Private Attorneys General Act Review – 2025

DISCLAIMER The material in this Review is of the nature of general commentary only. It is not meant as or offered as legal advice on any particular issue and should not be considered as such. The views expressed are solely those of the authors. In addition, the authors disclaim any and all liability to any person in respect of anything and of the consequences of anything done wholly or partly in reliance on the contents of this Review. This disclaimer is from the Declaration of Principles jointly adopted by the Committee of the American Bar Association and a Committee of Publishers and Associations.

CITATION FORMATS All citations in the Private Attorneys General Act Review are designed to facilitate research.

If available, the preferred citation of the opinion included in the West bound volumes is used, such as Johnson, et al. v. Lowe’s Home Centers, 93 F.4th 459 (9th Cir. 2024) or Turrieta, et al. v. Lyft, Inc ., 16 Cal. 5th 664 (2024). If the decision is not available in the preferred format, a Lexis or Westlaw cite from the electronic database is provided, such as Tehrani, et al. v. Amazon Studios, LLC, 2024 U.S. Dist. LEXIS 140485 (C.D. Cal. Aug. 7, 2024). E-BOOK HIGHLIGHTS The Private Attorneys General Act Review is available for use on a smartphone, laptop, tablet, or any personal electronic reader by using any e-book reader application. E-book reading allows users to quickly scroll, highlight important information, link directly to different sections of the Review, and bookmark pages for quick access at a later time. The e-book is designed for easy navigation and quick access to informative data. The e-book is available by scanning the below QR code:

Private Attorneys General Act Review – 2025

NOTE FROM THE EDITOR The PAGA creates a scheme to “deputize” private citizens - “aggrieved employees” - to sue their employers for violations of the California Labor Code on behalf of their co-workers as well as the State. If successful, aggrieved employees receive 25% of any recovered civil penalties and pass the other 75% to the California Labor and Workforce Development Agency (LWDA). The PAGA authorizes the attorneys who pursue the action to collect their attorneys’ fees and costs in addition to the civil penalties. Over the past year, PAGA representative actions have exploded in California. For companies facing PAGA claims, rulings in 2024 ushered in a new period of workplace litigation in California. This Review offers an overview of the most significant trends and developments that shaped the PAGA landscape in 2024, as well as the key PAGA-related decisions on issues such as arbitration, preemption, manageability, and the interplay of PAGA and class and collective action theories of liability. We hope this book – manifesting the collective experience and expertise of our class action defense group – will assist our clients by identifying developing trends in the case law and offering practical approaches in dealing with class action litigation. Sincerely,

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CONTRIBUTORS

Private Attorneys General Act Review – 2025

GLOSSARY AND KEY U.S. SUPREME COURT DECISIONS Adequacy Of Representation – Plaintiffs must show adequacy of representation per Rule 23(a)(4) to secure class certification. It requires representative plaintiffs and their counsel to be capable of fairly and adequately protecting the interests of the class. Amchem Products, Inc. v. Windsor, et al. , 521 U.S. 591 (1997) – Windsor is the U.S. Supreme Court decision that elucidated the requirements in Rule 23(b), insofar as common questions must predominate over any questions affecting only individual class members and class resolution must be superior to other methods for the adjudication of the claims. Ascertainability – Although not an explicit requirement of Rule 23, some courts hold that the members of a proposed class must be ascertainable by objective criteria. Comcast Corp. v. Behrend, et al. , 569 U.S. 27 (2013) – Comcast is the U.S. Supreme Court decision that interpreted Rule 23(b)(3) to require that, for questions of law or fact common to the class, the plaintiffs’ damages model must show damages are capable of resolution on a class-wide basis. Commonality – Plaintiffs must show commonality per Rule 23(a)(2) to secure class certification. This requires that common questions of law and fact exist as to the proposed class members. Class – A group of individuals that has suffered a similar loss or alleged illegal experience on whose behalf one or more representatives seek to bring suit. Class Action – The civil action brought by one or more plaintiffs in which they seek to sue on behalf of themselves and others not named in the suit but alleged to have suffered the same or similar harm. Class Certification – The judicial process in which a court reviews the submissions of the parties to determine whether the plaintiffs have met their burden of showing that class treatment is the most appropriate form of adjudication. Collective Action – A type of representative proceeding governed by 29 U.S.C. § 216(b) where one or more plaintiffs seeks to bring suit on behalf of others who must affirmatively opt-in to join the litigation. It is applicable to claims under the Fair Labor Standards Act, the Age Discrimination in Employment Act, or the Equal Pay Act. Cy Pres Fund – In class action settlement agreements, this is the money set aside for distribution to a § 501(c) organization when class members do not return a settlement claim form and money is left over after distribution to the class. Decertification – Following an order granting conditional certification of a collective action or certification of a class action, a defendant can move for decertification based on the grounds that the members of the collective action are not actually similarly-situated or that the requirements of Rule 23 are no longer satisfied for the class action. Epic Systems Inc. v. Lewis, et al. , 138 S. Ct. 1612 (2018) – Epic Systems is the U.S. Supreme Court decision holding that arbitration agreements requiring individual arbitration and waiving a litigant ’ s right to bring or participate in class actions are enforceable under the Federal Arbitration Act. Opt-In Procedures – Under 29 U.S.C. § 216(b), a collective action member must opt-in to join the lawsuit before he or she may assert claims in the lawsuit or be bound by a judgment or settlement. Opt-Out Procedures – If a court certifies a class under Rule 23(b)(3), class members are bound by the court ’ s judgment unless they opt-out after receiving notice of the lawsuit.

Private Attorneys General Act Review – 2025

Numerosity – Plaintiffs must show that their proposed class is sufficiently numerous that adding each class member to the complaint would be impractical. This is a requirement for class certification imposed by Rule 23(a)(1). Ortiz, et al. v. Fibreboard Corp., 527 U.S. 815 (1999) – Ortiz is the U.S. Supreme Court ruling that interpreted Rule 23(b)(3) to require personal notice and an opportunity to opt-out of a class action where money damages are sought in a class action. Predominance – The Rule 23(b)(3) requirement that, to obtain class certification, the plaintiffs must show that common questions predominate over any questions affecting individual members. Rule 23 – This rule from the Federal Rules of Civil Procedure governs class actions in federal courts and requires that a party seeking class certification meet four requirements of section (a) and one of three requirements under section (b) of the rule. Rule 23(a) – It prescribes that a class meet four requirements for purposes of class certification, including numerosity, commonality, typicality, and adequacy of representation. Rule 23(b) – To secure class certification, a class must meet one of three requirements of Rule 23(b)(1), Rule 23(b)(2), or Rule 23(b)(3). Rule 23(b)(1) – A class action may be maintained if Rule 23(a) is satisfied and if prosecuting separate actions would create a risk of inconsistent or varying adjudications with respect to individual class members or adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests. Rule 23(b)(2) – A class action may be maintained if Rule 23(a) is satisfied and the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole. Rule 23(b)(3) – A class action may be maintained if Rule 23(a) is satisfied and questions of law or fact common to class members predominate over any questions affecting only individual members and a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. Similarly-Situated – Under 29 U.S.C. § 216, employees may bring suit on behalf of themselves and others who are similarly-situated. The standard is not clearly defined in the statute and many courts have found that, if plaintiffs make a preliminary showing that they are similarly-situated to those they seek to represent, conditional certification is appropriate. A finding in this regard is usually not based on the merits of the claims. Superiority – The Rule 23(b)(3) requirement that a class action can be permitted only if class resolution is the superior method of adjudicating the claims. Typicality – The plaintiffs’ claims and defenses must be typical to those of proposed class members’ claims. This is required by Rule 23(a)(3). Wal-Mart Stores, Inc. v. Dukes, et al., 564 U.S. 338 (2011) – Wal-Mart is the U.S. Supreme Court ruling that tightened the commonality requirement of Rule 23(a)(2) and held that judges must conduct a “rigorous analysis” to determine whether there is a “common” contention central to the validity of the claims that is “capable of class-wide resolution.”

Private Attorneys General Act Review – 2025

TABLE OF CONTENTS

Page California Private Attorneys General Act .................................................................... 1 I. The Explosion Of PAGA Notices....................................................................... 2 II. The PAGA As A Work-Around To Arbitration ................................................. 2 III. The Dagger Of Viking River ............................................................................... 3 IV The California Supreme Court’s Adolph Decision........................................... 3 V. New PAGA Reform Bills..................................................................................... 5 VI. Key Rulings In PAGA Actions In 2024 .............................................................. 9 1. California Supreme Court Rulings. ............................................................... 9 2. Decisions Regarding The PAGA And Arbitration. ..................................... 12 3. Notable California Federal Court Rulings................................................... 18 4. Other California State Court PAGA Decision ............................................. 19 Index Of 2024 PAGA Rulings ..................................................................................... 21

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California Private Attorneys General Act As with previous years, claims filed under the California Private Attorneys General Act (PAGA), Cal. Lab. Code, § 2698, et seq., continue to be one of the most popular claims filed in California, allowing plaintiffs to bring claims on behalf of their co-workers with no class certification requirements and minimal barriers to legal standing. By all accounts, 2024 was a very active year on the PAGA litigation front. The PAGA creates a scheme to “deputize” private citizens - “aggrieved employees” - to sue their employers for violations of the California Labor Code on behalf of their co-workers as well as the State. If successful, aggrieved employees receive 25% of any recovered civil penalties and pass the other 75% to the California Labor and Workforce Development Agency (LWDA). The PAGA authorizes the attorneys who pursue the action to collect their attorneys’ fees and costs in addition to the civil penalties. In 2009, the California Supreme Court held in Arias v. Superior Court , 46 Cal. 4th 969 (2009), that PAGA actions need not satisfy class action requirements. This has allowed employees to bring large-scale claims on behalf of all non-exempt employees against employers on a state-wide basis with no concern as to whether or not a Court would approve that scope. In 2014, the California Supreme Court ruled in Iskanian, et al. v. CLS Transportation Los Angeles, 59 Cal. 4th 348 (2014), that the Federal Arbitration Act (FAA) does not preclude the California Legislature from deputizing employees to prosecute violations of the California Labor Code on behalf of the state and, therefore, does not preempt a state law that prohibits waiver of PAGA representative actions. Along with Arias , this ruling led to a significant increase in the filing of PAGA actions, which were generally unimpeded until 2022. However, in 2022, PAGA actions suffered a setback. In June 2022, the U.S. Supreme Court held in Viking River Cruises v. Moriana, et al., 142 S.Ct. 1906 (2022), that the FAA preempts California law to the extent it precludes a PAGA action from being divided into individual and non-individual components, and that individual PAGA claims are thus subject to arbitration. The U.S. Supreme Court ruled that once an employer compels an employee to arbitrate the employee’s individual PAGA claim, the representative, or non-individual PAGA claim on behalf of other employees should be dismissed. The U.S. Supreme Court reasoned that, having been compelled to arbitrate his or her individual claim, the plaintiff no longer had standing to maintain a non-individual PAGA action in court. This was obviously a favorable ruling for employers, but Justice Sotomayor’s concurrence in Viking River complicated matters. She noted that, if the Supreme Court’s analysis of state law was wrong regarding a plaintiff’s lack of standing to maintain a non-individual PAGA action if the individual PAGA action was compelled to arbitration, then California state courts would have the last word. Taking Justice Sotomayor’s cue, the California Supreme Court took up this standing issue in Adolph v. Uber Technologies , 14 Cal. 5th 1104 (2023). It ruled that PAGA plaintiffs can first pursue individual claims in arbitration and then can pursue non-individual claims in court as long as they are aggrieved employees. If the plaintiffs lose in arbitration, they are not aggrieved and therefore lack standing. However, if the plaintiffs prevail or settle their individual claims in arbitration, they can then return to court to prosecute their non-individual PAGA claims. For companies facing PAGA claims, Adolph has ushered in a new period of workplace litigation in California. This Appendix offers an overview of the most significant trends and developments that shaped the PAGA landscape in 2024, as well as the key PAGA-related decisions on issues such as arbitration, preemption, manageability, and the interplay of PAGA and class and collective action theories of liability.

Private Attorneys General Act Review – 2025

I. The Explosion Of PAGA Notices According to data maintained by the California Department of Industrial Relations, the number of PAGA notices filed with the LWDA has increased exponentially over the past two decades. The number grew from 11 notices in 2006, to 1,606 in 2013, and then experienced three sizable jumps – to 4,530 in 2014, to 5,732 in 2018, to 7,780 in 2023, each coinciding with a significant shift in the legal landscape, as discussed below. From 2013 to 2014, employers saw the largest single year increase, from 1,605 notices in 2013 to 4,532 notices in 2014, an increase of 182%. The most significant drop in the past two decades occurred in 2022, when notices fell from 6,502 in 2021 to 5,817 in 2022, before their resurgence in 2023. In 2024, the notices topped 9,464.

The increase is a likely reaction to the growth of workplace arbitration, fueled by the availability of fee-shifting awards for attorneys’ fees. II. The PAGA As A Work-Around To Arbitration Although the proliferation of mandatory arbitration programs started as early as 1991 when the U.S. Supreme Court issued its ruling in Gilmer, et al. v. Interstate/Johnson Lane Corp ., 500 U.S. 20 (1991), the movement did not gain steam until 2011, when the U.S. Supreme Court decided AT&T Mobility LLC v. Concepcion, et al., 563 U.S. 333 (2011), and held that the FAA preempts state rules that stand “as an obstacle to the accomplishment of the FAA’s objectives,” and it did not peak until 2018 with the U.S. Supreme Court’s decision in Epic Systems Corp. v. Lewis, et al ., 138 S. Ct. 1612 (2018), wherein the last hurdle to enforcement of class and collective action waivers was eliminated. As the adoption of arbitration programs gained popularity as a mechanism to contract around class and collective actions, the plaintiffs’ class action bar has identified work-arounds. The California Supreme Court cemented the PAGA as the frontrunner for generated employment-related claims with its 2014 decision in Iskanian, et al. v. CLS Transportation Los Angeles , 59 Cal.4th 348 (Cal. 2014), which seemingly immunized the

Private Attorneys General Act Review – 2025

PAGA from arbitration programs. In Iskanian , the California Supreme Court held that “where an employment agreement compels the waiver of representative claims under the PAGA, it is contrary to public policy and unenforceable as a matter of state law.” Id. at 384. Whereas the California Supreme Court acknowledged Concepcion , it nevertheless reasoned that the rule against PAGA representative action waivers did not frustrate the FAA’s objectives because, whereas the FAA aims to ensure an efficient forum for the resolution of private disputes, a PAGA action “is a dispute between an employer and the state Labor and Workforce Development Agency.” Id. The Iskanian ruling fueled the filing of PAGA notices in 2014 and thereafter, as it cleared the PAGA as a mechanism by which to maintain a representative action unhindered by agreements to arbitrate on an individual basis. The PAGA workaround suffered its first significant set-back in 2022 with the U.S. Supreme Court’s highly anticipated decision in Viking River Cruises, Inc. v. Moriana, et al., 142 S.Ct. 1906 (2022), which addressed the arbitrability of PAGA claims. III. The Dagger Of Viking River In Viking River , the U.S. Supreme Court drove a dagger through the heart of this work-around by continuing its trend of enforcing the FAA over state efforts to avoid or flat-out prohibit arbitration. See, e.g., Cal. Lab. Code § 229 (“Actions to enforce the provisions of this article for the collection of due and unpaid wages claimed by an individual may be maintained without regard to the existence of any private agreement to arbitrate.”). The U.S. Supreme Court confirmed that, whether judicial or legislative in nature, where the FAA is in play, it preempts efforts to enforce those state-based rules. In Viking River , the U.S. Supreme Court found a conflict between the FAA and the PAGA’s procedural structure. It recognized that the PAGA contains a “built-in mechanism of claim joinder,” which permits “aggrieved employees” to use the Labor Code violations they personally suffer as a basis to join to the action any claims that could have been raised by the State in an enforcement proceeding. Id. at 1923. The Supreme Court held that, to the extent that Iskanian precludes division of PAGA actions into individual and non-individual claims, and thereby “prohibits parties from contracting around this joinder device,” the FAA preempts such a rule. Id. Importantly, however, after finding that the employer in Viking River should have been able to compel arbitration of plaintiff’s individual claim, the U.S. Supreme Court addressed “what the lower courts should have done with Moriana’s non-individual claims.” Id. at 1925. It ruled that, once an individual claim has been committed to a separate proceeding, the employee is no different from a member of the general public, and the PAGA provides no mechanism for such person to maintain suit. As a result, the correct course was to dismiss the remaining claims. Id. As a result, the U.S. Supreme Court eviscerated perhaps the most popular work-around to workplace arbitration, thereby dealing a significant blow to the plaintiffs’ bar and its ability to pursue claims on a representative basis. IV. The California Supreme Court’s Adolph Decision On PAGA Standing In her concurrence in Viking River , Justice Sotomayor expressly opened the door to two potential solutions to the majority opinion. She suggested that, in its analysis of the parties’ contentions, the Supreme Court detailed “several important limitations on the preemptive effect of the [FAA],” meaning that “California is not powerless to address its sovereign concern that it cannot adequately enforce its Labor Code without assistance from private attorneys general.” Id. at 1925. First, she suggested that, if the majority was incorrect in its understanding that the plaintiff lacked “statutory standing” under the PAGA to litigate “non-individual” claims separately, “California courts, in an appropriate case, will have the last word.” Second, and alternatively, Justice Sotomayor opined that “the California Legislature is free to modify the scope of statutory standing under the PAGA within state and federal constitutional limits.” Id. at 1925-26. On July 20, 2022, the California Supreme Court granted review in Adolph, et al. v. Uber Technologies, Inc ., on the question as to whether an aggrieved employee, who agreed to arbitrate claims under the PAGA that are

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“premised on Labor Code violations actually sustained by” the aggrieved employee, maintains standing to pursue “PAGA claims arising out of events involving other employees” in court or in any other forum agreed by the parties. In July 2023, the California Supreme Court issued its ruling in Adolph, et al. v. Uber Technologies, Inc. , 14 Cal.5th 1104 (2023). It determined that, once a PAGA plaintiff’s individual claims are compelled to arbitration, the plaintiff retains standing to maintain non-individual, representative PAGA claims in court so long as they are an aggrieved employee. If the plaintiff loses in arbitration, they are not aggrieved and therefore lack standing. However, if the plaintiff prevails or settles their individual claims in arbitration, they can then return to court to prosecute their non-individual PAGA claims. Erik Adolph, an Uber delivery driver, alleged that Uber misclassified him as an independent contractor. Although Adolph initially sought to maintain a class action, those efforts were thwarted by a class action waiver in his workplace arbitration agreement. Adolph then amended his complaint to allege PAGA claims. The trial court denied Uber’s motion to compel arbitration, and the California Court of Appeal affirmed on the basis of California’s prior rule that, under Iskanian v. CLS Transportation , 59 Cal. 4th 348 (2014), the PAGA claims could not be split into individual and non-individual parts and that a PAGA claim was non-arbitrable. In a unanimous decision, the California Supreme Court disagreed with the interpretation of PAGA standing in Viking River. The California Supreme Court held that, so long as an employee asserts that they are aggrieved by a violation, they maintain standing under the PAGA. Thus, even after individual PAGA claims are compelled the arbitration, the plaintiff retains standing to pursue non-individual PAGA claims in court. As to litigation logistics, the California Supreme Court clarified several things. First, even though individual PAGA claims may be pending in arbitration and non-individual PAGA claims pending in court, the claims all remain in one action, and the court action may be stayed pending completion of arbitration. Second, if the plaintiff loses in arbitration, at that juncture, the plaintiff no longer has standing to maintain non- individual PAGA claims. Third, if the plaintiff prevails in arbitration or settles their individual claims, they continue to possess standing to return to court to pursue non-individual PAGA claims on behalf of others. In the wake of Adolph , the stakes for employers in individual PAGA arbitrations are even higher. Employers facing PAGA claims should conduct an early assessment of the plaintiff’s individual claims and if unmeritorious, they should aggressively defend the matter because a win in arbitration will extinguish the case in court as well. We also anticipate that PAGA plaintiffs may begin alleging their aggrieved employee status, yet disclaiming any individual relief, in order to bypass arbitration altogether. It remains to be seen if that pleading strategy will be condoned by California courts. In addition, a new strategy has become significantly more popular amongst plaintiffs since Adolph . In an effort to avoid the arbitration of the individual PAGA claims, plaintiffs are now filing PAGA claims with only representative components, explicitly waiving their individual PAGA claims. These claims have informally become known as “headless” PAGA claims. While this line of reasoning seemingly goes against the ruling in Adolph and other cases, which have held that a PAGA claim necessarily consists of both and individual and representative portion, the California Court of Appeal supported it in April of 2024 with the decision in Lizbeth Balderas v. Fresh Start Harvesting , 101 Cal.App.5th 533 (2024). In that opinion, the California Court of Appeal denied a motion to compel arbitration, holding that the PAGA standing requirements are meant to be interpreted broadly and a representative PAGA action could still be maintained even without an individual PAGA action, as long as the plaintiff alleges he or she suffered a Labor Code violation.

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We expect this line of reasoning to continue to be litigated heavily in the coming year, with multiple appeals already filed as to rulings that follow the Balderas “headless” PAGA claim standard. That being said, in the interim, employers who face PAGA claims should be aware that courts may find their arbitration agreements unenforceable if the plaintiff has not brought an individual PAGA claim. V. New PAGA Reform Bills On June 27, 2024, the California Legislature signed off on two bills (AB 2298 and SB 92) resulting in significant reforms to the PAGA. Governor Newsom previously announced the deal between business and labor groups, which also meant the referendum to repeal the PAGA was not on the November 2024 ballot. The new reforms will bring sweeping changes to the PAGA. These changes aim to curtail many of the criticisms that have been levied at the PAGA from both groups. The changes apply to PAGA actions in which the PAGA notice was filed on or after June 19, 2024. It is anticipated that the changes will also have an immediate impact on litigation strategy in pending PAGA actions filed before that date as well. California Legislature Approves PAGA Reform Bills After Governor Newsom announced on June 18, 2024, that labor and business interests had inked a deal significantly altering the PAGA, the California Legislature quickly moved to approve two bills (AB 2288 and Senate Bill 92). Proponents of the initiative to repeal PAGA agreed to withdraw the referendum if the bills were passed within the deadline to withdraw the referendum. The bills were approved just in the nick of time — on June 27, 2024, which was both the deadline to withdraw the PAGA referendum and the date the two bills were passed. These changes include reforms to the penalty structure, new defenses for employers, standing requirements limiting the scope of PAGA actions, and a new “cure” process for both small and large employers, among other changes that will significantly impact litigation strategy for PAGA claims (and likely spawn new legal questions as the law is tested in the field and the courts.) The reforms do not alter the requirement that a claimant first file a notice with the Labor & Workforce Development Agency (LWDA) also known as an LWDA or PAGA notice. These reforms affect all PAGA notices filed on or after June 19, 2024, with some exceptions, described in further detail below. Penalty Structure Reforms One of the primary complaints from business interests, in particular small business interests, was that the PAGA’s penalty structure frequently resulted in potential penalties in the millions of dollars based on the barest of allegations, often of highly technical violations of the California Labor Code. Employers complained that these violations did not implicate any actual harm to employees and that there could be compounded penalties for so- called “derivative” claims. The compounding of penalties meant plaintiffs would try to stack multiple penalties based on the same alleged act or omission by an employer. The new PAGA reform measure addresses several of these complaints, eliminating some penalties altogether, limiting the availability of penalties for certain derivative claims, and clarifying how penalties are calculated. • Clarity on Initial vs. Subsequent Violations: Previously, PAGA penalties were set at $100 for “initial” violations of the Labor Code and $200 for any “subsequent” violations, unless otherwise prescribed by statute. The reforms removed the distinction between “initial” and “subsequent” violations — now the civil penalty for an alleged violation is $100 for each aggrieved employee per pay period. However, a court may reduce a penalty award in order to avoid an award that is unjust, arbitrary, and oppressive, or confiscatory. See Lab. Code § 2699(e)(2). Repeat offenders may be subject to higher penalties.

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• Reduced Penalties for Isolated Events: If the violation resulted from an isolated, non-recurring event ( i . e ., the violation had not extended beyond the lesser of 30 days or four consecutive pay periods), the penalties are further limited to $50 per aggrieved employee per pay period. See Cal. Lab. Code § 2699(f)(2)(A)(ii). • Reduced Penalties for Wage Statement Violations: If the violation is a violation of Labor Code § 226 for non-complaint wage statements, additional limitations apply. For violations of § 226(a) (other than (a)(8) regarding the legal name or address of the employer), the penalty is $25 for each aggrieved employee per pay period if the employee could promptly and easily determine accurate information from the wage statement or if the employee would not be confused or misled about the correct identity of their employer. If the violation involves § 226(a)(8), the penalty is $25 if the employee would not be confused or misled about the correct identity of their employer or, if their employer is a farm labor contractor, the legal entity that secured the services of that employer. These limitations do not apply if the employer failed to provide a wage statement to the employee. See Lab. Code § 2699(f)(2)(A)(i). • Special Rules for Increased Penalties: In lieu of the “subsequent violation” penalty, a $200 penalty per aggrieved employee per pay period can now be levied only in certain circumstances. Specifically, this amount may only be awarded where an agency or court has determined that the employer’s policy or practice led to that same violation of the Labor Code in the previous five years or if a court determines that the employers’ conduct was malicious, fraudulent, or oppressive. See Lab. Code § 2699(f)(2)(B). • No Additional Recovery For Derivative Penalties Under Labor Code Sections 201, 202, or 203: An employee can no longer recover additional penalties for violations of Labor Code §§ 201, 202, or 203, which address when an employee must be paid upon resignation or termination, when seeking recovery for underlying wage violations. The same applies to Labor Code §§ 204 and 226, unless the violation meets heightened scienter requirements as outlined below. See Lab. Code § 2699(i). • Limited Recovery Under Labor Code §§ 204 and 226: An employee can recover additional penalties for Labor Code § 204, which addresses when an employee must be paid during their employment if that violation is willful or intentional. Additionally, an employee can recover additional penalties for violation of Labor Code § 226, which mandates that certain information be included on wage statements, if that violation is knowing, intentional, or involves a complete failure to provide a wage statement. See Lab. Code § 2699(i). • Pay Period Defined: The PAGA originally imposed monetary penalties on a per pay period basis. This unfairly penalized employers that paid employees on a weekly basis, as opposed to a biweekly basis. The reforms address this disparity, by clarifying that the recoverable penalties will be reduced by 50% where an employer’s regular pay period is weekly rather than biweekly. • Employee’s Share Of Recovery Increased : The percentage of penalties awarded to the aggrieved employees has been increased from 25% to 35%. The “Cure” For Employers’ Ills The reforms also introduce a new and more complicated “cure” process for avoiding or reducing penalties. Employers may take steps before a complaint is filed, or during litigation, to limit potential penalties. • Pre-LWDA Notice Penalty Cap: If, before receiving an LWDA notice or a request for records from the employee, an employer takes “all reasonable steps” to cure the violations alleged in the LWDA letter, awardable penalties are now capped at no more than 15% of the total available penalties. See Lab. Code § 2699(g).

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• Post-LWDA Notice Penalty Cap : The penalty cap is increased to 30% if the “reasonable steps” are taken within 60 days of receiving the LWDA Notice. See Lab. Code § 2699(h). An employer takes “all reasonable steps” if it conducts periodic payroll audits and takes action to respond to those audits, disseminates lawful policies, trains supervisors on applicable Labor Code and wage order compliance, and takes appropriate corrective action with regard to its supervisors. Whether or not an employer’s conduct was reasonable will be evaluated by the totality of the circumstances. See Cal. Lab. Code § 2699(g)(2). Eliminating Penalties Altogether In addition to these caps, there is now a path toward the complete elimination of PAGA penalties if an employer cures an alleged labor code violation. Specifically, if an employer takes the “reasonable steps” defined by statute and actually cures an employee’s unpaid wages, the employee can no longer recover PAGA penalties for the Labor Code violation. The “cure” is effective when the employee is “made whole,” or provided an amount sufficient to recover any unpaid wages due to the alleged violations going back three years from the date of the notice. However, this amount must also include seven (7) percent interest, liquidated damages that are required by statute, and a reasonable attorneys’ fees award as determined by the court or agency. Practically speaking, this “cure” option will likely require costly outlays to ensure all fees are covered and potentially litigation over the reasonableness of the claimed attorneys’ fees. We anticipate that, in response to these complicated requirements, the plaintiffs’ bar may start to include in the LWDA notice a calculation of the proposed “cure” amount, much like an initial settlement demand. New Standing Requirement Prior to the passage of these bills, judicial interpretations of the statute held that an employee who experienced a single Labor Code violation could bring a claim for violations of any provision of the Labor Code on behalf of aggrieved employees, even for violations the employee bringing the claim never experienced. Now, an employee must have suffered every violation he or she attempts to bring on behalf of other aggrieved employees. This new provision effectively negates the California Court of Appeal’s ruling in Huff v. Securitas Security USA Services, Inc., 23 Cal.App.5th 745 (2018), which held that an employee could seek PAGA penalties for any and all Labor Code violations, even if the employee had not experienced those violations. The new standing requirement will narrow the scope of PAGA actions to only those allegedly suffered by the PAGA plaintiff — and by extension add some guard rails to discovery as well as the size of the representative group at issue. Manageability Defense The bills also codified a long-litigated potential defense known as “manageability.” Specifically, in January of 2024, the California Supreme Court struck down the limited defense that employers had been using to try to reign in PAGA matters, holding that trial courts did not have the inherent authority to strike a claim as unmanageable. See Estrada v. Royal Carpet Mills, Inc. , 15 Cal.5th 582 (2024). Now, under the new PAGA reform measure, courts are empowered by statute to limit evidence presented at trial or the scope of the claims to ensure that the case is manageable and may be tried effectively and efficiently. It will remain to be seen whether requests for trial plans enter the employer’s toolbox in these representative matters as they have in California class actions. Injunctive Relief Another criticism of the PAGA was the inability of a PAGA plaintiff to seek injunctive relief, effectively making the PAGA a bounty-hunter statute with no real teeth to effectuate change. Under the new reform measure, an employee can now seek injunctive relief related to alleged Labor Code violations. Employers should be prepared for new PAGA claims to include requests that the court require the employer to modify their practices

Private Attorneys General Act Review – 2025

to ensure compliance with Labor Code provisions. This is reminiscent of the injunctive relief available to plaintiffs under California’s Unfair Competition Law. Labor interests had identified this provision as a key priority for PAGA reform and comments from representatives from the business community reflect the common interest in working towards full compliance with the Labor Code for all employers and employees. New Early Evaluation Procedures For Large And Small Businesses The reforms introduce new procedures with the LWDA and the courts to allow for effective litigation, and potential early resolution, of these claims. For PAGA notices (and their associated claims) filed on or after June 19, 2024, employers who employed at least 100 employees during the PAGA period can now request an “early evaluation conference” and a request to stay the proceedings before or simultaneous with the employer’s responsive pleading. This request must include a statement from the employer identifying which allegations it disputes and which allegations it will cure. The court will then set an early evaluation conference. To the extent the employer stated that it would cure any of the alleged violations, the court may also ask the employer to submit to the neutral and the plaintiff, on a confidential basis, the employer’s plan to cure the deficiencies. If other violations remain in dispute, the neutral may stay the consideration of the cure plan or agreement until after the litigation of the disputed issues. If the neutral approves the cure plan, the employer must submit evidence within ten (10) days showing that the cure occurred. If the neutral, employer, and employee all agree the violations have been cured, they are to submit a joint statement to the court setting forth the terms of their agreement. If the neutral or employee do not agree that the violation was cured, the employer may file a motion to request the court to approve the cure. The employer can submit evidence with this motion showing that the alleged violations were corrected. Any PAGA penalties calculated with these cures must take in to account other limitations and caps on penalties that would be applicable due to the prompt cure. Smaller employers have a separate early evaluation process. Before October 1, 2024, employers with fewer than 100 employees during the PAGA period cannot take advantage of this early conference. However, as of October 1, 2024, employers with under 100 employees can now submit a confidential proposal to the LWDA within 33 days of their receipt of notice that lays out their exact plan for the cure. The LWDA is to make a determination on the sufficiency of the cure at the outset or set a conference to determine the sufficiency of the cure. If the cure is facially sufficient or if the LWDA believes a conference is needed to discern the sufficiency of the cure, the LWDA will set a conference. This is an accelerated timeline, as the LWDA must rule on the plan within 14 days of its submission and the conference must occur within 30 days of that date. At this conference, the LWDA will discern if the cures are sufficient, whether or not any additional information is needed, and set a deadline to complete the cure. When the employer completes the cure, it must provide to the LWDA and the plaintiff a sworn notification to the employee and agency that the cure is completed, accompanied by a payroll audit and check register if the violation involves a payment obligation. The LWDA must confirm whether the cure was completed within twenty days of receiving the cure documents. If the LWDA preliminarily believes the violation has been cured, the LWDA must provide notice to the plaintiff that the cure is complete. If a plaintiff disagrees with the decision, the plaintiff may request a hearing on that determination. If the LWDA confirms the violation was cured, the employee cannot continue with a civil action. The employee can also appeal this determination to the superior court, although any payment the plaintiff received as part of the cure process will offset any judgment later entered with respect to that violation if the superior court concludes the agency abused its discretion in finding the cure was adequate. In circumstances where the LWDA believes the cure proposal is not sufficient, the employee can proceed with a civil action. Importantly, if this process extends beyond the 65-day timeframe for the investigation by the LWDA, the statute of limitations on the PAGA claims are tolled. As of October 1, 2024, employers with fewer than 100 employees during the PAGA period can also request the early evaluation conference described above for larger

Private Attorneys General Act Review – 2025

employers. The employer’s submission of a cure proposal to the LWDA does not prevent the employer from requesting the early evaluation conference. However, no employer can use this notice and “cure” provision more than one time in a 12-month period for violations of the same provision, regardless of the location of the worksite or if it did not cure that same violation upon prior notice. See Cal. Lab. Code § 2699.3(d). There is also a separate process if the only alleged violation the small employer will seek to cure is a violation of Labor Code section 226. In that case, the employer can cure the deficiency within 33 days of the postmark date of the notice and file notice with a description of the cure to both the LWDA and the plaintiff. If the plaintiff disputes this cure, he or she may file notice describing why the cure is being disputed. This process is also on an accelerated timeline, and the LWDA is required to issue a determination within 17 days of receipt of that dispute. The LWDA can either confirm the cure, provide an additional three (3) days for the employer to complete the cure, or allow the employee to file a PAGA claim for violation of Labor Code § 226. If the LWDA does not respond, the employee can continue with his or her PAGA claim. This determination can also be appealed to the superior court. Impact On Employers And Litigation Strategy While the focus may be on the reduction of penalties, the passage of these PAGA reforms has also ushered in a new era for employers. Not only will this greatly impact litigation strategy when dealing with PAGA claims, but also employers now have a tight timeline in which to make important strategic decisions regarding things like election into early evaluation, cure, or other alternative dispute resolution. Many are celebrating the reforms, but it remains to be seen how these reforms will impact PAGA litigation generally. In addition, we anticipate that there will be some bumps as the LWDA and the courts work through new questions raised by these reforms. Each case is unique and employers should work closely with counsel to evaluate each claim. VI. Key Rulings In PAGA Actions In 2024 1. California Supreme Court Rulings The California Supreme Court issued two impactful decisions in 2024. First was its opinion in Turrieta, et al. v. Lyft, Inc ., 16 Cal. 5th 664 (2024), on August 1, 2024. It held that, when an employer is facing multiple overlapping PAGA actions and settles one such action, the plaintiffs in the other PAGA actions are not permitted to intervene in the settled action so as to require a trial court to receive and consider their objections to the settlement, or to seek to vacate the ensuing judgment. The Turrieta decision has significant ramifications for employers facing a multiplicity of PAGA actions and ensures that an employer can settle one such action without substantial interference from other PAGA plaintiffs and their attorneys. In rapid succession between May to July 2018, three Lyft drivers, Olson, Seifu, and Turrieta, each filed separate PAGA actions alleging improper classification as independent contractors. In 2019, Turrieta reached a $15 million settlement with Lyft, which included a $5 million payment to her counsel. As part of the settlement, Turrieta amended her complaint to allege all PAGA claims that could have been brought against Lyft. She then filed a motion for court approval of the settlement. The LWDA did not object to the settlement. However, when Olson and Seifu and their counsel got wind of the settlement, they moved to intervene and objected. The trial court denied the intervention requests, approved the settlement, and then denied motions by Olson and Seifu to vacate the judgment in the Turrieta PAGA action. The Court of Appeal affirmed. It held that, as non-parties, Olson and Seifu lacked standing to move to vacate the judgment as only an “aggrieved party” can appeal from a judgment. On the intervention issue, the Court of Appeal explained that the real party in interest in a PAGA action is the State and thus neither Olson nor Seifu had a direct interest in the case. The California Supreme Court then granted review to consider whether a PAGA plaintiff has the right to intervene, or object to, or move to vacate a judgment in a related PAGA action that purports to settle the claims

Private Attorneys General Act Review – 2025

that plaintiff has brought on behalf of the state. The California Supreme Court agreed with the Court of Appeal and the trial court. Justice Jenkins authored the decision, with Chief Justices Guerrero and Justices Corrigan, Kruger, and Groban concurring. The California Supreme Court first addressed whether a PAGA plaintiff can intervene in another PAGA action that settles. The Supreme Court noted there was nothing in the PAGA statute expressly permitting intervention, and that PAGA’s purpose — to penalize employers who violate California wage and hour laws and to deter such violations — was well served by the settling PAGA plaintiff. Thus, having other PAGA plaintiffs involved in a settled PAGA claim is not necessary to effectuate PAGA’s purpose. The Supreme Court also found significant the fact that the PAGA only requires that notice of settlement be provided to the LWDA and approved by the trial court, necessarily implying that other litigants need not be informed of the settlement or involved. The Supreme Court also noted that permitting intervention would result in a PAGA claim involving multiple sets of lawyers all purporting to advocate for the same client and fighting over who could control the litigation and settlement process, and who could recover their attorneys’ fees. The Supreme Court opined that not only does the statute not address such complexities, but also such a messy situation would thwart the pursuit of PAGA claims, which would be contrary to the statute’s purpose. The Supreme Court highlighted that PAGA plaintiffs nonetheless have a variety of options to pursue other than intervention. They remain free to seek consolidation or coordination of PAGA cases to facilitate resolution of the claims in a single proceeding. Or a PAGA plaintiff can offer arguments and evidence to a trial court assessing a PAGA settlement or can raise his or her concerns with the LWDA so as to spur LWDA action. The Supreme Court held that the same reasoning for its conclusion against a right to intervention also meant that a PAGA plaintiff has no right to move to vacate the judgment obtained by another PAGA plaintiff in a separate PAGA action, or to require that any objections he or she files to another plaintiff’s settlement be ruled upon. In a concurring opinion, Justice Kruger emphasized that there is nothing preventing a private plaintiff (rather than a PAGA plaintiff) from intervening to protect their own personal interests as an allegedly aggrieved employee, and she emphasized the trial court’s duty to carefully examine PAGA settlements. Justice Liu penned a lengthy dissent. Seemingly mistrustful of trial courts’ ability to gauge the fairness of a PAGA settlement, Justice Liu expressed his view that the majority’s opinion creates a substantial risk of auctioning settlement of PAGA claims to the lowest bidder and insulting those settlements from appellate review. Justice Liu encouraged the California Legislature to take action to amend the PAGA to expressly confer the rights the majority found lacking. The Turrieta decision has significant ramifications for employers facing a multiplicity of PAGA actions. By settling with one plaintiff who then amends the complaint to cover the claims at issue in the other PAGA actions, the employer can pull the rug out from underneath the other plaintiffs and their counsel. Recent amendments to the PAGA now require that a PAGA plaintiff have suffered the same alleged injury as the other allegedly aggrieved employees he or she is, as the State’s proxy, representing. That amendment diminishes the likelihood of employers continuing to face multiple overlapping PAGA claims. But, to the extent an employer is facing a multiplicity of overlapping PAGA actions, the Turrieta decision makes clear that settlement of one such action can be accomplished without substantial interference from other PAGA plaintiffs. On January 18, 2024, the California Supreme Court issued its opinion in Estrada v. Royalty Carpet Mills , 15 Cal.5th 582 (2024). It is a game changer for employers operating in California. The Supreme Court held, in a unanimous decision, that trial courts lack inherent authority to dismiss claims under the PAGA with prejudice due to lack of manageability. The Supreme Court declined to address whether, and under what circumstances, a defendant’s right to due process might ever support striking a PAGA claim. As such, the decision in Estrada is a required read for employers and their decision-makers.

Private Attorneys General Act Review – 2025

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