PAGA Reform Benefits Proactive Employers

In 2024¹, California reformed its Private Attorneys General Act (“PAGA”) for the first time in the statute’s two-decade history. The reforms were less drastic than some had hoped, but they afford employers new avenues for relief that some may want to consider. In particular, the reforms typically reward proactive employers who address potential Labor Code violations early. Employers who receive a pre-filing PAGA notice could have greater opportunities to cure potential violations and may even qualify for a new early evaluation process. The reforms also tightened standing requirements, which should make it more difficult for employees to pursue “kitchen sink” lawsuits. And PAGA penalties themselves are now capped at much lower rates in certain circumstances, particularly where employers remedy Labor Code violations prior to litigation.
 
New Opportunities to Cure Labor Code Violations
 
For pre-filing PAGA notices sent on or after October 1, 2024, employers might have new opportunities to cure Labor Code violations. While some of these opportunities are available to employers of any size, others are limited to employers that had fewer than 100 employees in the year prior to the date of the PAGA notice.
 
Employers with Fewer than 100 Employees
 
Within 33 days of receiving a PAGA notice, smaller employers can submit to the California Labor & Workforce Development Agency (“LWDA”) a confidential proposal to cure one or more of the alleged violations.  An employer does not admit liability by submitting a cure proposal. Employers may also independently remedy violations, and parties may agree to mediate without resort to the LWDA.
 
Upon receipt of a cure proposal, the LWDA has three options: (1) determine the proposal would sufficiently cure the alleged violations, at which point the employee could consider requesting a conference to challenge that determination; (2) request a conference with the parties to determine the sufficiency of the proposal; or (3) reject the proposal without a conference. In the event the LWDA approves a cure proposal, employers will have 45 days to comply with the proposal. Along with curing, compliance includes providing to the employee and LWDA a sworn notification accompanied by a payroll audit and, if a payment is necessary, a check.
 
If the LWDA accepts a cure proposal and determines violations have been cured, the employee cannot pursue those violations in a PAGA civil action. However, the employee can appeal such a determination to the superior court. If the LWDA rejects or fails to act on a cure proposal with the 65-day notice period, the employee can file a PAGA civil complaint.
 
Given that employees must wait only 65 days from the notice date to file a PAGA lawsuit, employers may face the distinct possibility that the LWDA will not timely respond to their cure proposals, if at all. Because this is a new process, time will tell if the LWDA has sufficient resources to make cure proposals a viable alternative to litigation.
 
Employers of Any Size
 
If the only alleged violation the employer seeks to cure is an itemized wage statement violation (Labor Code section 226), the employer may cure the violation within 33 calendar days of the PAGA notice postmark date.  Within this time period, if the alleged violations are cured, the employer must give written notice (1) to the aggrieved employee (or representative) via certified mail and (2) to the LWDA via online filing.  If the employer does not cure the alleged violation within the 33-day period, the employee may file a civil action.  If the employee disputes that the alleged wage statement violation has been cured, the employee must provide written notice to the LWDA and employer. At that point, the LWDA will review the employer’s curing actions and may grant the employer additional time to cure.  If the LWDA determines the employer has not cured the alleged violation or else fails to respond to the employee’s notice, the employee can proceed with the civil action.
 
New Early Evaluation Conferences
 
Employers with 100 or more employees now have access to an early evaluation conference, but only after a PAGA lawsuit is filed. Smaller employers (with less than 100 employees) also have access to early evaluation conferences as of October 1, 2024, but only if the LWDA failed to timely act on the employer’s cure plan, as addressed above. Upon receipt of a PAGA lawsuit, an employer may file with the LWDA a request for an early evaluation conference, which should take place within 70 days of the request. The lawsuit should be stayed pending completion of the conference.
 
The purpose of the conference is to consider the alleged violations, whether the employer has cured any violations, the claims and defenses at issue, potential to settle the claims, and whether sharing information would facilitate resolution. If the conference is unsuccessful but the employer believes its cure was sufficient, it can ask the superior court to approve its cure.
 
As with the new cure proposal option, addressed above, it remains to be seen whether the LWDA has sufficient staffing and resources to timely process requests for early evaluation conferences. Nonetheless, the conferences present a new avenue for potentially avoiding costly PAGA litigation, making them an option many employers may find worth exploring.
 
Lesser Penalties for Proactive Employers
 
The reforms include additional incentives for employers to proactively address Labor Code violations. Now, a court determining PAGA penalties must consider whether an employer cured violations identified in the employee’s PAGA notice (meaning it made employees whole for past violations) and whether it remediated (meaning it took all reasonable steps to comply with the Labor Code sections identified in the notice going forward).
 
If a court determines an employer cured and remediated the violations, no penalties are allowed. Employers that cure but do not remediate receive an 85% discount on the default penalty amount, whereas employers that remediate without curing receive a 70% to 85% discount, depending on whether remediation occurred before or after the employer received the PAGA notice. And, where an employer cures wage statement violations, even without remediating, no penalties are allowed.
 
Conclusion
 
These seemingly small textual changes could have a significant, positive impact for proactive employers. Now, more than ever, employers may want to review their wage and hour policies and practices for compliance. Employers who identify, cure, and remediate Labor Code violations, whether before or after receiving a PAGA notice, will likely better position themselves to take advantage of PAGA reform.
 
Employers are encouraged to contact a labor and employment attorney if they receive a PAGA notice, if a PAGA action is filed against them, or if they have any questions about the evolving PAGA landscape.

**Any opinions expressed are those of the authors and not the firm or their colleagues.