The Private Attorneys General Act (PAGA) is a California labor law that allows employees to file lawsuits on behalf of themselves and other employees for violations of the California Labor Code. Enacted in 2004, California PAGA enables employees to seek civil penalties that would typically be enforced by state agencies. The penalties collected are split, with 75% going to the state’s Labor and Workforce Development Agency (LWDA) and 25% distributed among the affected employees. Employers facing PAGA claims may be subject to substantial financial penalties for PAGA noncompliance. Since PAGA was enacted in 2004, employers have paid billions in penalties—making PAGA compliance a critical priority for businesses operating in California.
Recent California PAGA Compliance Reform
In response to growing concerns over the impact of PAGA litigation on businesses and workers alike, Governor Gavin Newsom signed two bills reforming aspects of the law, with the changes taking effect retroactively to June 19, 2024. These reforms introduce critical limitations and compliance incentives aimed at reducing frivolous lawsuits while ensuring that legitimate claims are addressed fairly and efficiently, a win for California employers.
Key changes include:
- Penalty Caps: Employers who take proactive compliance steps may now face significantly reduced penalties—15% or 30% of the original penalty amount—depending on when corrective actions were taken.
- Expanded Right to Cure: Prior to these reforms, most alleged violations under PAGA could not be cured. Now, businesses have greater opportunities to correct issues before facing penalties.
- Stricter Standing Requirements: Previously, an employee could sue on behalf of all California workers by alleging a single violation. The reform now requires plaintiffs to have personally experienced the violations they are suing over and to file their claims within one year.
- Nonprofit Exception: A narrow exception to PAGA now exists for certain nonprofit organizations.
Steps to Limit Exposure
With these reforms, employers have stronger incentives to proactively comply with California’s wage and hour laws. Compliance best practices that can help limit PAGA liability include:
- Conducting regular payroll audits and taking corrective action if issues are found.
- Implementing and enforcing clear written policies on wage and hour practices.
- Ensuring compliance with industry-specific wage orders and regulations.
- Providing manager and supervisor training on Labor Code requirements.
- Taking corrective action when wage and hour violations occur.
- Documenting compliance efforts to demonstrate proactive good faith measures.
These reforms represent a significant shift in how PAGA claims are handled, offering relief to businesses that maintain strong compliance programs while maintaining protections for workers who experience genuine violations.
Types of PAGA Claims and Penalties
PAGA claims generally fall into three categories:
- Labor Code Violations – Employees can bring claims for violations of wage and hour laws, meal and rest break violations, overtime miscalculations, failure to reimburse business expenses, and more.
- Health and Safety Violations – Some claims involve workplace safety infractions overseen by Cal/OSHA.
- Pay Stub and Payroll Violations – This includes missing or incorrect wage statements, failure to provide pay stubs, or incorrect calculations of wages.
Penalties Under PAGA
The penalties for PAGA violations can be significant, typically structured as follows:
- Initial Violation: $100 per employee per pay period.
- Subsequent Violations: $200 per employee per pay period.
- Additional penalties may apply based on specific Labor Code sections.
Because PAGA claims can be filed collectively, penalties can accumulate quickly, leading to settlements or judgments amounting to hundreds of thousands of dollars for businesses. Compliance with California wage and hour laws is crucial to mitigating these risks.
Ensuring Compliance with Sophisticated HR and Timekeeping Systems
Maintaining compliance with California’s complex wage and hour laws is critical to avoiding costly PAGA claims. HRDelivered offers an integrated HR and timekeeping solution designed to help businesses remain compliant and reduce risk exposure.
Here’s how:
Business Expense Reimbursement
- Ensures timely and accurate reimbursement for business expenses (e.g., cell phone, internet, mileage, uniforms).
- Provides seamless documentation submission, leadership approvals, and secure record keeping.
Employee Handbook Compliance
- Upload handbooks into HRIS (Human Resources Information System) for electronic access.
- Store policies on:
- Timekeeping & Off-the-Clock Work
- Meal & Rest Breaks and waivers
- Final Pay & Wage Statements
- Overtime
- Personnel Records
- Pay Differentials & Split Shift Pay
- Wage and Hour Policies
- On-duty meal agreements with revocation rights
- Automated tracking of employee acknowledgments.
Final Pay Compliance via HRIS
- Immediate payment of final wages upon termination.
- Ensures payment within 72 hours for resignations.
- Prevents waiting time penalties for delayed wages.
Meal and Rest Break Compliance with timekeeping
- Tracks actual time worked and break compliance.
- Flags premium pay when required.
Overtime Pay Compliance
- Accurate tracking of actual hours worked.
- Automatic overtime calculations:
- Time-and-a-half for over 8 hours/day or 40 hours/week.
- Double-time for over 12 hours/day or 8+ hours on the seventh consecutive workday.
- Inclusion of commissions, shift differentials, and bonuses in overtime calculations.
HRIS Supports Compliant Paid Sick Leave, Vacation, or PTO Policies
- Ensures compliance with state/local paid sick leave laws.
- Tracks vacation and PTO accruals, usage, and balances in real time.
Payroll & Wage Statement Accuracy
- Prevents unlawful pay deductions.
- Ensures detailed, legally compliant wage statements:
- Gross wages, total hours, pay period dates.
- Itemized deductions, employer info, hourly rates.
- Meal/rest break premium payments.
Record keeping & Employee Self-Service
- Secure storage of employee records and payroll history.
- Employees can update personal details in real time through the HRIS system
- Reports and audits available instantly upon request.
Required Labor Law Postings
Electronic access to required notices (e.g., Wage and Employment Notice, minimum wage orders, sick leave policies) via the HRIS Employee Portal.
Alternative Workweek Schedules
- HRIS facilitates electronic agreements, policy storage, and employee consent tracking for valid alternative workweek schedules.
- Timekeeping ensures accurate overtime calculations for work beyond agreed schedules.
Exempt Employee Compliance
- HRIS verifies minimum salary basis test compliance.
- Supports annual salary adjustments for exempt employees.
By leveraging our HRIS system and timekeeping through a partnership with HRDelivered, businesses can proactively address compliance gaps, automate record keeping, and mitigate the risk of costly PAGA claims in California. Investing in a comprehensive HR and timekeeping system isn’t just about efficiency—it’s about protecting your business from potential litigation while ensuring fair and compliant treatment of employees.