Employers accused of California Labor Code violations under the state’s Private Attorneys General Act (PAGA) can face substantial civil penalties. PAGA allows current and former employees to pursue claims for labor law violations on behalf of the state, and successful PAGA plaintiffs can receive up to 35% of the penalties recovered.

California’s Private Attorneys General Act (PAGA) poses substantial risks for employers. Under PAGA, any current or former employee can file a lawsuit in state court alleging violations of California’s Labor Code; and, if a PAGA lawsuit is successful, the employer can be held liable for substantial civil monetary penalties owed to the State of California.

Plaintiffs in PAGA actions can receive up to 35% of the penalties recovered (plus attorney fees and costs); and, as plaintiffs can file for violations impacting themselves and other “aggrieved employees,” employees (and plaintiffs’ firms) can have significant financial incentives to file. This, combined with the low barriers to filing PAGA actions, means that these lawsuits have become increasingly common in recent years.

“Employers that are facing PAGA exposure need to prioritize their defense. PAGA allows plaintiffs and plaintiffs’ firms to seek civil penalties for alleged California labor law violations, and successfully defending against workers’ allegations of noncompliance can be critical for avoiding substantial liability.” - James Bell, Senior Trial Attorney Oberheiden P.C.

Businesses targeted in PAGA litigation can potentially face other legal risks as well—including the risk of class action litigation outside of PAGA in some cases. As a result, targeted businesses need to rely on experienced counsel for strategic guidance, and those that are at risk of facing liability due to noncompliance may need to execute creative strategies to protect their interests long-term.

What California Employers Need to Know About the PAGA Statute

The Private Attorneys General Act (PAGA) appears in California Labor Code Section 2698 through Section 2699.8. While the Labor Code is enforced by the California Labor and Workforce Development Agency (LWDA) and other state authorities, PAGA includes a provision that allows employees to pursue claims for labor law violations on the state’s behalf. While plaintiffs cannot recover damages under PAGA, plaintiffs can receive a percentage of any penalties they recover.

Under PAGA, employees can file claims for all types of compliance violations. This includes (but is not limited to) common compliance violations such as:

• Failure to pay minimum wage
• Failure to provide rest breaks
• Failure to provide wage statements
• Wrongful termination
• Other wage and hour violations

Penalties under PAGA generally apply on a per-employee per-violation basis. These penalties can be up to $100 for each “aggrieved employee” in most cases, though this can increase to $200 for repeated violations (within five years) or for conduct that the court deems “malicious, fraudulent, or oppressive.” Thus, in cases involving large numbers of employees and violations allegedly committed across multiple pay periods, employers’ liability exposure can be substantial.

PAGA lawsuits are subject to strict substantive and procedural requirements—though, at this stage, most plaintiffs’ firms handling these cases are well-versed in the statute’s requirements. While PAGA claims differ from claims under other wage and hour laws in that they do not involve potential liability for damages, they present similar financial risks for targeted employers. As a result, all PAGA filings need to be taken seriously; and, when a company receives written notice of a pending PAGA claim, the company should promptly engage defense counsel with specific, and extensive, experience defending employers targeted under California law.

What California Employers Need to Know About PAGA Litigation

With this background in mind, what do California employers need to know about PAGA litigation? The most important thing to know is that PAGA lawsuits can—and do—lead to significant liability. As discussed above, civil monetary penalties under PAGA can be substantial, and employees and plaintiffs’ firms have a strong financial incentive to seek as much penalty liability as possible. Here are some additional key insights for targeted employers:

Plaintiffs’ Law Firms Statewide Are Using PAGA to Seek Substantial Penalties and Attorneys’ Fees

From Los Angeles in Southern California to San Francisco in Northern California, plaintiffs’ law firms statewide are using PAGA to seek substantial penalties and attorneys’ fees. Since plaintiffs’ firms can seek to recover their fees separately from the penalties imposed, this both adds to targeted employers’ liability exposure and increases the financial incentive for employees and plaintiffs’ firms to pursue wage and hour claims under PAGA.

Coming Into Compliance Before or After Receiving a Written Notice Can Substantially Reduce Targeted Employers’ Liability Exposure

Under reforms enacted in 2024, employers targeted under PAGA can substantially reduce their liability exposure by coming into compliance with the California Labor Code. If an employer comes into compliance before receiving notice of a PAGA claim, the employer’s liability can be capped at 15% of the penalties that would otherwise apply. If an employer timely comes into compliance after receiving notice of a PAGA claim, the employer’s liability can be capped at 30% of the penalties that would otherwise apply.

Settlement is a Possibility (Subject to Court Approval)

As with other types of litigation involving employee rights, settlement is a possibility in cases filed under California’s Private Attorneys General Act (PAGA). When it makes sense to do so, targeted employers can focus their efforts on negotiating a settlement that minimizes their financial liability. Proposed settlements under PAGA are subject to court approval. As the LWDA explains, “the court must independently review and approve PAGA settlements to make sure the resolution is fair[ and the] LWDA also is entitled to review proposed settlement agreements.”

Disputes Regarding Employers’ Cure Efforts Can Prolong the Litigation Process

While employers can substantially mitigate their liability under PAGA by promptly curing relevant violations, employees can dispute employers’ cure claims. As the LWDA also explains, “[a]n employee may respond to an employer’s wage statement cure notice to dispute that the employer has cured the violation alleged. . . . [w]hen an employee files a notice of dispute, the LWDA has 17 days to review the matter and give written notice of its decision to the parties. If LWDA determines the employer has not cured the violation, it may give the employer up to three additional business days to do so.”

PAGA Liability May Not Be Targeted Employers’ Only Concern

For employers targeted under PAGA, facing civil monetary penalties may not be their only concern. Targeted employers can also face private civil actions under California’s Fair Employment and Housing Act (FEHA) as well as federal wage and hour laws, including the Fair Labor Standards Act (FLSA). Facing private civil litigation in state or federal court can substantially increase targeted employers’ liability exposure—particularly in class action cases.

PAGA Claims vs. Employment Law Class Actions

While PAGA is not a class action statute, employers targeted under PAGA can potentially face wage and hour class actions under other state or federal statutes. While the California Labor Code imposes stricter requirements than many comparable laws, violations of the California Labor Code will still constitute violations of these other laws in some cases. If employees allege discrimination or other unlawful employment practices in addition to alleging wage and hour violations, this can pose substantial liability risks as well.

Responding to Employment Claims Under the PAGA Statute

Taking all of this into account, employers targeted under California’s PAGA statute need to take an informed, proactive, and strategic approach to their defense. Among other things, this involves:

• Carefully Reviewing the PAGA Notice – Upon receiving a written PAGA notice, an employer should promptly engage legal counsel to review the notice and begin structuring a response. Time is of the essence in this scenario.
• Conducting an Internal Compliance Assessment – Targeted employers should also work with their legal counsel to promptly conduct an internal employment and labor law compliance assessment.
• Determining Appropriate Next Steps – After assessing their risk exposure, targeted employers should work with their legal counsel to determine appropriate next steps. This includes, but is not limited to, determining whether efforts to cure are warranted.
• Proactively Targeting a Favorable Resolution – While it will be in targeted employers’ best interests to litigate in some cases, proactively targeting a favorable resolution by working with the LWDA and seeking a settlement can help facilitate an efficient and favorable outcome when warranted.
• Ensuring Compliance Going Forward – To mitigate their risk of facing additional PAGA claims (and other employment and labor law claims) in the future, targeted employers should also work with their legal counsel to ensure compliance going forward.

Again, this is not a comprehensive list. When facing PAGA claims, targeted employers need to rely on the advice of experienced legal counsel to make informed and strategic decisions every step of the way. While PAGA lawsuits can present substantial liability risks, targeted employers can maximize their chances of avoiding unnecessary and unwarranted liability by prioritizing their defense. What executing a strategic defense entails will depend on the specific circumstances involved; but, in all cases, a proactive approach is essential for securing a favorable resolution.