California’s Private Attorneys General Act of 2004 (PAGA) has served as a critical enforcement tool, designed to address the shortcomings of state labor agencies. PAGA enables employees to act as private attorneys general, pursuing penalties for labor code violations that might otherwise go unchecked.
Yet, as with any well-intentioned legislation, PAGA is not perfect and has not been immune to misuse. In fact, the last two decades have shed light on a number of serious flaws within the law. Businesses (particularly small enterprises and nonprofits) in my district and throughout the state have reported significant challenges highlighted by the actions of an enterprising few to exploit the system. These challenges have prompted a years’-long critical reassessment of PAGA’s framework by stakeholders and lawmakers.
In order to address these deficiencies while bolstering protections for workers, I am proud to have authored the compromise agreement in Senate Bill 92. Assemblymember Kalra similarly championed its companion bill in Assembly Bill 2288. Both bills were signed into law by Governor Newsom and took effect on June 19, 2024. The legislation strikes a careful balance between bolstering enforcement and reducing the potential for abuse.
Critically, these reforms are the result of extensive negotiations among business leaders, labor advocates, and legal experts. This collaborative approach ensured that the new measures address the concerns of all stakeholders while preserving PAGA’s core mission of safeguarding worker rights.
One of the most significant changes introduced in SB 92 is the creation of a formal “right to cure” process for small and mid-sized companies. Under this provision, businesses will be able to rectify labor code violations to the satisfaction of the Labor and Workforce Development Agency (LWDA) and avoid litigation altogether. The most common PAGA suits stem from allegations of basic wage and hour violations. They include minimum wage, overtime, meal periods, rest periods, wage statements, and expense reimbursements. Under the new and improved PAGA, these violations are now curable. This mechanism not only provides a pathway for compliance but also helps alleviate the burden on small businesses that might otherwise face undue financial strain from protracted legal battles.
Secondly, for businesses with more than 100 employees, SB 92 offers an early evaluation conference that allows for the prompt resolution of disputes. This approach is designed to foster quicker settlements and reduce the adversarial nature of litigation. Ultimately, this will benefit both employers and employees by facilitating more efficient dispute resolution through a neutral evaluator.
Meanwhile, AB 2288 complements these reforms by incentivizing proactive compliance. It introduces a tiered penalty system where penalties are reduced for employers who act swiftly to correct violations. Conversely, the bill also imposes higher penalties for egregious violations, ensuring that bad actors are held accountable while encouraging employers to maintain high standards of labor law compliance.
For employers that take all reasonable steps to comply with the Labor Code before receiving a PAGA notice, the civil penalties can be capped at 15 percent of the penalties. If employers take all reasonable steps after receiving a PAGA notice, the civil penalties can be capped at 30 percent. When an employer’s violation lasts for less than 30 days or four consecutive pay periods, the penalties are capped at $50. For wage statement violations that do not cause injury, the civil penalty is capped at $25.
AB 2288 also improves the overall fairness of PAGA by: adding injunctive relief as a remedy; updating the split of PAGA penalties; increasing workers’ ability to get back wages with interest; and allowing judicial discretion to increase penalties where the outcome would otherwise be unjust. Previously, employers faced a civil penalty of $100 per employee per pay period for initial violations and $200 per employee per pay period for subsequent violations.
Under the old PAGA, penalties were applied on a per-pay period basis, which meant that employers with weekly payrolls faced twice as many penalties as those with biweekly payrolls and approximately twice as many as those with semimonthly payrolls. This disproportionately impacted employers who paid employees weekly. AB 2288 has now addressed this issue by reducing penalties by 50% for employers with weekly payrolls.
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Additionally, civil penalties for derivative violations have been eliminated. Employers are now only liable for penalties related to the primary overtime violation, reducing overall exposure to civil penalties by 75%. For instance, if an employer fails to pay an employee for one minute of overtime, this previously resulted in penalties for the overtime violation itself plus three derivative violations: underpayment of wages, an inaccurate wage statement, and failure to pay all wages owed by the last date of employment. Now, penalties are only applied to the primary overtime violation.
The reform of PAGA is a crucial evolution of labor law enforcement in California. By addressing the flaws that have emerged over time, SB 92 and AB 2288 promise a more balanced and effective approach to navigating the Labor Code and labor disputes. These changes will help maintain the integrity of worker protections while ensuring that employers are not unduly penalized for minor infractions. As these reforms take effect, they offer hope for a more equitable and efficient enforcement landscape, where both workers and businesses can thrive.
Thomas J. Umberg represents the 34th Senate District and is chair of the Senate Judiciary Committee.
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