CA Governor announces PAGA clean-up deal in response to proposed ballot initiative and rift between business and labor

Last Updated 6/19/2024

We recently reported on the proposed California Employee Civil Action Law Initiative which qualified for this November’s California ballot.  The proposed Initiative was set to repeal the Private Attorneys General Act (PAGA), a 2004 law signed by then Governor Gray Davis, creating a private right of action allowing aggrieved employees to sue their employers on behalf of the state over labor law violations.  In turn, PAGA would be replaced with the  “Fair Pay and Employer Accountability Act” which would impose double statutory and civil penalties for willful violators; 100% of monetary penalties would be awarded to harmed employees (rather than current 25%), resources would go to employers to ensure labor compliance; the Division of Labor Standards Enforcement (DLSE) would be a party to all labor complaints; no award of attorney's fees, which are currently awarded under PAGA; and the state legislature would fully fund the DLSE to meet the division's requirements by law.

In response to the rift between business and labor over PAGA, Governor Gavin Newsom has headed off a contentious election season and brought leaders from both sides together to agree on vital reforms to PAGA.  The result of the bargain is that when legislation reflecting this agreement is passed by the Legislature and signed by the Governor by June 27, proponents of the PAGA ballot initiative will withdraw their measure.

Overall, the business community has been satisfied with the compromise, though admittedly labor was slightly favored overall.  However, business leaders feel this is a step in the right direction.  The California Chamber of Commerce weighed in to state, “This package provides meaningful reforms that ensure workers continue to have a strong vehicle to get labor claims resolved, while also limiting the frivolous litigation that has cost employers billions without benefiting workers.”  And the California Western Growers Association added, “Yes, labor was favored in the negotiations on several points, but that was to be expected. On balance, however, the [Fix PAGA] coalition believes that these changes will significantly reduce both the number and severity of PAGA cases. Make no mistake, this is a win for California – for both employers and the workers we support.”

A Press Release from the Governor’s office has outlined the specifics of the PAGA reform proposal as follows:

Reform penalty structure

  • Encourages compliance with labor laws by capping penalties on employers who quickly take steps to fix policies and practices, and make workers whole, after receiving a PAGA notice, as well as on employers that act responsibly to take steps proactively to comply with the labor code before even receiving a PAGA notice.
  • Creates new, higher penalties on employers who act maliciously, fraudulently or oppressively in violating labor laws.
  • Ensures that more of the penalty money goes to employees by increasing the amount allocated to employees from 25% to 35%.

Reducing and streamlining litigation

  • Expands which Labor Code sections can be cured to reduce the need for litigation and make employees whole quickly.
  • Protects small employers by providing a more robust right to cure process through the Labor and Workforce Development Agency (LWDA) to reduce litigation and costs.
  • Codifies that a court may limit both the scope of claims presented at trial to ensure cases can be managed effectively.

Improving measures for injunctive relief and standing

  • Allows courts to provide injunctive relief to compel businesses to implement changes in the workplace to remedy labor law violations.
  • Requires the employee to personally experience the alleged violations brought in a claim.

Strengthening state enforcement

Give the Department of Industrial Relations (DIR) the ability to expedite hiring and fill vacancies to ensure effective and timely enforcement of employee labor claims.

We will continue to track developments on the latest in PAGA reform and update you when and if the final deal goes through.  Rosasco Law Group commends Western Growers for their hard work and dedication in seeking this desperately needed relief.   If you have any questions on PAGA and what it means for your business, please don’t hesitate to contact Rosasco Law Group.

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