Employers in California more than likely have heard of the Private Attorneys General Act, commonly referred to as PAGA. However, understanding what it is, how it functions, and how it can affect them can be challenging.

PAGA is a California statute passed in 2004 to assist the State with its obligation to enforce the California Labor Code. More specifically, PAGA deputizes individuals to file lawsuits against current or former employers to recover civil penalties that were previously only recoverable by the State.  PAGA claims are brought as representative actions, meaning that the employees who initiate the lawsuits seek to represent – and recover civil penalties – on behalf of themselves and other purportedly “aggrieved employees,” making a PAGA lawsuit function as a pseudo-class action.

Given the increased number of PAGA notices submitted each year (nearly 2600 so far this year) and the potential exposure employers face in connection with these claims, it is vital for employers to have a firm understanding of PAGA and how a PAGA suit can impact their business.

The PAGA Notice

Before filing a lawsuit under PAGA, employees must first file a notice with the state Labor Workforce Development Agency (LWDA) indicating their intent to bring a civil action. In addition to identifying the employer(s) at issue, the notice must specify the sections of the Labor Code alleged to have been violated and include sufficient facts and legal theories to support each alleged violation.  

The notice is submitted online with the LWDA and must also be served on the employer(s) via certified mail. For employers receiving a PAGA notice for the first time, it is easy not to understand what the notice is when it comes in. This is because the notice itself is in the form of a letter directed to the LWDA.  As employers have limited time to assess whether to take action to cure or take steps to prevent alleged violations, businesses must train those who receive the mail to identify PAGA notices. 

Once notice is filed with the LWDA, the agency decides whether it will investigate the employee’s claims or allow the employee to proceed with a lawsuit.  Typically, if the LWDA is not going to investigate, they simply do not respond to the employee’s PAGA notice.  If the LWDA has not taken any action after 65 days, the employee may file a private lawsuit under PAGA in court.  While the LWDA historically investigated only a tiny percentage of PAGA notices, there appears to be an increased effort to investigate since PAGA was overhauled in June 2024.

Curing Violations Early

PAGA allows employers to address certain violations during the notice period, thereby avoiding PAGA litigation and penalties in connection with those violations. For notices filed on or after June 19, 2024, the PAGA reform legislation broadened the range of violations that can be corrected.  Curable violations now include claims related to minimum wage, overtime, meal and rest breaks, business expense reimbursements, and itemized wage statements, among others.

Depending on the size of the employer’s workforce, businesses may be able to submit a cure proposal to the LWDA prior to a lawsuit being filed, regardless of whether the LWDA chooses to investigate.  Employer proposals to correct violations are treated as confidential settlement proposals and cannot be used to validate any claim or as an admission of liability.  However, if accepted, the employer’s confirmation that the cure was completed, along with additional supporting records and information, must be shared with the employee who filed the PAGA notice.

Alternatively, employers not eligible to submit a pre-lawsuit cure proposal can request an early evaluation conference when making their initial appearance in the case.  If granted, the company will be required to submit a confidential statement identifying which alleged violations it intends to cure and dispute (which will be shared with the plaintiff’s counsel), and a neutral evaluator will hold a conference to assess whether any alleged violations occurred and whether any of the plaintiff’s claims can be settled.  

While employers can potentially avoid PAGA litigation by curing alleged violations, assessing whether it is in the company’s best interest to submit a cure proposal should not be taken lightly.  The PAGA amendments provide strict requirements to successfully cure violations, including the payment of unpaid wages, liquidated damages, and interest, and the decision to submit a cure proposal typically requires a nuanced analysis of employees’ time and payroll records to calculate payments owed to each employee covered by the proposal. 

PAGA Lawsuits

Once a lawsuit is filed, the individual plaintiffs are stepping into the shoes of the LWDA.  This means the plaintiffs are suing to enforce the California Labor Code on behalf of the State and other alleged aggrieved employees.

A PAGA case is similar to a class action in that you have one or more individual plaintiffs seeking to represent other similarly situated workers, however, there are several differences.  For example, while both actions are entitled to broad discovery, plaintiffs in PAGA actions are not required to certify their claims prior to trial as they would in a class action. 

Because of the representative nature of the action, if a PAGA lawsuit is resolved, the potential settlement must be submitted to the court for approval in order for the release of PAGA claims to be valid. 

Some of the most important changes under the 2024 amendments impact the potential civil penalties available under PAGA.  The new legislation seeks to level the playing field for employers by reducing penalties for technical violations or where the employer can demonstrate it took “all reasonable steps” to comply with the Labor Code, either before or after a PAGA notice is filed.  The amendments also impose stricter standing requirements – by requiring that plaintiffs personally experienced each Labor Code violation they seek to recover penalties for – and expressly grant courts discretion to limit the scope of PAGA claims and evidence presented at trial based on manageability arguments. 

PAGA Prevention

Employers can take various steps to mitigate the risks associated with PAGA claims, and the recent amendments incentivize and reward employers for making good faith efforts to comply with the Labor Code both before and after a PAGA notice is filed.  Proactive steps include:

• Conducting regular audits of time and payroll practices and records to ensure employees are being properly compensated and receiving state-mandated breaks.
• Regularly reviewing policies and procedures to ensure compliance with the California Labor Code.
• Conducting periodic trainings to educate supervisors and managers about company policies and relevant provisions of the California Labor Code.
• Implementing corrective actions if violations occur. 

In addition to wage and hour issues, employers should also be mindful of potential PAGA claims based on alleged health and safety violations.

Importantly, given the strict deadlines imposed by the new amendments, an employer should promptly review any PAGA notices it receives to determine whether to utilize PAGA’s newly expanded cure and early evaluation options.