PAGA Reform On The Horizon

By: Matthew Sgnilek & Andrea Rosenkranz, Partners

On June 18^th,  Governor Newsom and various legislative, business, and labor groups announced that they had reached an agreement on reforms to PAGA.  The agreement avoids a costly ballot measure set for this election cycle to repeal and replace PAGA.  While the text of any new or amended legislation is not yet available (but is anticipated next week), the following highlights key anticipated changes:

• Reforms to the Penalty Structure
  • Encourages compliance with employment laws by capping penalties on employers who quickly take steps to fix policies and practices, after receiving a PAGA notice, as well as on employers that act responsibly to take steps proactively to comply with the Labor Code before even receiving a PAGA notice;
  • Creates new, higher penalties on employers who act maliciously, fraudulently or oppressively in violating the Labor Code; and
  • Ensures that more of the penalty money goes to employees by increasing the amount allocated to employees from 25% to 35%.
• Efforts to Reduce and Streamline Litigation
  • Expands which Labor Code sections can be cured to reduce the need for litigation and make employees whole quickly;
  • Protects small employers by providing a more robust right to cure process through the Labor and Workforce Development Agency to reduce litigation and costs;
  • Codifies that a court may limit both the scope of claims presented at trial to ensure cases can be managed effectively;
  • Clarifies that a representative Plaintiff must have personally experienced each Labor Code violation for which they seek penalties; and
  • Clarifies that PAGA can be based only upon violations occurred within the statute of limitations.
• Improved Measures for Injunctive Relief and Standing
  • Allows courts to provide injunctive relief to compel businesses to implement changes in the workplace to remedy Labor Code violations; and
  • Requires the employee to personally experience the alleged violations brought in a claim.

Employers with pending or anticipated PAGA actions are not likely to find any relief from these changes, as it is unlikely that they will apply to pending PAGA lawsuits. The new law, if passed, is expected to only apply to PAGA cases based on notice letters submitted to the LWDA on or after June 18, 2024.

O’Hagan Meyer will provide a further update when the reform bill’s actual text/language is published next week.