Staying compliant with California’s Private Attorneys General Act (PAGA) now hinges on proactive measures, following the major 2024 reforms (AB 2288 & SB 92). Employers must now demonstrate that they have taken “all reasonable steps” to comply with the Labor Code. This includes conducting regular wage-and-hour audits, maintaining precise timekeeping records, and immediately correcting any discovered violations. Proactive compliance can reduce potential penalties by up to 85%, making documented diligence the new standard for managing PAGA risk.
California’s employment law landscape shifted dramatically on June 19, 2024. On this date, new reforms to the Private Attorneys General Act (PAGA) took effect, fundamentally changing the rules of engagement for employers.
For two decades, PAGA, often referred to as the “sue your boss” law, has been a source of massive, six- and seven-figure lawsuits for California businesses. The old framework incentivized litigation, as minor technical violations could stack into crippling penalties.
The 2024 reforms (AB 2288 and SB 92) represent a paradigm shift. While PAGA remains a significant threat, the new law creates substantial opportunities for employers to mitigate or even avoid penalties. For the first time, the law rewards employers who can prove they are actively trying to comply.
This is no longer a passive, defensive game. Proactive diligence is now your most powerful shield. This article provides a complete playbook for staying compliant in this new PAGA era.
What is the Private Attorneys General Act (PAGA)?
The Private Attorneys General Act is a unique California law that empowers an “aggrieved employee” to act on behalf of the state’s Labor and Workforce Development Agency (LWDA).
Here’s how it works:
- An employee files a lawsuit to recover civil penalties for Labor Code violations.
- They sue not only for themselves but also on behalf of all other current and former employees affected by the violation.
- PAGA claims are not class-action lawsuits. They do not require class certification, making them much easier for plaintiffs’ attorneys to file and pursue.
- The danger lies in “stacking” penalties. A simple $100 penalty for a paystub error, applied to 100 employees over 24 pay periods, explodes into a $240,000 liability before legal fees.
Common PAGA claims target meal and rest break violations, inaccurate wage statements, and overtime miscalculations.
California’s 2024 PAGA Reforms
The new reforms, effective for PAGA notices filed on or after June 19, 2024, restructure the law to encourage compliance and limit the filing of frivolous lawsuits. Here are the key changes employers must understand.
1. The “All Reasonable Steps” Defense
This is the most significant change. Employers can now assert a new affirmative defense by proving they took “all reasonable steps” to comply with the Labor Code before receiving a PAGA notice.
If an employer can demonstrate this proactive diligence, a court may reduce the potential penalties to as little as 15%. This represents an 85% reduction.
What are “reasonable steps”? While courts will define this over time, it includes:
- Conducting regular, privileged wage-and-hour audits.
- Using and maintaining compliant timekeeping and payroll systems.
- Providing clear, written, compliant employee policies.
- Consistently training managers and supervisors on wage-and-hour laws (especially meal breaks).
- Documenting all these efforts.
2. New Penalty Reductions & Expanded Cure Options
The reforms create a new penalty structure that heavily favors employers who act in good faith.
- 15% Penalty Exposure: For employers who prove they took “all reasonable steps” before notice.
- 30% Penalty Exposure: For employers who take corrective action after receiving a PAGA notice (within 60 days).
- Expanded “Right to Cure”: Employers now have greater opportunities to fully correct certain Labor Code violations before any penalties attach. This now includes wage statement errors (Labor Code 226) and meal/rest break violations, which were previously primary sources of litigation.
3. Narrowed Standing: Targeting Specific Violations
Previously, an employee who suffered one violation (e.g., a late meal break) could sue an employer for all alleged violations, even those that did not personally affect them (e.g., paystub errors).
Under the new law, a PAGA plaintiff must have personally suffered each specific violation they are suing over. This “narrowed standing” significantly curtails the broad, fishing-expedition lawsuits that were common under the old PAGA.
4. Updated Penalty Allocation
The new law also changes how penalties are distributed:
- Old Law: 75% to the state (LWDA) and 25% to the aggrieved employees.
- New Law: 65% to the state (LWDA) and 35% to the aggrieved employees.
This modest shift provides a slightly larger recovery for the employees involved in the claim.
The Proactive PAGA Compliance Playbook: How to Prove “All Reasonable Steps”
The 2024 reforms make one thing clear: you must move from a defensive crouch to a forward-leaning compliance posture. Your goal is to build a “Reasonable Steps” file today to protect you from a lawsuit tomorrow.
1. Audit Your Timekeeping and Payroll Immediately
This is the starting point for most PAGA claims.
- Timekeeping: Ensure all non-exempt employees enter their exact time. Emphasize that they must record the precise time they start and end work, as well as take their 30-minute, duty-free meal breaks. Eliminate any time-rounding policies that are not fully compliant.
- Paystub Compliance: Audit your wage statements against Labor Code 226. They must show all required information, including total hours worked, all applicable pay rates, gross and net wages, and pay period dates.
- Systems: Verify that your payroll systems are correctly configured to comply with California’s complex rules, including overtime and meal premium calculations.
2. Document Everything: Create Your “Reasonable Steps” File
If you cannot prove it, it did not happen. This file is your evidence to qualify for the 15% penalty cap.
Your file should include:
- Records of all internal or third-party wage-and-hour audits.
- Evidence of manager training, including dates, topics, and sign-in sheets.
- Copies of your employee handbook and signed acknowledgments from employees.
- Memos and notices are sent to employees to reinforce compliance practices (e.g., timekeeping reminders).
- Proof of any corrections made, such as back-pay for a corrected timecard error.
3. Train Your Managers (Your First Line of Defense)
Your managers are your biggest compliance asset or your most significant liability. They approve timecards, manage schedules, and enforce breaks.
- Train managers to proactively enforce meal and rest breaks. They must ensure employees are relieved of all duties.
- Train them to prohibit all off-the-clock work. This includes checking email, taking calls, or finishing tasks before clocking in.
- Ensure they understand how to classify employees (exempt vs. non-exempt) correctly.
4. Review and Update Your Employee Handbook
Your written policies are a cornerstone of your “reasonable steps” defense.
- Confirm your policies for meal and rest breaks, overtime, timekeeping, and expense reimbursement are fully compliant with California law.
- Ensure policies are written in clear, simple language.
- Distribute the updated handbook and collect signed acknowledgment forms from every employee.
5. Establish a Rapid-Response Correction Protocol
When you discover a potential wage-and-hour error, fix it immediately.
- Investigate: Determine the scope of the problem (one employee or many).
- Correct: Issue back-pay immediately.
- Document: Log the issue, the investigation, and the correction.
This protocol not only proves your good faith (for the “reasonable steps” defense) but also prepares you to use the 60-day cure option if you ever receive a PAGA notice.
Frequently Asked Questions (FAQ) about PAGA
Q: What is the difference between a PAGA lawsuit and a class action?
A: A PAGA lawsuit is a “representative action” filed on behalf of the state. The plaintiff does not need to meet the strict “class certification” requirements of a class-action lawsuit. This makes it much easier and cheaper for an employee’s attorney to sue an entire workforce.
Q: What is an “aggrieved employee”?
A: An “aggrieved employee” is any current or former employee who experienced one or more California Labor Code violations. The 2024 reforms now require the lead plaintiff to have personally suffered each violation they include in the lawsuit.
Q: What are the standard penalties for a PAGA violation?
A: The default penalty is $100 per employee per pay period for the first violation. For subsequent violations, the penalty is $200 per employee per pay period. These penalties stack quickly, creating significant potential liability.
Q: What is the LWDA?
A: The LWDA is California’s Labor and Workforce Development Agency. Before filing a PAGA lawsuit, an employee must first file a notice with the LWDA, giving the state the first opportunity to investigate the claim.
Q: Do the 2024 PAGA reforms apply to cases filed before June 19, 2024?
A: Generally, no. The new provisions, including the penalty reductions and “reasonable steps” defense, apply to PAGA notices filed on or after June 19, 2024. This makes it critical for employers to immediately adapt their compliance strategies.
Partnering with Windes: Your PAGA Compliance Solution
The new PAGA framework offers a clear choice: either risk massive penalties through passive compliance or leverage proactive diligence to reduce penalties. To effectively meet the “all reasonable steps” standard and fully implement your PAGA compliance playbook, partnering with an expert is critical. The Windes Human Capital team specializes in navigating California’s complex wage-and-hour laws. We offer comprehensive services, including HR compliance audits, meticulous timekeeping, payroll system reviews, and the crucial documentation required to build your defense file. Let us help you transform PAGA risk into a manageable compliance system, ensuring both your firm and your clients demonstrate the consistent due diligence the new law demands. Contact Windes Human Capital Team to schedule an HR audit today and secure your 15% penalty cap eligibility to protect your business from costly litigation.
Eileen Harris, Esq.
Chief Human Resources Officer
Human Capital Practice Leader
Eileen provides clients with a full range of integrated consulting services including recruitment services, personnel audits, employee handbook review and development, policies and procedures manuals, compliance services, termination services, performance appraisal systems, employee incentive programs, and training and development.