California’s comprehensive reform of the Private Attorneys General Act (PAGA) has now become law following the approval of Assembly Bill 2288 (AB 2288) and Senate Bill 92 (SB 92) by Governor Newsom. This reform was negotiated to prevent the repeal of PAGA from appearing on the November ballot, opting instead for significant changes aimed at balancing employer concerns with the state’s commitment to fair treatment of employees.

PAGA has been a contentious issue for California employers, often targeted by plaintiffs seeking substantial civil penalties for technical violations of wage and hour laws. The reform seeks to address longstanding grievances related to PAGA’s application in courts and aims to ensure that employees are treated fairly.

Effective immediately and applicable to cases filed after June 19, 2024, the PAGA reform introduces several key legal changes:

1. Rectification of Court Holdings:
   – PAGA plaintiffs can now only represent aggrieved employees for violations they personally suffered. Previously, plaintiffs could sue for violations they did not directly experience.
   – A strict one-year statute of limitations now applies to PAGA claims, clarifying the timeline for filing such claims.
   – The manageability of PAGA claims before trial has been bolstered, allowing courts to dismiss claims early if the evidence management is unfeasible.
2. Employer Protections:
   – Employers can avoid PAGA penalties entirely by demonstrating a good-faith dispute or by curing violations promptly.
   – Penalties for certain violations, such as wage statement errors, are now capped, providing relief from excessive financial liabilities.
3.  Reductions in Penalties:
   – The default penalty structure for subsequent violations under PAGA has been clarified and reduced in certain circumstances, providing clearer guidelines for penalties.
4. Cure and Early Resolution Processes:
   – Employers have the opportunity to “cure” alleged violations within specified timeframes, thereby potentially avoiding litigation.
   – Small and large employers have distinct processes for early evaluation and cure procedures, aimed at resolving disputes before they escalate.
5. Miscellaneous Provisions:
   – Changes include an increase in the share of PAGA funds going to aggrieved employees and adjustments in penalty calculations.

Overall, while the PAGA reform aims to address some of the most criticized aspects of the law, such as allowing claims for violations not personally suffered and excessive penalties, its implementation and interpretation remain complex. Employers are encouraged to ensure compliance with wage and hour laws and utilize the new provisions to mitigate potential legal exposure under PAGA.