California's labor landscape is set to undergo significant changes following the announcement of an agreement to reform the Private Attorneys General Act (PAGA). Governor Gavin Newsom, in collaboration with legislative leaders and representatives from labor and business groups, revealed a reform package aimed at enhancing worker protections, encouraging employer compliance, and streamlining litigation processes. This agreement also averts a potentially contentious ballot measure campaign.

Key Reforms

The PAGA reform proposal includes several key components:

Reformed Penalty Structure:

Penalties will be capped for employers who promptly rectify policy lapses and compensate employees after receiving a PAGA notice. Higher penalties will be imposed on employers who act maliciously, fraudulently, or oppressively. The portion of penalty money allocated to employees will increase from 25% to 35%.

Streamlined Litigation:

The reform expands the range of labor code sections that can be cured, reducing the need for litigation and allowing employees to receive remedies more quickly. A more robust right-to-cure process through the Labor and Workforce Development Agency (LWDA) is aimed at protecting small employers and reduce litigation costs. Courts will be able to limit the scope of claims presented at trial, ensuring that cases are manageable and adjudicated efficiently.

Enhanced Measures for Injunctive Relief and Standing:

Courts will also have the authority to provide injunctive relief, compelling businesses to implement changes in the workplace to address labor law violations. Employees must personally experience the alleged violations to bring a claim, reducing frivolous lawsuits and ensuring that only legitimate claims proceed.

Ensuring Employees Personally Experience Violations

A critical aspect of the PAGA reform is the requirement that employees personally suffer labor violations to bring a claim. Currently, under PAGA, employees can file representative claims on behalf of themselves and other current or former employees without having to personally suffer the same violations. This means an employee who experiences a particular labor law violation can file a lawsuit not only for their own grievances but also on behalf of all employees who have experienced any similar violations by the same employer. By requiring that employees must personally experience the alleged violations to bring a claim, the reform aims to reduce frivolous claims and make the system more efficient.

Strengthening State Enforcement

In addition to the measures ensuring employees must personally experience violations, the reform also strengthens state enforcement capabilities. The Department of Industrial Relations (DIR) will be empowered to expedite hiring and fill vacancies, enhancing the effective and timely enforcement of employee labor claims.

Averting a Contentious Ballot Measure

One outcome of this agreement is the withdrawal of the "Fair Pay and Employer Accountability Act" from the November 2024 ballot. This initiative aimed to replace PAGA with enhanced enforcement powers for the California Labor Workforce Development Agency (LWDA) and eliminate attorneys' fees. The agreement has averted this ballot measure, allowing for a more balanced and comprehensive reform of PAGA.

Looking Ahead

The full impact of the reform deal will become clear once the official bill is released. The legislation must be passed and signed into law by June 27, 2024, to ensure the initiative's removal from the ballot.