PAGA - (Private Attorneys General Act) has been a pain in small business's tail for several years. CA recently reformed PAGA making it easier for businesses to manage their legal liability. Here's some information on what this reform means to you and your small business.

California’s Private Attorneys General Act (PAGA) allows employees to sue employers for labor violations on behalf of the state. Recently, new amendments have been signed into law to address criticisms and make the system fairer. Here's a simplified look at the changes:

What the Heck is PAGA?

PAGA, enacted in 2004, permits employees to sue their employers for labor code violations and recover civil penalties. This law has been a double-edged sword: while it empowers employees to address labor violations, it has also led to a surge in litigation, causing headaches for employers. In a nutshell, the State has outsourced the task of labor board claims to attorneys and given them free reign to attack small business.

Key Points of the New PAGA Reforms

Penalty Limits:

• For Minor Violations. Penalties are reduced to $50 per employee per pay period for isolated, non-recurring incidents within 30 days or four pay periods.
• Cap on Penalties. Employers that take "all reasonable steps" to comply with labor laws before receiving a PAGA notice can limit penalties to 15% of the usual amount.
• Reduced Penalties for Weekly Payers. Companies paying weekly will see penalties reduced by half to avoid being penalized for each pay period.
• Higher Penalties for Severe Violations. The $200 penalty now applies only to malicious, fraudulent, or oppressive conduct or repeat offenses within five years.

Increased Worker Share

Workers' share of recovered penalties increases to 35% (up from 25%), while the state receives 65% (down from 75%). This means the incentive for attorneys to chase PAGA lawsuits has been reduced.

Right to Cure

• Small Employers. Those with fewer than 100 employees can avoid penalties by fixing violations within 33 days of receiving a PAGA notice. (This option becomes available to employers under 100 in October 2024.) 
• Large Employers. Those with 100 or more employees can request an early evaluation conference to discuss and remedy violations.
• Within 33 days of a LWDA letter, an employer can submit a proposal to cure. Curing a violation of Labor Code Section 226(a) could result in not being required to pay a civil penalty.

Pay Statement Violations

Penalties for pay statement issues are reduced to $25 per employee per pay period if minor errors don’t mislead the employee about their employer's identity or if they can still easily determine the required information.

Non-Pay Statement Claims

Employees must be made whole for any wage underpayments, including interest and liquidated damages.

Overall this is positive news for CA small business employers. These reforms aim to reduce unnecessary lawsuits while still protecting workers' rights.

Steps for Compliance

There is an incentive for employers to be proactive in their management of compliance issues in their workplace. It’s important for small businesses to be deliberate about wage and hour laws, harassment and workplace violence prevention and with general employee management processes.

• Audit Wage and Hour Practices. Immediately review and update your wage and hour practices to ensure compliance with California labor laws. This includes meal and rest breaks, paystub accuracy, final pay, regular rate of pay, and overtime, just to name a few.
• Be Proactive. Educate your managers and employees about their rights with regards to wage and hour laws and protections against harassment and workplace violence. This can help prevent violations and reduce the likelihood of lawsuits.
• Get HR Advice. Small businesses often take employment actions without considering or understanding the technicalities and complexities of CA labor law. It is advised strongly that small business employers reach out to competent HR professionals like the pros at Infinium HR, or qualified attorneys to be sure they are fully compliant with all requirements or before taking employment actions that may impact their liability.

Conclusion

By understanding and adapting to these changes, small businesses can minimize legal risks and focus on growth and employee satisfaction. By staying informed and proactive, small business owners can navigate and mitigate the threat of PAGA claims and class-action lawsuits.

For more detailed guidance, consult with the HR pros at Infinium HR or your legal advisor.

This summary is meant to help understand the changes and is not legal advice.

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