California: PAGA Reforms Look to Improve Fairness, Limit Frivolous Lawsuits
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APPLIES TO All Employers with Employees in CA |
EFFECTIVE July 1, 2024 |
QUESTIONS? Contact HR On-Call |
Quick Look
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Discussion
AB 2288 and SB 92 bring significant reforms to the California Private Attorneys General Act (PAGA). PAGA allows citizens to enforce state wage and hour laws on behalf of the Labor Commissioner. The changes are meant to create more fairness in the process for small businesses and encourage them to follow wage and hour laws, as well as “limit the frivolous litigation that has cost employers billions without benefiting workers.”
The bills limit PAGA penalties (1) if the employer has taken “all reasonable steps” to be in compliance before receiving a PAGA notice or request for records, and (2) if within 60 days after receiving a PAGA notice, the employer has taken all reasonable steps to prospectively be in compliance with all provisions identified in the notice. The penalty limitation for (2) only applies if the employer was not found to have unlawful policies or practices in the previous five years that gave rise to the alleged violations, and the conduct at issue was not malicious, fraudulent, or oppressive. Additionally, an employer who satisfies (1) or (2) above and cures a violation is not liable for civil penalties.
“All reasonable steps” includes, but is not limited to, conducting periodic payroll audits and taking action in response to the results, disseminating lawful written policies, training supervisors on applicable wage and hour compliance, or taking appropriate corrective action with regard to supervisors. Whether the employer’s conduct was reasonable will be evaluated by the totality of the circumstances and take into consideration the size and resources available to the employer, and the nature, severity and duration of the alleged violations. Notably, the existence of a violation, despite the reasonable steps taken, is insufficient to establish that an employer failed to take all reasonable steps.
A number of other reforms were implemented. For example, PAGA plaintiffs must have personally experienced the alleged Labor Code violations. Alleged violations must have occurred within the one-year statute of limitations period. The bills eliminate “stacking” of civil penalties for violations of Labor Code sections 201-204, and 226, which derive from other Labor Code violations. Employers also have the opportunity to cure alleged failure to pay wages, break premiums, or expense reimbursements if certain requirements are met. The new rules apply to lawsuits filed on or after June 19, 2024.
Action Items
- Review AB 2288 and SB 92.
- Conduct periodic payroll audits and taking action in response to the results.
- Distribute written policies to employees and obtain written acknowledgment thereof.
- Training supervisors on applicable wage and hour compliance.
- Review PAGA claims with legal counsel for compliance.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2024 ManagEase