California Governor Newsom Signs PAGA Reform, by Kartikey Pradhan, Esq., 7-2-2024

California Governor Gavin Newsom has signed legislation to reform the Private Attorneys General Act (PAGA) that among provisions includes significant changes to PAGA’s penalty structure.

The signing of the two reform measures-Assembly Bill 2288 and Senate Bill 92-comes on the heels of Governor Newsom announcing last month that he and labor and business groups had reached an agreement, averting a contentious ballot measure called the, “Fair Pay and Employer Accountability Act,” which could have potentially replaced PAGA.

Enacted in 2004, PAGA allows aggrieved employees to bring civil claims on behalf of themselves and other current or former employees against employers for alleged Labor Code violations. Before PAGA, only the state could recover these civil penalties. PAGA critics argue it has led to a surge of frivolous lawsuits and have pushed for reform.

According to the Governor’s office, the PAGA reform proposal will:

Reform Penalty Structure

• Encourages compliance with labor laws by capping penalties on employers who quickly take steps to fix policies and practices, and make workers whole, after receiving a PAGA notice, as well as on employers that act responsibly to take steps proactively to comply with the labor code before even receiving a PAGA notice.
• Creates new, higher penalties on employers who act maliciously, fraudulently or oppressively in violating labor laws.
• Ensures that more of the penalty money goes to employees by increasing the amount allocated to employees from 25% to 35%.

Reduce and Streamline Litigation

• Expands which Labor Code sections can be cured to reduce the need for litigation and make employees whole quickly.
• Protects small employers by providing a more robust right to cure process through the Labor and Workforce Development Agency (LWDA) to reduce litigation and costs.
• Codifies that a court may limit both the scope of claims presented at trial to ensure cases can be managed effectively.

Improve Measures for Injunctive Relief and Standing

• Allows courts to provide injunctive relief to compel businesses to implement changes in the workplace to remedy labor law violations.
• Requires the employee to personally experience the alleged violations brought in a claim.

Strengthen State Enforcement

• Give the Department of Industrial Relations (DIR) the ability to expedite hiring and fill vacancies to ensure effective and timely enforcement of employee labor claims.

Both bills would only apply to cases brought on or after June 19, 2024.

While the legislation may help curtail some frivolous litigation, it will not eliminate California employer’s exposure to PAGA litigation. Among proactive steps, it is prudent to review your wage and hour practices to mitigate your risk of running afoul of labor laws. If you need assistance navigating the complexities of PAGA, please contact the attorneys in Kaufman Dolowich’s labor and employment law team.