On June 18, 2024, California Governor Gavin Newsom, Senate President professional Tempore Mike McGuire and Meeting Speaker Robert Rivas introduced a tentative deal to reform a variety of elements of California’s Non-public Attorneys Normal Act (PAGA). Whereas laws is but to be launched, the publicly introduced key parts of PAGA reform embrace a rise in staff’ share of PAGA penalties, caps on penalties for employers who take steps to adjust to the Labor Code or repair potential points after receiving discover of a PAGA declare, and requiring the consultant plaintiff to expertise each alleged PAGA violation to have standing. This reform, if enacted, is prone to curb, however not eradicate PAGA litigation for California employers going ahead.
As presently written, PAGA permits a present or former worker to deliver litigation in opposition to an employer to get better penalties on behalf of “aggrieved staff”, in addition to get better lawyer’s charges and prices. PAGA penalties could attain as much as $100, $200 or extra per pay interval per aggrieved worker. The statute of limitations for a PAGA declare is one yr, and PAGA claims could also be asserted both as half of a bigger wage and hour class motion or as a standalone “PAGA-only” lawsuit. Whereas PAGA claims would possibly seem to hold decrease publicity primarily based on the shorter statute of limitations (1 yr versus 3-4 years in a typical wage and hour class motion), PAGA-only claims differ in a variety of essential methods from class actions. First, a PAGA declare will not be topic to class certification. Second, California regulation permits for broad discovery of worker info from the outset of a PAGA case. Third, technical violations which may in any other case be de minimis in a wage and hour class motion are topic to the statutory penalties of $100 or $200 per pay interval, per worker.
In mild of this, PAGA has been a big driver of wage and hour litigation in California, and on account of the latest exponential improve in PAGA litigation in California, a reform measure was positioned on the November 2024 poll by a coalition of non-profits, social justice advocates, household farmers, well being care suppliers, and companies.
After months of discussions with labor advocates and the coalition, California’s political leaders agreed on the outlines of a PAGA reform deal to be thought-about by the California Legislature. The reforms, if handed by the California Legislature and signed by Governor Newsom earlier than June 27, 2024 (the deadline for measures to be withdrawn from the November 2024 poll), would lead to elimination of the PAGA reform measure from California’s November poll.
The core components of the reform package deal are to extend the worker share of any restoration, improve penalties for malicious employer conduct, cap penalties for employers who make efforts to adjust to the Labor Code, allow employers to remedy extra alleged Labor Code violations to make staff complete and keep away from litigation, and require a consultant plaintiff to expertise all alleged Labor Code violations to have standing to pursue PAGA litigation. Every of those core components is mentioned additional beneath:
Worker Share of Penalty
At the moment, any PAGA penalties awarded, after lawyer’s charges and prices are subtracted, are apportioned 75% to the California Labor Workforce Improvement Company, and the remaining 25% is distributed amongst the aggrieved staff. The PAGA reform will increase the aggrieved worker’s share of the penalties to 35%.
Elevated Penalties for Malicious Employer Conduct
The PAGA reform deal will create a brand new $200 per pay interval penalty for cases the place an employer acted maliciously, fraudulently, or oppressively. It’s presently unclear what constitutes malicious, fraudulent, or oppressive conduct, although this language is just like the usual for punitive damages relevant to non-wage and hour employment claims.
Caps on Employer Legal responsibility
The PAGA reform deal proposes caps on PAGA penalties for employers who try to adjust to the Labor Code earlier than receiving a PAGA discover and people employers who take steps to repair insurance policies and practices after receiving a PAGA discover.
These employers who proactively take steps to adjust to the Labor Code earlier than receiving a PAGA discover would solely be topic to a most of 15% of the relevant PAGA penalty for a given declare.
These employers who take steps to repair insurance policies and practices after receiving a PAGA discover would solely be topic to a most of 30% of the relevant PAGA penalty for a given declare.
Whereas it has not been introduced what employer conduct qualifies as proactive compliance efforts or what steps to repair insurance policies or practices are essential to qualify for the relevant caps, it’s clear common compliance efforts and swift responses to PAGA letters will turn out to be solely extra crucial going ahead.
Different Penalty Reductions
The reform deal additionally reduces the utmost penalty by an unknown quantity in cases the place the alleged violation was transient, in addition to for alleged technical wage assertion violations that didn’t trigger confusion or financial hurt to the worker, corresponding to misspelling of firm names.
The reform deal additionally offers a mechanism for equalizing penalties for these employers who pay their staff on a weekly foundation, versus bi-weekly. PAGA penalties are presently assessed on a per pay interval foundation, making employers who make the most of weekly payroll doubtlessly topic to double the quantity of PAGA penalties as an employer paying bi-weekly.
Employer Alternative to Keep away from Litigation
The reform deal offers a number of alternatives for employers to keep away from litigation, both by curing the alleged violations or partaking in an early decision course of by way of the courts.
PAGA presently offers an employer the chance to keep away from legal responsibility if it correctly cures sure technical violations of the duty to offer correct wage statements.
The PAGA reform deal proposes an elevated, although presently unspecified, variety of Labor Code provisions that could be cured by an employer upon discover of the potential violations.
The reform deal additionally offers elevated remedy alternatives for small employers, by way of an unspecified course of by way of the Labor and Workforce Improvement Company.
Lastly, the reform deal offers for early decision alternatives for big employers in court docket, presumably by way of a court-mandated early settlement course of.
Standing
Presently, below Kim v. Reins Worldwide California, Inc.(2020) 9 Cal.fifth 73, a consultant plaintiff has standing to deliver a PAGA lawsuit as long as the plaintiff was employed by the alleged violator and personally suffered at any time limit at the least one Labor Code violation on which the PAGA lawsuit was primarily based. The reform deal proposes {that a} consultant plaintiff should have truly skilled all the alleged PAGA violations inside the one-year statute of limitations for PAGA claims to have standing to pursue the litigation.
Manageability
Presently, below the California Supreme Court docket’s latest choice in Estrada v. Royalty Carpet Mills, Inc., trial courts lack inherent authority to strike PAGA claims on manageability grounds, even when these claims are complicated or time intensive, not like the authority that trial courts should bar class motion claims. The PAGA reform deal can be a transfer towards overturning Estrada and codifying a trial court docket’s potential to restrict the scope of claims and the proof introduced at trial for causes of manageability.
Elevated State Enforcement
The PAGA reform deal would additionally commit the Newsom administration to in search of expedited hiring to fill vacancies on the California Division of Industrial Relations (DIR) to enhance and expedite enforcement of worker labor claims by the DIR, as an alternative of by non-public attorneys normal.
Conclusion
The PAGA reform deal, assuming it’s handed within the publicly introduced kind by the Legislature and signed by the Governor earlier than the June 27, 2024 deadline to withdraw the PAGA poll measure, is prone to curb, however not eradicate PAGA litigation for California employers going ahead. The reformed PAGA will, if handed as introduced, make it much more crucial for employers to proactively monitor their California wage and hour compliance, in addition to act swiftly to judge their choices to repair or remedy the alleged violations once they obtain discover of a possible PAGA declare.