claimant first file a notice with the Labor &amp; Workforce Development Agency (\u201cLWDA\u201d) also known as an LWDA or PAGA notice.\u00a0 These reforms affect all PAGA notices filed on or after June 19, 2024, with some exceptions, described in further detail below.<\/p>\n<p><strong>Penalty Structure Reforms <\/strong><\/p>\n<p>One of the primary complaints from business interests, in particular small business interests, was that the PAGA\u2019s penalty structure frequently resulted in potential penalties in the millions upon millions of dollars based on the barest of allegations, often of highly technical violations of the Labor Code.\u00a0 Employers complained that these violations did not implicate any actual harm to employees and that there could be compounded penalties for so-called \u201cderivative\u201d claims.\u00a0 The compounding of penalties meant plaintiffs would try to stack multiple penalties based on the same alleged act or omission by an employer.\u00a0 The new PAGA addresses several of these complaints, eliminating some penalties altogether, limiting the availability of penalties for certain derivative claims, and clarifying how penalties are calculated.<\/p>\n<ul>\n<li><strong>Clarity on Initial vs. Subsequent Violations:<\/strong> \u00ad\u00adPreviously, PAGA penalties were set at $100 for \u201cinitial\u201d violations of the Labor Code and $200 for any \u201csubsequent\u201d violations, unless otherwise prescribed by statute.\u00a0 The reforms removed the distinction between \u201cinitial\u201d and \u201csubsequent\u201d violations \u2014 now the civil penalty for an alleged violation is $100 for each aggrieved employee per pay period.\u00a0 However, a court may reduce a penalty award in order to avoid an award that is unjust, arbitrary and oppressive, or confiscatory.\u00a0 <em>See<\/em> Lab. Code \u00a7 2699(e)(2).\u00a0\u00a0Repeat offenders may be subject to higher penalties.<\/li>\n<li><strong>Reduced Penalties for Isolated Events:<\/strong> If the violation resulted from an isolated, non-recurring event (<em>e<\/em>., the violation had not extended beyond the lesser of 30 days or four consecutive pay periods), the penalties are further limited to $50 per aggrieved employee per pay period. <em>See<\/em> Cal. Lab. Code \u00a7 2699(f)(2)(A)(ii).<\/li>\n<li><strong>Reduced Penalties for Wage Statement Violations<\/strong><strong>:<\/strong> If the violation is a violation of Labor Code section 226 for non-complaint wage statements, additional limitations apply.\u00a0 For violations of \u00a7 226(a) (other than (a)(8) regarding the legal name or address of the employer), the penalty is $25 for each aggrieved employee per pay period if the employee could promptly and easily determine accurate information from the wage statement or if the employee would not be confused or misled about the correct identity of their employer.\u00a0 If the violation involves \u00a7 226(a)(8), the penalty is $25 if the employee would not be confused or misled about the correct identity of their employer or, if their employer is a farm labor contractor, the legal entity that secured the services of that employer.\u00a0 These limitations do not apply if the employer failed to provide a wage statement to the employee.\u00a0 <em>See<\/em> Lab. Code \u00a7 2699(f)(2)(A)(i).<\/li>\n<li><strong>Special Rules for Increased Penalties:<\/strong> In lieu of the \u201csubsequent violation\u201d penalty, a $200 penalty per aggrieved employee per pay period can now only be levied in certain circumstances.\u00a0 Specifically, this amount may only be awarded where an agency or court has determined that the employer\u2019s policy or practice led to that same violation of the Labor Code in the previous five years or if a court determines that the employers\u2019 conduct was malicious, fraudulent, or oppressive.\u00a0 <em>See<\/em> Lab. Code \u00a7 2699(f)(2)(B).<\/li>\n<li><strong>No Additional Recovery For Derivative Penalties Under Labor Code Sections 201, 202, or 203:<\/strong> An employee can no longer recover additional penalties for violations of Labor Code section 201, 202, or 203, which address when an employee must be paid upon resignation or termination, when seeking recovery for underlying wage violations.\u00a0 The same applies to Labor Code sections 204 and 226, unless the violation meets heightened scienter requirements as outlined below. <em>See<\/em> Lab. Code \u00a7 2699(i).<\/li>\n<li><strong>Limited Recovery Under Labor Code Sections 204 and 226:<\/strong> An employee can recover additional penalties for Labor Code section 204, which addresses when an employee must be paid during their employment, if that violation is willful or intentional.\u00a0 Additionally, an employee can recover additional penalties for violation of Labor Code section 226, which mandates that certain information be included on wage statements, if that violation is knowing, intentional, or involves a complete failure to provide a wage statement.\u00a0 <em>See<\/em> Lab. Code \u00a7 2699(i).<\/li>\n<li><strong>Pay Period Defined:<\/strong> PAGA originally imposed monetary penalties on a per pay period basis. This unfairly penalized employers that paid employees on a weekly basis, as opposed to a biweekly basis.\u00a0 The reforms address this disparity, by clarifying that the recoverable penalties will be reduced by 50% where an employer\u2019s regular pay period is weekly rather than biweekly.<\/li>\n<li><strong>Employee\u2019s Share Of Recovery Increased<\/strong>: The percentage of penalties awarded to the aggrieved employees has been increased from 25% to 35%.<\/li>\n<\/ul>\n<p><strong>The \u201cCure\u201d For Employers\u2019 Ills <\/strong><\/p>\n<p>The reforms also introduce a new and more complicated \u201ccure\u201d process for avoiding or reducing penalties.\u00a0 Employers may take steps before a complaint is filed, or during litigation, to limit potential penalties.<\/p>\n<ul>\n<li><strong>Pre-LWDA Notice Penalty Cap<\/strong><strong>:<\/strong> If, before receiving an LWDA notice or a request for records from the employee, an employer takes \u201call reasonable steps\u201d to cure the violations alleged in the LWDA letter, awardable penalties are now capped at no more than 15% of the total available penalties.\u00a0 <em>See<\/em> Lab. Code \u00a7 2699(g).<\/li>\n<li><strong>Post-LWDA Notice Penalty Cap<\/strong>: The penalty cap is increased to 30% if the \u201creasonable steps\u201d are taken within 60 days of receiving the LWDA Notice.\u00a0 <em>See<\/em> Lab. Code \u00a7 2699(h).<\/li>\n<\/ul>\n<p>An employer takes \u201call reasonable steps\u201d if it conducts periodic payroll audits and takes action in response to those audits, disseminates lawful policies, trains supervisors on applicable Labor Code and wage order compliance, and takes appropriate corrective action with regard to its supervisors.\u00a0 Whether or not an employer\u2019s conduct was reasonable will be evaluated by the totality of the circumstances. <em>See<\/em> Cal. Lab. Code \u00a7 2699(g)(2).<\/p>\n<p><strong>Eliminating Penalties Altogether <\/strong><\/p>\n<p>In addition to these caps, there is now a path towards the complete elimination of PAGA penalties if an employer cures an alleged labor code violation.\u00a0 Specifically, if an employer takes the \u201creasonable steps\u201d defined by statute <em>and<\/em> actually cures an employee\u2019s unpaid wages, the employee can no longer recover PAGA penalties for the Labor Code violation.\u00a0 The \u201ccure\u201d is effective when the employee is \u201cmade whole,\u201d or provided an amount sufficient to recover any unpaid wages due to the alleged violations going back <em>three years<\/em> from the date of the notice.\u00a0 However, this amount must also include seven percent interest, liquidated damages that are required by statute, <strong>and <\/strong>a reasonable attorneys\u2019 fees award as determined by the court or agency.\u00a0 Practically speaking, this \u201ccure\u201d option will likely still require costly outlays to ensure all fees are covered and potentially litigation over the reasonableness of the claimed attorneys\u2019 fees.\u00a0 We anticipate that, in response to these complicated requirements, employee\u2019s may start to include in the LWDA notice a calculation of the proposed \u201ccure\u201d amount, much like an initial settlement demand.<\/p>\n<p><strong>New Standing Requirement <\/strong><\/p>\n<p>Prior to the passage of these bills, judicial interpretations of the statute held that an employee who experienced a single Labor Code violation could bring a claim for violations of <em>any <\/em>provision of the Labor Code on behalf of aggrieved employees, even for violations the employee bringing the claim never experienced.\u00a0 Now, an employee must have suffered every violation he or she attempts to bring on behalf of other aggrieved employees.\u00a0 This inclusion effectively negates the California Court of Appeal\u2019s ruling in <em>Huff v. Securitas Security USA Services, Inc., <\/em>23 Cal.App.5th 745 (2018), which held that an employee could seek PAGA penalties for any and all Labor Code violations, even if the employee had not experienced those violations. The new standing requirement will narrow the scope of PAGA actions to only those allegedly suffered by the PAGA plaintiff\u2014and by extension add some guard rails to discovery as well as the size of the representative group at issue.<\/p>\n<p><strong>Manageability Is Back!<\/strong><\/p>\n<p>The bills also codified a long-litigated potential defense known as \u201cmanageability.\u201d\u00a0 Specifically, in January of this year, the California Supreme Court struck down the limited defense that employers had been using to try to reign in PAGA matters, holding that trial courts did <em>not <\/em>have the inherent authority to strike a claim as unmanageable.\u00a0 <em>See Estrada v. Royal Carpet Mills, Inc.<\/em>, 15 Cal.5th 582 (2024).<em>\u00a0 <\/em>Now, courts are empowered by statute to limit evidence presented at trial or the scope of the claims to ensure that the case is manageable and may be effectively tried.\u00a0 It will remain to be seen whether requests for trial plans enter the employer\u2019s toolbox in these representative matters as they have in California class actions.<\/p>\n<p><strong>Injunctive Relief<\/strong><\/p>\n<p>Another criticism of the PAGA was the inability of a PAGA plaintiff to seek injunctive relief, effectively making PAGA a bounty-hunter statute with no real teeth to effectuate change.\u00a0 Under the new reforms, an employee can now seek injunctive relief related to alleged Labor Code violations.\u00a0 Employers should be prepared for new PAGA claims to include requests that the Court require the employer to modify their practices to ensure compliance with Labor Code provisions.\u00a0 This is reminiscent of the injunctive relief available to plaintiffs under California\u2019s Unfair Competition Law.\u00a0 Labor had identified this provision as a key priority for PAGA reform and comments from representatives from the business community reflect the common interest in working towards full compliance with the Labor Code for all employers and employees.<\/p>\n<p><strong>New Early Evaluation Procedures For Large And Small Businesses<\/strong><\/p>\n<p>The reforms introduce new procedures both with the LWDA and the courts to allow for effective litigation, and potential early resolution, of these claims.<\/p>\n<p>For PAGA notices (and their associated claims) filed on or after June 19, 2024, employers who employed at least 100 employees during the PAGA period can now request an \u201cearly evaluation conference\u201d and a request to stay the proceedings before or simultaneous with the employer\u2019s responsive pleading.\u00a0 This request must include a statement from the employer identifying which allegations it disputes and which allegations it will cure.\u00a0 The court will then set an early evaluation conference.\u00a0 To the extent the employer stated they would cure any of the alleged violations, the court may also ask the employer to submit to the neutral and plaintiff, on a confidential basis, the employer\u2019s plan to cure the deficiencies.\u00a0 If other violations remain in dispute, the neutral may stay the consideration of the cure plan or agreement until after the litigation of the disputed issues.<\/p>\n<p>If the neutral approves the cure plan, the employer must submit evidence within ten days showing that the cure occurred. If the neutral, employer, and employee all agree the violations have been cured, they will submit a joint statement to the court setting forth the terms of their agreement.\u00a0 If the neutral or employee does not agree that the violation was cured, the employer may file a motion to request the court to approve the cure.\u00a0 The employer can submit evidence with this motion showing that the alleged violations were corrected.\u00a0 Any PAGA penalties calculated with these cures must take into account other limitations and caps on penalties that would be applicable due to the prompt cure.<\/p>\n<p>Smaller employers have a separate early evaluation process.\u00a0 Before October 1, 2024, employers with fewer than 100 employees during the PAGA period cannot take advantage of this early conference.\u00a0 However, starting October 1, 2024, employers with under 100 employees can submit a confidential proposal to the LWDA within 33 days of their receipt of notice that lays out their exact plan for the cure.\u00a0 The LWDA can make a determination on the sufficiency of the cure at the outset or set a conference to determine the sufficiency of the cure.<\/p>\n<p>If the cure is facially sufficient or if the LWDA believes a conference is needed to discern the sufficiency of the cure, the LWDA will set a conference.\u00a0 This is an accelerated timeline, as the LWDA must rule on the plan within 14 days of its submission and the conference must occur within 30 days of that date.\u00a0 At this conference, the LWDA will discern if the cures are sufficient, whether or not any additional information is needed, and set a deadline to complete the cure.<\/p>\n<p>When the employer completes the cure, it must provide to the LWDA and the plaintiff a sworn notification to the employee and agency that the cure is completed, accompanied by a payroll audit and check register if the violation involves a payment obligation.\u00a0 The LWDA must confirm whether the cure was completed within twenty days of receiving the cure documents.\u00a0 If the LWDA preliminarily believes the violation has been cured, the LWDA must provide notice to the plaintiff that the cure is complete.\u00a0 If a plaintiff disagrees with the decision, the plaintiff may request a hearing on that determination.\u00a0 If the LWDA confirms the violation was cured, the employee cannot continue with a civil action.\u00a0 The employee can also appeal this determination to the superior court, although any payment the plaintiff received as part of the cure process will offset any judgment later entered with respect to that violation if the superior court concludes the agency abused its discretion in finding the cure was adequate.<\/p>\n<p>However, if the LWDA believes the cure proposal is not sufficient, the employee can proceed with a civil action.\u00a0 Importantly, if this process extends beyond the 65-day timeframe for the investigation by the LWDA, the statute of limitations on the PAGA claims are tolled.\u00a0 As of October 1, 2024, employers with fewer than 100 employees during the PAGA period can also request the early evaluation conference described above for larger employers.\u00a0 The employer\u2019s submission of a cure proposal to the LWDA does not prevent the employer from requesting the early evaluation conference.\u00a0 However, no employer can use this notice and \u201ccure\u201d provision more than one time in a 12-month period for violations of the same provision, regardless of the location of the worksite or if it did not cure that same violation upon prior notice.\u00a0 <em>See<\/em> Cal. Lab. Code \u00a7 2699.3(d)<\/p>\n<p>There is also a separate process if the only alleged violation the small employer will seek to cure is a violation of Labor Code section 226.\u00a0 In that case, the employer can cure the deficiency within 33 days of the postmark date of the notice and file notice with a description of the cure to both the LWDA and the plaintiff.\u00a0 If the plaintiff disputes this cure, he or she may file notice describing why the cure is being disputed.\u00a0 This process is also on an accelerated timeline, and the LWDA must make a determination within 17 days of receipt of that dispute.\u00a0 The LWDA can either confirm the cure, provide an additional three days for the employer to complete the cure, or allow the employee to file a PAGA claim for violation of Labor Code section 226.\u00a0 If the LWDA does not respond, the employee can continue with his or her PAGA claim.\u00a0 This determination can also be appealed to the superior court.<\/p>\n<p><strong>Impact On Employers and Litigation Strategy<\/strong><\/p>\n<p>While the focus may be on the reduction of penalties, the passage of these bills has also ushered in a new era for employers.\u00a0 Not only will this greatly impact litigation strategy when dealing with PAGA claims, but employers now have a tight timeline in which to make important strategic decisions regarding things like election into early evaluation, cure, or other alternative dispute resolution.\u00a0 Many are celebrating the reforms, but it remains to be seen how these reforms will impact PAGA litigation generally.\u00a0 Because the reforms only apply as of June 19, 2024, employers with pending PAGA matters will want to look closely at the reforms and their cases to see whether and how the reforms will impact those pending matters.\u00a0 In addition, we anticipate that there will be some bumps as the LWDA and the courts work through new questions raised by these reforms.\u00a0 Each case is unique and employers should work closely with counsel to evaluate each claim.<\/p>\n<p><strong>What Should Employers Do Next<\/strong>?<\/p>\n<p>As always, it is important to maintain up to date, compliant policies and practices and ensure your teams are trained on those policies.\u00a0 If you are hit with an LWDA notice, take prompt action to evaluate whether one of these new alternative procedures will benefit your company.<\/p>\n<p>Please stay tuned for additional steps you can take in light of these reforms.<\/p>\n<p>If you have any questions about this post, please feel free to contact any of the wage-and-hour attorneys in our Employment, Labor, Benefits and Immigration Practice Group or your Duane Morris contact.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Jennifer Riley and Gerald L. Maatman, Jr. Duane Morris Takeaways: PAGA reform is here.\u00a0 On June 27, 2024, the California Legislature signed off on two bills (AB 2298 and SB 92) resulting in significant reforms to California\u2019s Private Attorneys General Act (\u201cPAGA\u201d). Governor Newsom previously announced the deal between business and labor groups, which &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/blogs.duanemorris.com\/classactiondefense\/2024\/06\/28\/california-legislature-passes-paga-reform-bills\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;California Legislature Passes PAGA Reform Bills&#8221;<\/span><\/a><\/p>\n","protected":false},"author":583,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[107],"tags":[],"ppma_author":[30],"class_list":["post-1606","post","type-post","status-publish","format-standard","hentry","category-paga-actions"],"authors":[{"term_id":30,"user_id":583,"is_guest":0,"slug":"classactiondefense","display_name":"Class Action Defense","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2020\/10\/dmlogo.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/1606","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/users\/583"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/comments?post=1606"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/1606\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/media?parent=1606"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/categories?post=1606"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/tags?post=1606"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/ppma_author?post=1606"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}