As we previously reported HERE, in July 2024, Governor Newsom signed into law a pair of bills that significantly reformed the state's Private Attorneys General Act ("PAGA"). While the reform constituted a big victory for employers, it also left them high and dry to navigate the uncertain waters of uncharted territory.
In a timely rescue, the California Labor & Workforce Development Agency ("LWDA") threw a lifeline with its recent publication of PAGA FAQs (HERE). Among the issues addressed, the FAQs provide practical guidance on the law and clarify the respective requirements for PAGA notices filed before June 19, 2024 – to which preexisting law applies – and for those filed on or after that date – to which the amended law applies.
To save you from an upstream swim against the currents of PAGA reform, here are the highlights of the PAGA FAQs.
Who can sue and be sued in a PAGA lawsuit?
Generally, PAGA allows employees to file an action on behalf of themselves and other current and former employees for violations of the Labor Code.
- For PAGA notices filed before June 19, 2024, current or former employees may file a lawsuit if they experienced at least one of the alleged violations of labor laws.
- For PAGA notices filed on or after June 19, 2024, any current or former employee may file an action if they experienced each of the alleged violations asserted.
The FAQs clarify that only private employers are subject to PAGA lawsuits.
What can be recovered in a PAGA lawsuit?
Generally, a PAGA lawsuit allows for the recovery of civil penalties, the amount of which depends on the type of violation.
- For PAGA notices filed before June 19, 2024, the State will receive 75% of the recovered penalties and aggrieved employees will receive 25%.
- For PAGA notices filed on or after June 19, 2024, the State will receive 65% of the recovered penalties and aggrieved employees will receive 35%. The court also may order the employer to cease unlawful actions or practices.
The FAQs also address limitations on recoverable penalties under the reform. For PAGA notices filed on or after June 19, 2024:
- If the employer took all reasonable steps to comply with the law prior to receiving a PAGA notice, the maximum civil penalties are reduced to 15% of the penalty sought.
- If the employer takes all reasonable steps to be in compliance with the law within 60 days of receiving a PAGA notice, the maximum civil penalties are reduced to 30% of the penalty sought.
What is the cure process?
The recent amendments expand the types of violations that employers can cure. For notices filed on or after June 19, 2024, curable violations now include claims for minimum wage, overtime, meal and rest breaks, necessary expense reimbursement, and wage statement requirements. Employers must file cure notices, proposals, or disputes through the PAGA Filing Portal. All cure proposals will be treated as confidential settlement proposals.
The PAGA reform also establishes new processes for certain types of cures:
- Prior to October 1, 2024, within 33 days of the PAGA notice, the employer must (1) give written notice by certified mail to the aggrieved employee, and (2) file online with the LWDA that the alleged violation has been cured with a description of actions taken. Upon review, the LWDA will notify the aggrieved employee and employer of its decision and may provide the employer with an additional three days to complete the cure. This procedure still applies if the sole violation an employer seeks to cure is a wage statement violation.
- Effective October 1, 2024, all employers can cure wage statement violations. Additionally, employers with fewer than 100 employees may submit cure proposals to the LWDA within 33 days of the PAGA notice, upon which the LWDA may set a conference to evaluate the proposed cure. Employers must complete the cure within 45 days of the conference. If the LWDA determines the violation has been cured, the aggrieved employee may request a hearing to dispute the finding.
In both instances, the aggrieved employee may file a PAGA lawsuit if the LWDA (1) determines the violation is not cured, or (2) does not provide timely notice.
What does an effective cure require?
The FAQs clarify that an effective cure requires employers to (1) correct the alleged violation, (2) comply with the statute allegedly violated, and (3) make-whole each aggrieved employee, as follows:
- For owed wages, the cure must include (1) unpaid wages for the past three years, (2) 7% interest, (3) liquidated damages required by statute, and (4) reasonable attorney's fees and costs;
- For wage statement violations, the employer must provide each aggrieved employee with fully compliant wage statements for each pay period of the violation for the past three years; and
- For wage statement violations where an employer fails to include its correct legal name, the employer must provide each aggrieved employee with written notice of the correct information.
What is the Early Evaluation Conference?
An early evaluation conference is overseen by a neutral evaluator and is intended to facilitate early evaluation and resolution of the dispute.
- Employers with at least 100 employees may request an early evaluation conference and stay of the court proceedings when served with a summons and complaint.
- Although not detailed in the FAQs, employers with less than 100 employees who wish to request an early evaluation conference must first submit a proposed cure plan and related information to the LWDA.
What should be avoided in a PAGA settlement?
The FAQs list certain characteristics that indicate an agreement may not be fair, reasonable, and adequate. These "red flags" include settlement agreements that:
- Release claims not included in the PAGA notice;
- Designate the terms of settlement as confidential;
- Revert settlement funds to the employer if not fully paid out to aggrieved employees;
- Do not correct violations identified in the PAGA notice;
- Fail to justify the settlement amount and discounts to claims; and
- Include substantial discounts to claims and extinguish other pending PAGA lawsuits.
Proposed settlements must be submitted to the court and online through the PAGA Filing Portal.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
