On June 18, 2024 Governor Newsom announced that an agreement has been reached to reform the Private Attorney General’s Act (PAGA). This action is in response to the pending November Ballot measure which we have previously reported on that sought to completely overall the broken PAGA system.

This is a huge victory for employers and businesses throughout the state of California who have been dealt a horrible hand in recent years having to contend with the onslaught of litigation that benefits the Plaintiff’s attorneys and is financially devastating to most businesses. The reforms also seek to benefit employees.

The reform is intended to put the wage claims back in the hands of the Labor Commissioner and limit the “frivolous litigation that has cost employers billions without benefiting workers,” according to the California Chamber of Commerce.”

While it was acknowledged that “PAGA is an essential tool to help workers hold corporations accountable for widespread wage theft, safety violations, and misclassification” union leaders involved in the negotiations agreed that changes had to be made.

The proposal is not in final form yet but once drafted the Governor will sign it into law – presumably with an immediate effective date.

As the legislation has not yet been introduced into the legislature nor signed by the Governor, the key components of the reform include an increase in the share of the penalties recovered paid to the employees, caps on penalties for employees who proactively take steps to comply or fix issues after receiving the required PAGA notice, and require the employee acting as the representative to personally experience every alleged violation.

Below are some of the key changes that are expected to be included in the legislation.

Standing Required:

The employee who brings the lawsuit and is acting as the “representative” for the other employees must have actually and personally experienced all of the alleged PAGA within the one year statute of limitations to have standing to bring the litigation.

Penalty Structure Reformed:

  • Penalties Capped: Employers who quickly take steps to fix policies and practices, and make workers whole, after receiving a PAGA notice, will benefit from a cap on the penalties to be assessed, as well as on employers that act responsibly to take steps proactively to comply with the labor code before even receiving a PAGA notice.
  • Higher Penalties for Bad Actions: There will be higher penalties for employers who act maliciously, fraudulently, or oppressively in violating labor laws.
  • Larger Recovery for Employees: Previously the employees would receive 25% of the recovery; the reform increases the amount allocated to employees to 35%.

Reduced and Streamlined 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 (LWDA) to reduce litigation and costs.
  • Codifies that a court may limit the scope of claims presented at trial to ensure cases can be managed effectively.

Improving Measures for Injunctive Relief and Standing:

  • Allows courts to provide injunctive relief to compel businesses to implement changes in the workplace to remedy labor law violations.
  • Requires the employee to personally experience the alleged violations brought in a claim.

Strengthening State Enforcement:

Give the Department of Industrial Relations (DIR) the ability to expedite hiring and fill vacancies to ensure effective and timely enforcement of employee labor claims.

What’s Next?

A bill must be drafted, passed by the legislature, and then signed by the Governor by June 27. If this occurs the ballot measure will be removed from the November ballot.  Given the wide support from all involved, it is fully expected that this will be accomplished.

A copy of Governor Newsom’s press release can be found here.

This Newsletter is intended as a brief summary of employment law. While every effort has been made to ensure the accuracy of the information contained herein, it is not intended to serve as “legal advice,” or to establish an attorney-client relationship. If additional information is needed on any of the topics contained herein, please contact our office. All rights reserved. ©2024.

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