On July 1, 2024, Governor Gavin Newsom signed Assembly Bill (AB) 2288 and Senate Bill (SB) 92 to reform the Private Attorneys General Act (PAGA), the California law that allows employees to bring Labor Code violations and penalties against their employers.
The bills encourage employer compliance with the Labor Code and provide employers with tools to reduce damages related to wage and hour violations.
The new changes are not retroactive and apply only to lawsuits arising on or after June 19, 2024.
Below is a high-level summary of the changes:
Reformed Penalty Structure
- Previously, if there was a PAGA violation for a provision in the Labor Code that did not outline a specific penalty amount, the penalty was set at $100 per aggrieved employee per day. Under AB 2288, that penalty is decreased to $50 if the violation results from an isolated, nonrecurring event that was less than 30 consecutive days or four consecutive pay periods.
- For wage statement violations (except incorrect employer name and address), the civil penalty is now reduced to $25 per employee per pay period, provided that the employee could promptly and easily determine from the wage statement alone the accurate, required information. If a wage statement violation is related to an employer name or address, the penalty is $25 per employee per pay period if the employee would not be “confused or misled about the correct identity of their employer.”
- Civil penalties are now capped at 15% of what the employer would otherwise be assessed if the employer takes “all reasonable steps” to comply with the provisions alleged to have been violated prior to receiving notice of a Labor Code violation. “All reasonable steps” may include periodic payroll audits, updated policies, training supervisors on Labor Code compliance, and taking appropriate corrective action with regard to supervisors. Civil penalties are now capped at 30% if the employer takes “all reasonable steps” to come into compliance within 60 days after receiving notice.
- If an employer has taken “all reasonable steps” to come into compliance and cures the Labor Code violation, the employer will not be required to pay any PAGA penalties. If the employer has not taken “all reasonable steps” but has otherwise cured any violations, the penalties are now capped at $15 per pay period.
- The new bills do not allow employees to stack penalties on their employer for certain wage violations that are not willful or intentional if a penalty has already been collected for the same underlying unpaid wage violation.
- Employers that pay on a weekly basis will now receive a 50% reduction in the per-pay-period penalties. This change resolves an issue under the previous law, whereby employers that paid employees more frequently had higher potential penalties since the penalties were based upon the number pay periods.
- There are now higher penalties ($200 per violation) on employers who act maliciously, fraudulently or oppressively in violating labor laws. The $200 penalty also applies if an agency or court, within the last five years, has found that the employer’s policy or practice that gave rise to the violation is unlawful.
- The new law provides that more of the penalty money goes to employees, by increasing the amount allocated to employees from 25% to 35%.
Efforts to Reduce and Streamline Litigation
- SB 92 provides the process to cure a non-wage statement violation, which includes: paying any unpaid wages going back three years; pay 7 percent interest; provide any liquidated damages required under statute; and cover reasonable attorneys’ fees and costs. For wage statement violations, employers may cure a name and address violation by providing employees the correct information. For any other wage statement violations, the employer must provide three years of corrected wage statements, which can be done digitally in certain cases.
- SB 92 expands which Labor Code sections can be cured. Previously, the following twelve sections were non-curable: Sections 226 (wage statements); 226.7 (meal and rest breaks); 227 (wage withholdings); 227.3 (paying out unused vacation upon termination); 500 (workday and workweek periods); 512 (meal periods); 513 (makeup time); 1194, 1197, and 1197.1 (minimum wage remedies); and 2800 and 2802 (indemnification).
- SB 92 allows for early evaluation and settlement procedures for curable provisions of the Labor Code. Starting October 1, 2024, a new version of Labor Code section 2699.3 will take effect, which, among other changes, will allow the Labor & Workforce Development Agency to dismiss a wage statement claim if the agency determines that it has been cured.
Injunctive Relief and Standing
- AB 2288 allows courts to provide injunctive relief to compel employers to implement changes in the workplace to remedy labor law violations.
- AB 2288 requires the employee to personally experience the alleged violations within the statute of limitations in order to bring a claim.
More information about the PAGA reform bill can be found here.
Nonprofit organizations should regularly review and audit their wage and hour practices and policies to check for any compliance issues. LCW attorneys are available to assist nonprofit organizations with any questions about the PAGA reform bills and are able to advise on steps nonprofits may want to consider taking in response to the changes in the law.
