818.501.4343July 26, 2024
For years, the Private Attorneys General Act (PAGA) has been a hot topic in California’s employment law landscape. Since its initial enactment, PAGA has led to thousands of lawsuits against businesses, many of which have been frivolous or, at minimum, questionable.
The sheer volume of grievances has created a backlog of claims and cost businesses thousands, if not more, in legal bills. Over the last few years, initiatives were introduced to repeal the controversial law, most recently one was set to appear on the 2024 ballot.
However, on July 1, 2024, Governor Gavin Newsom signed legislation to reform PAGA. Below, we’ll discuss what the new bill means for California businesses and highlight how a lawyer for employers can help you protect companies’ interests.
What’s PAGA?
Before we focus on the reform ballot, it’s important to understand the Private Attorneys General Act and how it currently affects California companies.
Enacted in 2004, PAGA allows workers to file lawsuits for labor code violations. That may sound simple enough, but here’s the problem: Workers did not need to have suffered the breach of code themselves. They were allowed to file lawsuits for labor code grievances on behalf of their coworkers and the state of California as a whole. The penalties were collected and then divided between the state and the employees.
Of course, the lawmakers behind PAGA had good intentions when creating the law, believing that dividing the fines between complainants and victims would incentivize whistleblowers to report labor law violations. Though that has proved true, PAGA has also fueled a litigious culture among California workers.
Why PAGA Is Controversial
Since its start, PAGA has been controversial because it has led to a huge increase in suits against businesses. Critics argue that PAGA does the following:
Increases Litigation: PAGA suits often result in substantial legal fees and penalties, even for minor or technical violations
Creates Uncertainty: The broad scope of the act makes it difficult to ensure labor law compliance
Disadvantages Employers: Many businesses believe PAGA disproportionately impacts them
If you’ve been the subject of a PAGA claim, it’s important to consult with a lawyer for employers right away. They can evaluate the legitimacy of the claims and help you work toward a prompt and fair resolution.
What Changes Did the PAGA Reform Bring About?
The new legislation, AB 2288 and SB 92 includes several significant reforms with the following goals:
Altering the Penalty Structure
One of the most notable provisions of the reform is its penalty structure, incentivizing compliance by capping penalties for employers who quickly correct any violations and “make workers whole” after receiving a PAGA notice.
On the other hand, the new penalty structure also creates higher penalties for employers who behave maliciously or fraudulently toward their staff. Additionally, the changes ensure that more money from penalties goes to affected employees.
California’s Labor and Workforce Development Agency used to receive 75% of all PAGA penalties, with aggrieved employees receiving the remaining 25%. The reform has increased the employee share to 35% and routed the remaining balance to the Labor and Workforce Development Agency.
Streamlining Litigation
The potential for frivolous litigation is one of the biggest complaints of current PAGA laws. To this end, AB2288 expands on the list of Labor Code sections that can be cured to help employers avoid unnecessary litigation by making employees whole.
The reform also protects small businesses by providing a more extensive and confidential “right to cure” process via the Labor and Workforce Development Agency (LWDA), reducing the costs of litigation. Large businesses with 100 or more employees can request an early evaluation conference and seek a stay of court proceedings to quickly determine whether violations occurred and whether the business has cured them.
Additionally, AB 2288 enables the court to limit the scope of claims presented at trial to promote case management efficiency. Cumulatively, these changes should alleviate the burden on the court system while expediting the resolution process.
Improving Measures for Injunctive Relief
Under AB 2288, courts will have an increased ability to provide injunctive relief, which means they can compel businesses to implement changes to address any labor law violations.
Most notably, AB 2288 requires that employees personally experience alleged violations brought in their claim. This change prevents employees who may have suffered a single violation from suing on behalf of every coworker who may have suffered a possible violation under California’s Labor Code.
Trial Courts Will Hear PAGA Cases
In a January 2024 ruling, the California Supreme Court ruled that trial courts cannot dismiss PAGA claims with prejudice on the grounds of “manageability.” Several employers have contested PAGA suits by claiming that the cases are unmanageable because they involve hundreds or thousands of employees who are spread across multiple locations.
They argue that litigating the cases is too difficult due to the sheer complexity and scope of the claims. However, the California Supreme Court has made it tougher to use that defense by ruling that trial courts cannot strike PAGA claims on the grounds of unmanageability. The reforms also allow trial courts to consolidate or coordinate PAGA actions to ensure cases are managed efficiently.
A lawyer for employers can help you contend with these changes and better insulate yourself from potential suits. A skilled lawyer for employers can vet grievances and ensure that complainants actually experienced the alleged labor code violations.
Connect With a Lawyer for Employers
Despite its efforts, the reform likely won’t significantly reduce PAGA lawsuits. Therefore, connecting with a lawyer for employers who handles PAGA claims is the best way to protect your business from potentially senseless lawsuits.
Contact Pearlman, Brown & Wax, LLP today to ensure your business is safeguarded against these claims.