Positive News About The Updated PAGA Rules

Do your wage and hour practices pass the test for potential reduced penalties?

The California Private Attorneys General Act (PAGA) has long been a topic of debate among employers and employees alike. Originally enacted in 2004, PAGA allows employees to sue their employers for labor code violations on behalf of themselves and other employees. These violations included items such as not paying overtime correctly, not giving eligible employees breaks or meal periods and even missing required information on employees’ payroll wage statements.

While it aimed to empower workers, it often resulted in costly lawsuits for businesses. However, recent changes to the PAGA rules bring a breath of fresh air and provide helpful changes for employers.?

The new rules provide an opportunity for employers to engage in constructive conversations with employees which has the potential to enhance trust and collaboration in the employment relationship and lead to more amicable solutions. It also means the employer can focus their efforts on more critical areas that genuinely impact employee welfare rather than getting bogged down by minor technicalities such as missing the ‘Inc.’ in their company name on a wage statement.?

While the new rules are a positive development for employers, there are some steps you should follow to take advantage of the potential benefits including the reduced penalties for wage and hour violations.

What are the new PAGA rules?

The changes made significant updates to PAGA that aim to streamline processes and reduce frivolous lawsuits. The key changes include:

1. Stricter Requirements for Claims: Employees must personally experience every violation they are attempting to bring on behalf of other employees. In the past, they could file a lawsuit over things they never experienced themselves.
2. Scope of the Claim: Employers will have more opportunities to have the judge rule on standing and to narrow the scope of the case. Judges can also limit the evidence presented at trial to ensure the case is manageable. Because of the new rules, the employee group will be potentially smaller and involve fewer violations.
3. Increased Clarity and Predictability: Enhanced notice requirements mean employers will have clearer insights into what specific violations are being claimed. This transparency allows for quicker investigations and remediation, fostering a proactive rather than reactive approach to compliance.
4. New Early Evaluation Conference Process: This process is dependent on the size of the employer. For employers with under 100 employees, there is the option to notify the Labor and Workforce Development Agency (LWDA) of the employer's proposal to fix the alleged violations. The LWDA will determine if the proposal is sufficient and what the deadline will be for the employer to complete the corrections.?For employers with over 100 employees, they may request an Early Evaluation Conference. If granted, the Evaluation Conference will address if any allegations actually occurred, if the employer has corrected them and what settlement options may be available to the parties.
5. Reduced Penalties: Most penalties have been reduced to half or less of the amounts that would be awarded under the old PAGA. In addition, penalties are substantially reduced if the employer can show good faith in attempting to comply with the labor codes’ wage and hour laws.
6. Enhanced Opportunities for Proactive Employers: Employers are given more time and multiple ways to correct alleged violations before a lawsuit can be filed, encouraging resolution through dialogue rather than litigation. Employers must show they have taken all reasonable steps to comply with the law to take advantage of this benefit.

What should you do right now to take advantage of the new PAGA rules?

To take advantage of the benefits of the new rules, employers should take all reasonable steps to comply with the labor code’s wage and hour laws.?

Being able to cap PAGA penalties is an important part of the new rules. There are two scenarios where an employer can take advantage of this:

1. Penalties are capped at 15% if an employer can show they took all reasonable steps to comply with the law before receiving a PAGA notice.
2. Penalties are capped at 30% if the employer can show they took all reasonable steps to comply with the law within 60 days after receiving a PAGA notice.

There are several additional proactive steps employers should take to minimize their chances of receiving a PAGA claim and potentially reduce penalties if they do:

• Conduct periodic payroll audits and take immediate action to correct any issues found as a result of the audit.

• Provide lawful written policies to all employees such as those normally contained in an Employee Handbook.

• Train supervisors on the labor code’s wage and hour laws and their role in complying with these laws.

• Take the appropriate corrective action with supervisors who are violating wage and hour laws with their employees.

How SDHR Consulting can help!

The new PAGA rules in California represent a shift towards a more balanced approach to labor law enforcement. While the original intent of PAGA—to protect workers—remains intact, the updates aim to create a more manageable environment for employers. By reducing the risk of frivolous lawsuits, encouraging open communication, and focusing on substantial violations, these changes not only protect businesses but also contribute to a healthier workplace for all.

At SDHR Consulting, our focus has always been on helping companies comply with the law as well as creating a positive working environment for everyone so the business can reach its goals.

We can provide the proactive steps you need to mitigate your risks of employee dissatisfaction and lawsuits, such as:

• HR Review/Gap Analysis: Be assured that you comply with all laws, such as anti-discrimination and wage and hour laws. Our HR Review/Gap Analysis provides a deep dive into all your HR processes and produces a comprehensive report for you to understand what you are doing well and what you need to improve in the areas of both compliance and best practice.

• Employee Handbook: We are experts in creating compliant and employee-friendly handbooks for companies, no matter your size. We stay current on all the required changes needed to ensure you have the most current information being distributed to your employees.

• Training Workshops: We have developed engaging workshops for both managers and employees. Our ‘Avoiding the Habits of Highly Sued Managers’ workshop will provide managers with the information they need to ensure they are complying with anti-discrimination and wage and hour laws. We also offer workshops to develop your managers' skills in the areas of Coaching and Leadership, Effective Feedback, and Conflict Management.

Author: Traci Hagan, Manager, HR Training & Compliance