What is PAGA?

The Private Attorneys General Act (PAGA) allows aggrieved employees to bring claims on behalf of themselves, other employees, and the State of California.1  Over the last 15 years, more than 35,000 PAGA notices have been sent to employers.2

PAGA fines can be significant.  Two years ago, Walmart received a $102 million verdict in federal court after defending against a PAGA claim regarding wage statements that did not include overtime calculations.3  In order to avoid the potential for a significant judgment, many small and medium-sized employers settle out of court.

PAGA claims are often initiated when a terminated employee reaches out to an attorney.  The attorney may ask to see the employee’s pay stubs and might find a mistake in the name or address of the employer. The error is considered a violation of the state’s labor code, and the attorney can proceed with PAGA claims.  The attorney will be permitted to seek relief not just for the employee who initially reached out, but also for other employees regardless of whether they would like to participate in PAGA litigation.  The attorney may use the discovery process to increase the cost of the litigation, putting pressure on the company to reach a settlement.

Seventy-five percent of any settlement or judgment in a PAGA case is distributed to the Labor and Workforce Development Agency (LWDA), while the other 25 percent is provided to the aggrieved employees.4  The attorneys who represent the aggrieved employees typically request one-third of the amount recovered.  Thus, a PAGA settlement for three hundred thousand dollars will typically result in the attorneys receiving one hundred thousand dollars, the LWDA receiving one hundred fifty thousand dollars, and the employees receiving just fifty thousand dollars.  Under this scenario, the attorneys representing the aggrieved employees recover twice as much as their clients.  Some businesses have pushed for PAGA to be eliminated or scaled back in California.5

Who Is Considered an “Aggrieved Employee”?

Only an aggrieved employee has standing to sue an employer under PAGA.6  An aggrieved employee is “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.7

Employees sometimes bring individual wage and hour claims in addition to PAGA claims. In the past, some employers settled the individual claims, hoping the employee would lose standing to proceed with PAGA claims. In the case of Kim v. Reins International California, Inc., the California Supreme Court held that settling individual claims while excluding PAGA claims from the settlement did not prevent the employee from later bringing PAGA claims for the same labor code violations that had been released on an individual basis.8

The impact of Kim v. Reins may be somewhat reduced given that many settlement agreements do not contain a carve-out of PAGA claims in the release.  Employers should consider including in settlement agreements a covenant that the former employee will not participate in or bring a class action or PAGA claim.

What Claims Can be Brought under PAGA?

Under PAGA, employees can bring claims for California Labor Code violations to recover civil penalties. These penalties are separate from statutory damages that employees may recover in their individual capacity.9

There are three main categories of PAGA claims:

  1. First, California Labor Code Section 2699.5 provides a list of labor code sections for which employees can bring PAGA claims. These sections include retaliation or discrimination against employees,10 failure to timely pay wages on discharge,11  failure to provide proper meal and rest breaks,12  failure to provide itemized wage statements,13  and various other labor code violations. In total, section 2699.5 identifies over 100 Labor Code violations to which PAGA applies.14
  2. Second, PAGA claims can be brought for violations of the California Occupational Safety and Health Act of 1973.15 Common examples include failure to provide a safe and healthful workplace,16 failure to provide safety devices and adopt safe practices,17 and failure to implement an effective injury prevention program.18  It is important to note that PAGA claims may also be brought in cases where employers retaliate against employees who make oral or written complaints regarding workplace safety and health.19 Additionally, PAGA claims may be brought if employers laid off or discharged an employee who refused to work in a workplace containing an occupational safety or health violation.20
  3. Finally, PAGA claims can be brought by an aggrieved employee for violations not listed in section 2699.5 or in Cal OSHA.21 This category covers a broad range of labor code violations not already mentioned, such as failure to provide paid sick days,22 willful misclassification of an employee as an independent contractor,23 and violations of labor code rules for certain special occupations (e.g., mining, lumber, door-to-door sales, and theater),24  among other violations.

Certain claims cannot be brought under PAGA. First, PAGA claims cannot be brought for “any violation of a posting, notice, agency reporting, or filing requirement of this code, except where the filing or reporting requirement involves mandatory payroll or workplace injury reporting.”25

Additionally, PAGA “[does] not apply to the recovery of administrative and civil penalties in connection with . . . workers’ compensation law”26

Has the Employee Met the Notice Requirements?

For civil actions alleging a violation of a labor code section listed in section 2699.5, the aggrieved employee or representative must first “give written notice by online filing with the Labor and Workforce Development Agency (LWDA) and by certified mail to the employer of the specific provisions of this code alleged to have been violated, including the facts and theories to support the alleged violation.”27 The employee must also pay a $75 filing fee.28 Likewise, an employer must pay a filing fee of $75 for any response to that notice.29

For civil actions alleging Occupational Health and Safety violations, the aggrieved employee must give notice by “online filing with the Division of Occupational Safety and Health and by certified mail to the employer, with a copy to the Labor and Workforce Development Agency” of the specific provisions of the California Occupational Safety and Health Act of 1973 alleged to have been violated, including the facts and theories to support the alleged violation.30

Lastly, for civil actions alleging a violation not listed in section 2699.5 or Cal/OSHA, the aggrieved employee or representative “shall give written notice by online filing with the Labor and Workforce Development Agency and by certified mail to the employer of the specific provisions of this code alleged to have been violated, including the facts and theories to support the alleged violation.”31 The employee must pay a $75 filing fee, and the employer must pay a $75 filing fee for any response to the notice.32

For additional information on filing, see: https://www.dir.ca.gov/Private-Attorneys-General-Act/Private-Attorneys-General-Act.html

If employees fail to meet the notice requirements, the court may preclude the employee from pursuing PAGA claims. In Khan v. Dunn-Edwards Corp., a former employee provided the employer’s counsel and the LWDA with notice that stated: “This correspondence shall constitute written notice under Labor Code §2699.3 of my claims against my former employer.”33 The notice did not mention any other current or former employee besides the one who provided the notice.34

As a result, the court held that the employee failed to comply with the administrative requirements of PAGA.35 Because the employee failed to give fair notice of the individuals involved in the PAGA claim, the court affirmed a finding of summary judgment on the PAGA claim in favor of the employer.36

In Alcantar v. Hobart Service, the court found that a written notice containing purely legal conclusions fails to meet PAGA’s notice requirements because it did not contain sufficient facts or theories.37

Has the Employee Exhausted Administrative Remedies?

By statute, there are certain administrative requirements that must be met before an employee is allowed to bring a PAGA claim. For example, the LWDA or Division of Occupational Safety and Health must be given a chance to decide whether to investigate the matter first.

  • For 2699.5 listed violations:

After the employee has properly given notice, the LWDA will notify the employer and aggrieved employee or representative by certified mail if it does not intend to investigate the alleged violation “within 60 calendar days of the postmark date of the notice.”38 Upon being notified by the LWDA within 60 days or if the LWDA does not provide notice within 65 days, the aggrieved employee may proceed and pursue the PAGA claim.39

If the LWDA decides to investigate the alleged violation, it will notify the employer and the aggrieved employee or representative of its decision within 65 calendar days of the postmarked notice.40 Then, within 120 days of that decision, the LWDA may investigate the alleged violation and issue any appropriate citation.41 If the LWDA decides not to issue a citation, it will notify the employer and aggrieved employee within five business days by certified mail.42 Upon receiving notice that no citation will issue, the aggrieved employee may pursue a PAGA claim.43 Additionally, if the LWDA fails to give notice within the 65 calendar days or fails to give notice within the 120 days after deciding to investigate, then the aggrieved employee may likewise pursue a PAGA claim.44

  • For Cal/OSHA:

After the employee properly gives notice for Cal/OSHA violations, the Division of Occupational Safety and Health will inspect or investigate the alleged violation based on the procedures specified in Cal. Labor Code Section 6300, et. seq.45

If the division decides to issue a citation, the employee cannot bring a PAGA action.46

If the division fails to issue a citation (by the end of the time specified in section 6317), and the aggrieved employee disputes that decision, the employee may challenge the decision in superior court.47

  • For violations not listed in 2699.5 or Cal/OSHA:

Apart from providing notice to the LWDA and the employer, there is no agency investigation that needs to take place. However, violations not listed in 2699.5 or Cal/OSHA are subject to certain cure provisions, which will be addressed later in this article.

Statute of Limitations

The statute of limitations for PAGA claims is one year.48  Accordingly, an employee must at least file notice with the LWDA within one year after a violation occurred. For example, in Esparza v. Safeway, Inc., the plaintiffs’ PAGA claim rested on violations that occurred before June 17, 2007, so the California Court of Appeal found that the plaintiff’s PAGA claims could not be brought as of June 17, 2008.49  The plaintiffs had not asserted a PAGA claim nor filed notice with the LWDA until July 2008.50 Therefore, the court found that the PAGA claims were time-barred and could no longer be brought.51

Two Main Responses to Violations

  • Cure the violations:

PAGA allows employers to cure certain violations. Curing is defined as: 1) The employer abates each violation alleged by any aggrieved employee;  2) The employer is in compliance with the underlying statutes as specified in the employee’s notice, and 3) Any aggrieved employee is made whole.52  There are special cure requirements for certain violations related to itemized wage statements.53

Violations listed in section 2699.5 cannot be cured. Only violations not listed in section 2699.5 may be cured. Cal/OSHA violations can also be cured, but only if the Division of Occupational Safety and Health fails to investigate after being given notice.54

  • Time to cure:

The employer has 33 calendar days to cure the alleged violations, starting from the time of the postmarked notice sent by the aggrieved employee or representative.55  If the alleged violation is cured, the employer must provide written notice within that time period by certified mail to the aggrieved employee or representative and by online filing with the agency, describing the remedial actions taken.56 Once the violations have been cured within the 33 days, the aggrieved employee is not allowed to pursue a PAGA lawsuit for them.57 However, the employee may pursue PAGA claims if the violations are not cured within the 33 days.58

Employers may only cure the violation or violations contained in the employee’s notice up to three times in a 12-month period, regardless of the location of the workplace.59  For violations related to the requirement that itemized wage statements list the dates of the employee’s pay period and the name and address of the legal entity, the employer may only cure the violation or violations contained in the notice once in a 12-month period, regardless of the location of the workplace.60

However, the aggrieved employee is allowed to dispute that an alleged violation has been cured with the relevant agency and then with the superior court if there is still disagreement.61

  • Mitigate the penalties:

Even if violations are not subject to the cure provisions of PAGA, employers may still be able to mitigate the penalties assessed at trial by promptly correcting the alleged violations. Courts have discretion to reduce the civil penalty amount if it will prevent “an award that is unjust, arbitrary and oppressive, or confiscatory.”62

In Fleming v. Covidien Inc., the court found a PAGA penalty to be unjust where “‘Defendants were not aware that the wage statements violated the law and took prompt steps to correct all violations once notified.’”63

Correcting any violations promptly upon being notified is a good strategy to demonstrate at trial that lower penalties should be assessed for a PAGA claim, regardless of whether those violations can be cured by statute or not.

Preventing Future PAGA Claims

Employers should work closely with their human resources department and legal counsel to ensure that proper processes are in place to prevent potential PAGA claims. They should also keep records of their efforts to comply with the law, such as documenting any updated policies due to legal changes, keeping records of training sessions, and preserving emails demonstrating compliance efforts.

The following are some examples of preventative measures:

  • Ensure that employees receive compliant meal and rest periods.  Periodically review time records for employees and follow-up with those who are not timely taking their meal periods.
  • Provide meal period premiums and rest period premiums when employees were not able to take compliant meal and rest breaks.
  • Properly pay all overtime earned by employees.
  • Ensure that employees are properly classified.
  • Make sure that your employment policies comply with current labor laws.
  • Consider offering severance packages to employees who were terminated or who resigned after making a complaint.
  • If a departing employee claims they did not receive meal or rest periods, then promptly provide them with meal and rest period premiums for each shift affected.
  • Review payroll records to ensure they show the hours worked daily by each employee, the wages paid to each employee, and the number of piece-rate units earned by and paid to employees.64 Employers must keep such records on file for at least three years.65
  • If the employer uses a rounding policy, make sure that it complies with the law. Rounding policies for timekeeping are allowed in California but are subject to restrictions.66 In Donohue v. AMN Services, LLC, the California Supreme Court held that rounding time punches is not allowed for required meal periods.67 Employees must receive their full 30-minute meal period for every five hours worked.68
  • Ensure that proper itemized wage statements are being provided to employees when wages are paid.69
  • Review your workplace health and safety standards to ensure they comply with Cal/OSHA.

There are additional measures that can be taken to reduce the potential for a PAGA claim to be filed.  If you are unsure whether your company’s policies are compliant with California law, feel free to reach out to an employment attorney at Martin Law Firm, P.C.

Citations

1. Additional information can be found at the California Department of Industrial Relations.
2. See article from the OC Register entitled “The Rise in PAGA penalties is evidence of law’s abuse.
3. This verdict was later overturned by the Ninth Circuit in an opinion that can be found here.
4. California Labor Code Section 2699(i).
5. See CABI.
6. California Labor Code Section 2699(a).
7. California Labor Code Section 2699(c).
8. Kim v. Reins International California, Inc., 9 Cal.5th 73, 80.
9. Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348, 381.
10. Cal. Labor Code 98.6.
11. Cal. Labor Code 201.
12. Cal. Labor Code 226.7.
13. Cal. Labor Code 226(a).
14. Cal. Labor Code 2699.5.
15.  Cal. Labor Code 2699.3(b); Cal. Labor Code 6300.
16. Cal. Labor Code 6400(a).
17. Cal. Labor Code 6401.
18. Cal. Labor Code 6401.7(a).
19. Cal. Labor Code 6310.
20. Cal. Labor Code 6311.
21. Cal. Labor Code 2699.3(c).
22. Cal. Labor Code 246.5.
23. Cal. Labor Code 226.8(a)(1).
24. Cal. Labor Code 270-273.
25. Cal. Labor Code 2699(g)(2).
26. Cal. Labor Code 2699(m).
27. Cal. Labor Code 2699.3(a)(1)(A).
28. Cal. Labor Code 2699.3(a)(1)(B).
29. Id.
30. Cal. Labor Code 2699.3(b)(1).
31. Cal. Labor Code 2699.3(c)(1(A).
32. Cal. Labor Code 2699.3(c)(1)(B).
33. Khan v. Dunn-Edwards Corp., 19 Cal.App.5th 804, 806-07.
34. Id. at 807.
35. Id. at 810.
36. Id.
37. Alcantar v. Hobart Service, 800 F.3d 1047, 1056-57.
38. Cal. Labor Code 2699.3(a)(2)(A).
39. Id.
40. Cal. Labor Code 2699.3(a)(2)(B).
41. Id.
42. Id.
43. Id.
44. Id.
45. Cal. Labor Code 2699.3(b)(2)(A).
46. Cal. Labor Code 2699.3(b)(2)(A)(i).
47. Cal. Labor Code 2699.3(b)(2)(ii).
48. California Code of Civil Procedure 340(a).
49. 36 Cal.App.5th 42, 60.
50. Id.
51. Id.
52. Cal. Labor Code 2699(d).
53. Id.
54. Cal. Labor Code 2699.3(b)(2)(B).
55. Cal. Labor Code 2699.3(c)(2)(A).
56. Id.
57. Id.
58. Id.
59. Cal. Labor Code 2699.3(c)(2)(B).
60. Cal. Labor Code 2699.3(c)(2)(B)(ii).
61. Cal. Labor Code 2699.3(c)(3).
62. Cal. Labor Code 2699(e)(2).
63. Id.
64. Cal. Labor Code 1174.
65. Id.
66. See See’s Candy Shops, Inc. v. Superior Court, 210 Cal.App.4th 889, 907.
67. Donohue v. AMN Services, LLC, 11 Cal.5th 58, 61.
68. Cal. Labor Code 512.
69. Cal. Labor Code 226(a).

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