Governor Newsom signed new laws that amend California’s Private Attorneys General Act (PAGA). As many of you know, PAGA allows private individuals to sue their employers and recover penalties for Labor Code violations. PAGA lawsuits are being filed at a high rate and can be devastating to employers because Plaintiffs can recover large penalties and attorneys’ fees.

The new amended law makes various changes to the PAGA statute that benefit employers. Keep in mind that these new changes only apply to PAGA cases filed after June 19, 2024.

Under the new law, after a PAGA lawsuit is filed, an employer can request an early evaluation conference and stay the case. This process will allow the parties to discuss which Labor Code violations the employer will cure and a possible early resolution of the entire case. Under this process, and if the violations are cured, penalties can be reduced to $15 or less per employee per pay period.

Starting in October, employers with fewer than 100 employees can potentially avoid a PAGA lawsuit altogether by curing the Labor Code violations alleged in a written PAGA notice. PAGA notices are required to be sent to the employer before litigation begins.

In addition, if an employer can demonstrate that before it received a PAGA notice, it took “all reasonable steps” toward complying with the Labor Code, then penalties can be reduced by 85%. “Reasonable steps” means (a) conducting periodic payroll audits, (b) taking action in response to the results of the audits, (c) distributing written wage and hour policies, (d) training supervisors on wage and hour compliance, and (e), taking appropriate corrective action. If the employer takes reasonable steps within 60 days after receiving the PAGA notice, penalties can be reduced by 70%. If an employer takes reasonable steps now, and cures all issues, penalties could be zero.

The amended law also reduces penalties for minor or isolated violations. In addition, PAGA previously allocated 75% to the Labor and Workforce Development Agency (LWDA), and 25% to the employee. The new amended law allocates 65% to the LWDA and 35% to the employee.

Under the new law, PAGA plaintiffs can only file claims related to violations that they have personally experienced within a year of the PAGA notice. Before, if the employee claimed that they missed meal periods, they could also file for missed rest breaks or unpaid overtime. Now, an employee who only missed meal periods, can only file PAGA claims related to meal periods.

Steps employers should take now: (1) Review all wage and hour policies to ensure that they meet all California requirements -- If they do not, fix the issues and make sure all employees are properly compensated; (2) Distribute compliant wage and hour policies to all employees; (3) Conduct an audit now (and periodically) to ensure that the company's timekeeping and payroll practices are compliant and accurate; (4) Train all staff, including supervisors, on appropriate timekeeping practices. By taking these steps, employers may significantly reduce -- or even eliminate -- the risks associated with a PAGA lawsuit.

The PAGA reform is good news for employers. But employers still need to be vigilant in following all California wage and hour laws.