PAGA reform finally on the horizon

This week, California Governor Gavin Newsom announced that legislative leadership, in partnership with business and labor groups, reached an agreement on long-needed reforms to the Private Attorneys General Act (PAGA). The proposed bill will be in print by June 24. If—as expected—the bill is approved by the Legislature by June 27, the PAGA repeal initiative set to go before voters in November 2024 will be removed from the ballot.

Although the full bill has not yet been published, here is what we know so far:

1. Caps penalties: PAGA penalties will be capped for employers who proactively take steps to comply with the Labor Code before receiving a PAGA notice (15 percent of the maximum penalty) and those who proactively take steps to comply after receiving a PAGA notice (30 percent of the maximum penalty). Additionally, the maximum penalty may be reduced where the violation was brief, did not cause economic harm to the employee or did not confuse the employee as to their hours and pay (with respect to technically inaccurate wage statements).
2. Addresses “stacking” and derivative claims: The proposal may include limitations to the “stacking” of penalties and derivative claims based on a single violation.
3. Employer right to cure: Expands which Labor Code sections can be cured, so employees are made whole more quickly. The proposal will also expand the Labor and Workforce Development Agency (LWDA) to provide a more robust early resolution and cure process in order to reduce litigation costs.
4. Strengthens standing: PAGA plaintiff must have personally experienced each Labor Code violation for which they seek to recover civil penalties. Further, any alleged violations must have occurred within the last year. 
5. Judicial discretion: Courts will have the authority to limit both the scope of claims and evidence presented at trial.
6.  Increases employee share of penalty: The proposal will increase the share employees receive from any penalty from 25 percent to 35 percent.
7. Expands state enforcement: The Governor’s office will also pursue a trailer bill which will expand the California Department of Industrial Relations (DIR) so that the State is able to handle a larger share of enforcement actions rather than plaintiffs’ attorneys.

While much is still unclear about the full scope of the agreement, we expect the picture to come into focus when the full text of the bill is released in the coming days. In the meantime, if you have any questions please reach out to Debbie Birndorf-Zeiler and Phillip Di Tullio.