The GigReporter

On June 18^th the California Chamber of Commerce, Governor Gavin Newsom, and the leaders of each house of the California legislature announced that they had agreed to a suite of reforms to the Private Attorney General Act (PAGA). PAGA allows individuals to sue employers for violations of the Labor Code on behalf of the Department of Labor and collect a portion of the civil penalties imposed, even for provisions that do not otherwise grant private parties a right to sue (see Cal. Lab. Code § 2698 et seq). On July 1^st, Governor Newsom signed the PAGA reform into law, improving the system for businesses and workers alike.

Most importantly, the reforms will require employees to personally experience the violations they allege in a claim. This would eliminate the contentious practice of the so-called “representative action”, whereby individuals could file PAGA lawsuits on behalf of others, potentially in large numbers, without the usual procedural steps of a class action. Removing these representative actions will greatly reduce the risk of cripplingly large penalties being inflicted on small businesses by PAGA actions.

Additionally, some penalties are being capped or reduced. Employers that cure violations can reduce maximum penalties to 15 or 30 percent of the amount otherwise applicable, depending on whether the cure happens before or after receiving a notice of a complaint. Certain pay period violations are being adjusted to account for disparities between weekly and biweekly pay periods. Violations that are brief or involve a technical wage statement mistake that does not actually cause any harm to employees are having their maximum penalties reduced outright.

There are some pro-employee changes, as well.  The share of penalties prevailing plaintiffs earn is being increased from 25 to 35 percent, which may incentivize more lawsuits, and there is a new penalty for employers who act maliciously, fraudulently, or oppressively, which has the potential to be applied overbroadly. On balance, though, these changes are quite positive for most employers.

These reforms are not retroactive and will only be applied to lawsuits arising on or after June 19, 2024. To SCI and Adapt clients it’s a step in the right direction.