On June 18, Governor Gavin Newsom and legislative leaders announced an agreement with employers on reforms to the Private Attorneys General Act (PAGA), and legislation was introduced on June 21. PAGA has been the subject of ongoing legal challenges and has been criticized by business leaders and others for being overly punitive and favoring plaintiffs' attorneys while providing minimal benefits to workers. When PAGA opponents failed to pass legislative reforms, a coalition group that included former government labor advocates drafted a ballot initiative that would put the issue directly to voters in November.

If Assembly Bill 2288 and/or Senate Bill 92 pass and are signed by Governor Newsom, supporters of the PAGA ballot initiative scheduled for the November ballot have agreed to withdraw their measure by the June 27 deadline. The PAGA ballot initiative, as currently drafted, would effectively eliminate PAGA as a tool for private litigants. The bill is a compromise resulting from months of negotiations between the governor, labor organizations and business groups.

PAGA reforms included in the law include:

• PunishTo encourage compliance with labor laws, the bill would cap penalties at 30 percent of the applicable penalty amount for employers who quickly take steps to correct policies and practices and compensate workers after receiving a PAGA notice. Employers who proactively take steps to comply with labor law even before receiving a PAGA notice would also face lower penalties (with a maximum penalty of 15 percent of the applicable penalty amount). Alternatively, employers who “maliciously, fraudulently, or oppressively” violate labor laws would face a new penalty of $200 per pay period. In addition, the bill excludes various derivative penalties that have been commonly used in PAGA cases to exponentially increase potential penalties for the same underlying harm.
• Employee shareThe level of penalties imposed on workers under the law would change, increasing from 25 to 35 percent.
• Expanded cure provisions to reduce litigation. The measure expands the sections of the labor law that can be cured to reduce the need for litigation and provides for a more robust right to cure through the Labor and Workforce Development Agency to reduce litigation and costs for small employers. And importantly, the legislation allows a court to limit the scope of claims brought in court to ensure that effective case management is also included. This provision appears to be a direct response to the California Supreme Court's opinion that trial courts not have the inherent authority to dismiss PAGA claims on the grounds that they are too cumbersome or unmanageable to effectively pursue. For more information, see our previous coverage of this case here.
• InjunctionCourts would be given the ability to issue injunctions to force companies to make workplace changes to correct violations.
• Stand. To assert a PAGA claim under the proposal, a worker must have personally experienced the alleged violations at issue in the claim within the past year. This provision was in response to a 2018 California Court of Appeals case that held that PAGA plaintiffs have broad standing to bring claims on behalf of other injured workers for labor law violations that the representative plaintiff did not suffer, so long as the representative plaintiff suffered at least (and only) one violation of one labor law provision.
• Process remediation procedures for small and large employers. In an effort to reduce the number of litigations, particularly against small employers (those with fewer than 100 employees), who have criticized PAGA as a tool of extortion given the potentially crippling effects of PAGA litigation, the LWDA will be more directly involved in evaluating employers' remedial efforts prior to litigation.
• State enforcementTo strengthen state enforcement of the laws, the Department of Labor Relations will be given the ability to expedite hiring and fill vacancies to ensure effective and timely enforcement of workers' labor claims.
• No retroactive effect. The new legislation will not affect current PAGA legislation or matters notified to the LWDA before June 19, 2024.

The settlement came on the heels of the U.S. Supreme Court's denial of certiorari in two cases involving PAGA.

In Uber Technologies Inc. v. Gregg And Lyft Inc. v. SeifuThe ride-sharing companies tried to convince the courts that the Federal Arbitration Act (FAA) preempts PAGA claims and requires dismissal of the non-individual claims at issue. After failing at the state level, Uber and Lyft filed petitions for review, which were denied by the judges.

Click here to read AB 2288.

Click here to read SB 92.

Why it is important

Both sides called the PAGA reforms a victory. “We sat down at the bargaining table and negotiated a deal that works for both businesses and workers and makes needed improvements to this system,” Governor Newsom said in a statement. “This proposal continues to provide strong protections for workers, provides incentives for businesses to comply with labor laws, and reduces litigation.”