Private Attorneys General Act Review – 2025

• 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

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