PAGA Deal Signed into Law

California Gov. Gavin Newsom signed AB 2288, the California Private Attorneys General Act (PAGA) reform deal, which SHRM supported, into law July 1. The deal includes the following changes to penalties and “cure provisions.”

Structure of Penalties

Under the deal, there is a 15% cap on penalties for employers that take reasonable steps to comply. If an employer demonstrates that it has taken all reasonable steps to comply with the law prior to receipt of a PAGA notice or a request for personnel records, the available penalties are capped at 15% of the penalties sought.

Examples of such reasonable steps include “conducted periodic payroll audits and took action in response to the results of the audit, disseminated lawful written policies, trained supervisors on applicable Labor Code and wage order compliance, or took appropriate corrective action with regard to supervisors.”

Whether the 15% cap is applied will be up to the discretion of a court to determine if the employer took reasonable steps to achieve compliance.

There is a 30% cap on penalties for employers that take steps to comply after receipt of a PAGA notice.

The enhanced $200 penalty for a subsequent violation is only available if there has been a court or agency determination that a violation occurred or if a court determines the employer’s conduct that caused the violation was malicious, fraudulent, or oppressive. This is the same standard for imposition of punitive damages in California. This stresses the importance of immediately addressing any violation found by a court or agency.

When violations occur for less than 30 days or four consecutive pay periods, the maximum penalty available is $50.

A court has discretion, based on the facts and circumstances of the case, to reduce the penalties to be imposed on employers to avoid an award that is unjust.

Cure Provisions

AB 2288 overhauled PAGA’s “cure provision,” allowing more violations to be cured and introducing new mechanisms that employers can take advantage of.

It is now codified that some of the most frequently alleged violations under PAGA— violations of Labor Code Section 226 (wage statements), Section 226.7 (failure to pay meal/rest period premiums), Section 510 (overtime), and Section 2802 (expense reimbursement)—may be cured prior to any imposition of liability.

A small employer—defined as having under 100 employees during the relevant period—can notify the California Labor & Workforce Development Agency that it would like to cure the alleged violations. The agency will then arrange a settlement conference with the plaintiff and employer in an attempt to reach an early resolution for the matter, like the conferences held by the labor commissioner for individual wage claims.

The deal allows employers with at least 100 employees to file a request for a stay and early neutral evaluation with the court, which requires that the court stay all discovery and responsive pleading deadlines. The court will then provide a ruling as to whether the cure was sufficient in addressing the violations alleged in the PAGA notice and, if so, preclude the PAGA claims from proceeding in court.

Injunctive Relief

The new legislation also permits courts to impose injunctions, requiring that entities either do something or refrain from doing something. It will be HR that has to implement compliance with such court orders.