Agreement Reached to Reform CA Private Attorneys General Act (PAGA)

by Gregory B. Wilbur and Ryan Carlson

Michael Sullivan & Associates, LLP

Governor Newsom’s office announced Tuesday, June 18th, that much needed and long-awaited reform to the Private Attorneys General Act (“PAGA”) is finally on the horizon! While we’re still waiting to see the exact text of the bill, here is what we expect from “PAGA 2.0” based on a release from the Governor’s office.

Pre-claim Compliance

We have very few details at this point, but the Governor’s press release promises the new reforms will include caps on PAGA penalties for employers “that act responsibly to take steps proactively to comply with the labor code before even receiving a PAGA notice.” Stay tuned for further updates once draft legislation fleshes out these steps, which may become an important part of ongoing compliance efforts.

Enhanced Corrective Options

The PAGA reform deal also appears to expand the options available to employers for taking corrective action after a PAGA claim begins. Under existing law, a narrow set of violations can be “cured” or corrected by employers after receiving a PAGA notice, most notably technical violations on wage statements such as failing to list the employer’s correct business address, which can be cured by issuing corrected wage statements en masse. Under the reform deal, a wider set of violations will apparently be subject to the right to cure. The proposal also appears to create a mechanism within the Labor Commissioner’s office to adjudicate the sufficiency of an employer’s cure efforts, which may prove a more efficient venue to assert such a defense than the courts.

Additionally, the proposal would create caps on penalties that can be imposed on employers who take prompt steps to correct and/or remedy unlawful practices upon receiving an Labor and Workforce Development Agency (LWDA) notice. How this forward-looking cure right interacts with the existing —and potentially expanded—retroactive cure mechanism will not be certain until the legislation is drafted.

Procedural Safeguards

Two other proposed changes give reason for hope for employers frustrated by the expansive scope of PAGA, abrogating judge-made law in the process. These changes involve an employee’s “standing” to bring PAGA representative claims and the requirement that litigating those claims be “manageable” in court.

The first change requires PAGA plaintiffs to have personally suffered a Labor Code violation to seek penalties for it. This changes existing law—established by the Court of Appeal in Huff v. Securitas Sec. Svcs. USA, Inc.—that allows a single employee affected by any Labor Code violation to bring claims on behalf of any employee who suffered any Labor Code violation, whether or not the Plaintiff suffered the other violations. This could focus future PAGA litigation on the Plaintiff’s own experiences, rather than those of the employer’s whole workforce.

Another about-face the Legislature plans to make from current California case law is by authorizing courts to limit the scope of PAGA claims to ensure they are “manageable.” The California Supreme Court recently held that judges lack this authority under current law. Under the new proposal, however, it appears that PAGA defendants may get new ways to limit the scope of PAGA claims based on manageability concerns, such as whether the claims are susceptible to common proof.

While the true impact of these reforms will not be known until the legislation is drafted and passed—and even then, regulations and judicial opinions may further refine our understanding for years—there is reason to think that the agreement reached by government, business, and labor leaders will be a positive for California employers. We’re excited to keep you abreast of changes as the text of this bill is released by the Legislature next week. Stay tuned for further updates and do not hesitate to reach out if you have any questions about the current PAGA landscape or your business’ compliance with the Labor Code.