California’s PAGA Gets a Makeover: What Employers Need to Know

Buckle up because we’ve got some big news that might just make your day. Remember PAGA, that thorn in your side for the last two decades? Well, it’s finally getting a much-needed overhaul!

On July 1, 2024, Governor Gavin Newsom put pen to paper and signed Assembly Bill 2288 and Senate Bill 92 into law. These bills are set to shake things up in a major way when it comes to California’s Private Attorney General Act (PAGA). And trust me, it’s about time!

A Little PAGA History For those who need a refresher, PAGA came into being 20 years ago with the noble intention of letting employees collect penalties for Labor Code violations on behalf of the state. Sounds good in theory, right? Well, as many of you know all too well, it didn’t quite pan out that way. Instead, it became a weapon in the hands of plaintiffs’ attorneys, leading to a flood of lawsuits that’s been giving California employers headaches for years.

The Winds of Change Fed up with the situation, various industry groups were gearing up to put initiatives on the November 2024 ballot to repeal PAGA altogether. But in a twist that would make any political drama writer proud, labor and business groups reached a compromise with Governor Newsom. The result? The most significant changes to PAGA since its inception.

So, what’s new? Let’s break it down:

• Tougher Standing Requirements Remember when plaintiffs could bring PAGA claims for any Labor Code violation as long as they personally experienced just one? Those days are over! Now, plaintiffs need to have actually experienced each violation they’re claiming. This is huge, folks. It means more focused lawsuits and potentially fewer frivolous claims.
• Statute of Limitations Clarification The one-year statute of limitations now applies to the specific violation that gives the plaintiff standing. This puts an end to the argument that there was no time limit on individual PAGA claims.
• Manageability Matters Courts now have the power to limit the scope of PAGA claims to ensure they can be effectively tried. This is a win for common sense and should help prevent sprawling, unmanageable lawsuits.
• Opportunity to Cure Here’s a big one: employers now have more chances to fix alleged violations before things escalate to litigation. There’s even an option for an early evaluation conference with a neutral evaluator. For smaller businesses (less than 100 employees), there are additional opportunities to propose cures for violations.
• Penalty Caps for Good Faith Efforts If you’re taking reasonable steps to comply with the Labor Code (like conducting audits, enforcing good policies, and training your team), you could see your potential penalties capped at 15% or 30% of what they would have been otherwise. In some cases, penalties might even be eliminated entirely if you act fast to fix issues.

What Does This Mean for You?

While these changes are definitely a step in the right direction, don’t start popping champagne corks just yet. PAGA still poses risks, and compliance is more important than ever. Here’s what you should do:

• Review and update your policies
  Conduct regular audits of your payroll and timekeeping practices
  Train your managers and supervisors on Labor Code requirements
  Act quickly if you receive a PAGA notice – time is of the essence!

These PAGA reforms offer some much-needed relief for California employers, but they also underscore the importance of staying on top of your labor law compliance game. By taking proactive steps and leveraging these new provisions when needed, you can significantly reduce your PAGA risk exposure.

Remember, most of these changes apply to PAGA actions filed on or after June 19, 2024, so you’ve got some time to get your ducks in a row. Use it wisely!
Stay compliant, stay vigilant, and here’s to a future with fewer PAGA headaches!

Be Audit-Secure!

Lisa Smith, SPHR, SCP