One of this year’s biggest changes to California employment regulations was to the Private Attorneys General Act (PAGA). This article summarizes key changes to PAGA and how those changes may impact your HR strategy in 2025.
PAGA is a California statute that enables individual employees to file class action lawsuits against their employers for Labor Code violations on behalf of themselves, other “aggrieved” employees, and the State of California. This has resulted in expensive litigation for businesses over the years.
On July 1, 2024, California Governor Gavin Newsom signed legislation that reforms PAGA and applies to civil actions filed on or after June 19, 2024.
Key changes to PAGA:
Penalty Structure
New Penalty for Malicious Acts: A new penalty of $200 per pay period will apply for employers who act maliciously, fraudulently or oppressively.
Reduction for Minor Violations: The maximum penalty is reduced for minor infractions, like brief violations or harmless wage statement errors (e.g., omitting the employer’s full corporate name on pay stubs).
Cap on Penalties: If an employer can show that they took all reasonable steps to comply with the Labor Code before receiving a PAGA notice, their penalties may be capped at 15% of the total statutory penalty. An employer who acts to become compliant within 60 days of receiving a PAGA notice faces a maximum penalty of 30% of the total statutory penalty.
Opportunity to Remedy Violations
Employer Right to Cure: The reform package expands the Labor Code sections that employers can cure to reduce or eliminate potential penalties altogether.
New Defenses for Employers
Plaintiff Requirements: Previously, employees could claim on behalf of others, but under the reform, only those who have “personally suffered each alleged violation” are considered “aggrieved.”
Reduced Statute of Limitations: The reform limits claims to violations occurring within one year before the PAGA claim is filed.
What can you do to reduce your risk of a PAGA claim?
Conduct Periodic Payroll Audits
Employers can reduce PAGA penalties by up to 85% if they prove that they have taken reasonable steps to comply with the Labor Code. California employers should conduct periodic wage and hour audits to ensure compliance with at least the following:
- Timely meal and rest periods
- Prohibition of off-the-clock work
- Correct recording and payment of overtime
- Reimbursement for all work-related expenses to employees
- Provision of itemized wage statements each pay period to all employees
Quarterly audits with employment law counsel are also recommended to show good faith compliance efforts.
Update Handbook Policies
Employers must keep wage and hour policies and employee handbooks updated to comply with California law.
Train Supervisors on Labor Code Compliance and Corrective Action
Training supervisors on Labor Code requirements, such as timekeeping, off-the-clock policies, and meal and rest break obligations, serves as evidence of reasonable compliance with wage and hour laws. Employers should document the training, including topics covered, attendees, and dates.
In addition to training supervisors on company policies and Labor Code, employers must monitor compliance and take corrective action against supervisors who violate obligations. Documenting these actions provides evidence of compliance efforts.
The bottom line: Be proactive
Staying proactive is the key to avoiding a PAGA claim. The time and attention it takes to follow the recommendations above can save thousands (of hours and dollars!) in the long run.
Questions? We’re here to help!
Write to us at hello@envisioninitiative.com with any questions about your current HR practices!