Author: David Lavi, Esq.
June 25, 2024
Subject: What are the implications of the anticipated PAGA Amendments in California?
On Friday evening, the California legislature released the text of anticipated amendments to the Private Attorneys General Act (PAGA). These amendments, presented in two bills—one from the Senate and one from the Assembly—together amend three statutory provisions of PAGA. To understand the new law, both bills must be read together. Currently, the bills are in committee and are expected to be voted on in the coming days. If signed into law by June 27, 2024, the legislation will prevent the PAGA repeal initiative from appearing on the California ballot in November.
If these amendments become law, they will apply to PAGA lawsuits filed on or after June 19, 2024, unless the related PAGA notice letter was filed before June 19, 2024. For companies with pending PAGA litigation or anticipating a PAGA complaint for a notice letter filed before June 19th, the amendments will not affect them.
While there are benefits, some aspects of the legislation are less favorable. Overall, if enacted, the legislation could substantially alter the litigation landscape in California for staffing companies that prioritize compliance.
Reduced Pay Period Exposure for Staffing Companies
The most critical change is that the legislation would stop penalizing employers who pay weekly instead of bi-weekly or semi-monthly. Staffing employers in California typically pay weekly to comply with Labor Code § 201.3, which requires weekly wage payments for temporary staffing employers. Under current PAGA provisions, this compliance results in double the pay periods and potential penalties for staffing employers. The new legislation would address this issue, potentially reducing PAGA exposure for staffing employers by half.
Courts will retain discretion to assess civil penalties and issue injunctive relief, and they will be required to significantly reduce penalties if certain criteria are met. The standard penalty will remain $100 per aggrieved employee per pay period, with exceptions. Penalties for certain wage statement violations will be reduced to $25 if employees can promptly and easily determine accurate information from the wage statement, and to $50 for isolated, nonrecurring violations not extending beyond 30 days or four consecutive pay periods.
The legislation also specifies that a $200 per employee per pay period penalty applies only if the employer had prior findings of unlawful policy or practice or if the conduct was deemed malicious, fraudulent, or oppressive by the court.
Notably, the legislation eliminates penalties for derivative claims under Labor Code §§ 201–204 and 226, though plaintiffs may seek “stacked” penalties for non-derivative violations within the same pay period. This potential for stacked penalties might offset the benefit of reduced pay period exposure.
Legislative Fixes of Perverse Judicial Interpretations
The legislation addresses several judicial interpretations that have created complications. It clarifies that a PAGA plaintiff may only bring claims for violations they actually suffered, overturning the Huff decision which allowed claims for any plausible Labor Code violations. This change is a significant win, though it might lead to more multi-plaintiff or simultaneous PAGA litigations.
Additionally, the proposed amendments establish a one-year statute of limitations for PAGA claims, resolving ambiguities from recent decisions.
The legislation also addresses the California Supreme Court’s Estrada decision, permitting courts to limit evidence and the scope of claims to ensure effective trials. This is particularly beneficial for staffing companies dealing with diverse workforces and varying facts.
Cure and Comply
The amendments provide employers with opportunities to “cure” certain alleged Labor Code violations after a PAGA notice letter is filed, potentially reducing or eliminating penalties. Employers can cure wage statement violations by paying full wages, liquidated damages, 7 percent interest, and attorneys’ fees.
The legislation incentivizes compliance by offering an 85 percent reduction in penalties if employers have taken all reasonable steps to comply with the Labor Code before receiving a PAGA notice or records request. Reasonable steps may include payroll audits, lawful policy dissemination, supervisor training, and corrective actions. The court will consider the totality of circumstances in determining compliance.
Similarly, a 70 percent reduction in penalties is available if employers take reasonable steps to comply after receiving a PAGA notice. These provisions encourage staffing employers to establish robust compliance programs.
PAGA Litigation
The amendments allow employers with 100 or more employees to request an early evaluation conference and a stay of court proceedings before or during their initial appearance. The conference aims to determine whether violations occurred, assess the case’s strengths and weaknesses, and explore settlement options. This process can be beneficial for providing an opportunity for early case evaluation.
If you are a victim of fraud for wages, or money owed, contact our attorneys’ at E&L, LLP, and allow our attorney’s to discuss and review your file.
