On July 1, 2024, California Governor Gavin Newsom signed Meeting Invoice 2288 and Senate Invoice 92 considerably reforming California’s Non-public Legal professional Basic Act (“PAGA”).
Twenty years in the past, PAGA was enacted as a mechanism to permit California workers to gather penalties for Labor Code violations on behalf of the state. Since then, the statute has been weaponized by the plaintiffs’ bar, forcing employers to stare down an ever-increasing variety of PAGA lawsuits within the a long time since its enactment. Fed up with the infamous abuses of the statute, numerous {industry} teams proposed initiatives to repeal PAGA and implement a brand new set of Labor Code enforcement mechanisms which have been set to seem on the November 2024 poll.
To keep away from a “battle of the poll” this Fall, labor and enterprise teams reached settlement with Governor Newsom on a set of PAGA reforms which are essentially the most important modifications to PAGA in its twenty-year historical past. The amendments present some lengthy overdue aid to California employers who’ve struggled beneath PAGA’s substantial weight for the final 20 years. Beneath is what employers must find out about these vital legislative modifications, which (with few exceptions) will apply solely to PAGA actions filed on or after June 19, 2024, in addition to PAGA notices submitted to the Labor Workforce Improvement Company (“LWDA”) on or after that date.
A Greater Burden for Plaintiffs to Set up Standing
Probably the most important developments is that SB 92 requires plaintiffs to really expertise every alleged Labor Code violation they’re in search of to pursue on a consultant foundation to satisfy the definition of an “aggrieved worker” throughout the that means of PAGA. This nullifies prior case regulation from the Court docket of Attraction in Huff v. Securitas Safety USA Companies, Inc., which gave plaintiffs standing to carry PAGA claims for any Labor Code violations, so long as they might present that they suffered not less than one Labor Code violation.
SB 92 raises what was beforehand perceived by California employers as an unreasonably low burden. The modification represents a return to a extra conventional strategy to standing and supplies extra sensible litigation methods for employers. For instance, following this modification, employers will now have the ability to advocate for the adjudication of plaintiff’s claims first, in order that the scope of the consultant group could also be restricted from the outset. Importantly, SB 92 won’t apply to PAGA actions introduced by nonprofit authorized help associations which have been concerned in PAGA litigation for not less than 5 years.
Along with the “private expertise” requirement of SB 92, AB 2288 makes clear that the one-year PAGA statute of limitations applies to the Labor Code violation that the plaintiff will need to have truly skilled to have standing to carry the PAGA motion within the first place. This has the impact of abrogating the Court docket of Attraction’s ruling in Johnson v. Maxim Healthcare Companies, Inc., that primarily allowed plaintiffs to argue that there was no time restrict on a plaintiff’s particular person PAGA claims.
Manageability of PAGA Claims
AB 2288 does away with the California Supreme Court docket’s ruling in Estrada v. Royal Carpet Mills, Inc., holding that courts lacked the inherent authority to strike PAGA claims on manageability grounds. With this modification, a courtroom “could restrict the proof to be offered at trial or in any other case restrict the scope of any declare filed pursuant to this half to make sure that the declare may be successfully tried.”
Early Analysis and Alternative to Treatment
Earlier than these amendments, PAGA supplied few avenues for employers to remedy violations to keep away from litigation and penalties. The PAGA amendments embody new procedures for employers to handle and remedy alleged Labor Code violations after an employer is served with a PAGA motion grievance.
- Early Analysis Convention with a Impartial Evaluator: Beneath SB 92, employers at the moment are in a position to request an early analysis convention with a impartial evaluator upon being served with a summons and grievance asserting a declare beneath PAGA. The request may be made earlier than, or simultaneous with, their responsive pleading or different preliminary look within the motion. As well as, the employer could request a keep of courtroom proceedings, and except there’s good trigger, the keep should be granted. The aim of the convention is to guage the strengths and weaknesses of plaintiff’s claims, to find out whether or not the alleged violations occurred, and if that’s the case, if they’ll or have been cured by the employer, and to evaluate the potential of an early decision.
- Extra Alternatives for Employers with Lower than 100 Staff: Starting on October 1, 2024, extra choices will turn into obtainable to employers with lower than 100 workers. Particularly, these smaller employers can have 33 days from receipt of the discover of violation to submit a confidential proposal to remedy a number of of the alleged violations to the LWDA. The LWDA could settle for the proposed remedy, or it could set a convention to debate the remedy. If the LWDA agrees that the proposed remedy is adequate, the PAGA motion can not transfer ahead, except sure exceptions apply.
Notably, employers can solely avail themselves of the discover and remedy provisions as soon as in a 12-month interval for violations of the identical provisions set forth within the discover, whatever the location of the worksite or if it has been served with a previous discover pursuant to this half alleging the identical violation that it didn’t remedy.
Caps on Penalties for Employers that Take “Cheap Steps” to Comply
One other important modification to PAGA beneath AB 2288 is the discount of most penalties. Previous to the amendments, employers have been left to argue an excellent religion protection and search an offset of penalties from courts who had discretion with respect to the PAGA penalties assigned.
The amendments restrict the potential penalties for employers who take cheap steps to adjust to the Labor Code. “Cheap steps” could embody, however are usually not restricted to, conducting periodic payroll audits, distributing and imposing lawful written insurance policies, offering coaching on Labor Code and Wage Order necessities, and disciplining and/or teaching supervisors who violate the regulation. For these employers who take such cheap steps, the utmost publicity will now be restricted to fifteen% or 30% of the penalties sought, relying on the precise circumstances.
For instance, if the employer takes all cheap steps to adjust to the Labor Code earlier than receiving a violation discover or a plaintiff’s request for personnel information, however fails to remedy the alleged violations, the obtainable penalties can be capped at 15% of the penalties sought. Additional, when an employer can show that it took cheap steps to prospectively adjust to all provisions recognized within the discover, inside 60 days after it acquired the PAGA discover, however did not remedy the alleged violations, the obtainable penalties can be capped at 30% of the penalties sought.
Furthermore, penalties could also be eradicated altogether if a violation is sufficiently cured. Particularly, employers who can present full remedy, as outlined by statute, with cheap steps taken inside 60 days of a PAGA discover, won’t be required to pay a civil penalty for that violation, and employers who can show full remedy, however not inside 60 days of receiving a PAGA discover, pays a civil penalty of not more than $15 per worker per pay interval for the statutory interval.
Key Takeaways for Employers
It stays to be seen whether or not these amendments will really stability the scales for employers. Though these modifications to PAGA will assist shift the stability, there’ll nonetheless be appreciable danger for employers. Accordingly, employers should guarantee compliance with the Labor Code and swiftly treatment points that come up to avail themselves of the brand new protections beneath these amendments. For instance, employers ought to have compliant written insurance policies which are supplied to workers and enforced. As well as, employers ought to conduct common audits of all payroll and timekeeping practices, notably insurance policies relating to extra time, meal and relaxation breaks, and expense reimbursements to have the ability to cut back potential PAGA penalties ought to inadvertent compliance points be revealed.
Additional, it’s crucial that employers react instantly once they obtain PAGA notices to find out whether or not to make the most of PAGA’s newly expanded remedy and early analysis choices. Fast motion can considerably cut back the potential danger and publicity introduced by a PAGA motion. Lastly, employers ought to remember to practice their managers and supervisors on Labor Code necessities and wage-and-hour guidelines, notably these contained in any relevant industry-specific Wage Orders.