California’s legislative leaders and Governor Newsom reached an agreement on reforms to the Private Attorney Generals’ Act which will change the landscape of PAGA going forward. PAGA has cost businesses billions of dollars in penalties and legal fees over the course of 20 years. With the new deal, business group leaders have finally secured long-awaited reforms, including restrictions on the duration of filing claims, limits on damages, and a higher proportion of payouts allocated to workers rather than Plaintiff’s lawyers.
The deal was announced in advance of the June 27 deadline in which a legislative measure qualifies for the November 5 general election.
Below are the proposed reforms under the PAGA reform proposal and how the anticipated effects on PAGA enforcement and litigation.1
Restructuring Penalties
- The new deal encourages compliance with labor laws by capping penalties for employers who promptly rectify policies and practices upon receiving a PAGA notice, and for those who proactively ensure compliance with labor codes before any notice.
- Introduces higher penalties for employers engaging in malicious, fraudulent, or oppressive conduct in violating labor laws.
- Increases the percentage of penalty funds allocated to employees from 25% to 35%.
Streamlining Litigation
- Expands the range of Labor Code sections that can be cured to minimize litigation and swiftly resolve employee grievances.
- Enhances protections for small employers by establishing a more robust cure process through the Labor and Workforce Development Agency (LWDA), aimed at reducing litigation expenses.
- Formalizes the court’s authority to narrow the scope of claims during trial to improve case management efficiency.
Enhancing Injunctive Relief and Standing
- Empowers courts to issue injunctive relief mandating workplace changes to address labor law violations.
- Requires employees to have personally experienced alleged violations when bringing claims.
Boosting State Enforcement
- Grants the Department of Industrial Relations (DIR) expedited hiring capabilities to swiftly fill vacancies and enforce labor claims effectively and promptly.
Overall, the deal provides a meaningful victory for employers which will aim to reduce litigation expenses for businesses and streamline the PAGA legislation to continue to provide meaningful protection to employees, while allowing businesses that are acting in good faith to limit their exposure.
We will continue to provide updates as the deal is signed into law as new legislation.