PAGA Amendments: Limited Right to Avoid Civil Penalties for Wage Statement Defects

The Private Attorney General Act, California Labor Code sections 2698 through 2699.5 (PAGA), was enacted in 2004, giving employees the right to recover civil penalties associated with specific violations of the California Labor Code. Until PAGA’s enactment, only the California Labor and Workforce Development Agency (LDWA) had the ability to recover civil penalties and any recovery was paid to the state.

PAGA was enacted to supplement enforcement actions by the LDWA and allows private actions on behalf of all aggrieved employees and former employees. Penalties recovered in private actions are shared, with 25 percent awarded to the aggrieved employees and the balance paid to the state. Any settlement of a PAGA claim requires court approval.

Before bringing PAGA claims, the aggrieved employee must provide written notice of the alleged violations to both the employer and the LDWA. The LDWA has 17 days to review the notice and any remedial actions taken by the employer. If the LDWA does not act within the 17 day window, the employee may proceed with a civil action.

Because a PAGA plaintiff is suing as the proxy of the LDWA, he or she may recover penalties on behalf of all aggrieved employees and former employees without meeting class certification requirements.¹ PAGA claims may proceed even after the court has declined to certify a class. The ability to obtain relief for a class, coupled with the requirement for judicial approval of any settlement releasing PAGA claims, has increased the burden on the courts.

In 2015, the Legislature took steps intended to slow some of the PAGA litigation. Many PAGA claims assert violations of California Labor Code Section 226, which requires the employer to provide specific information on each pay stub, including: gross and net wages earned; total hours worked by the employee; rate of pay; deductions; inclusive dates of the pay period; employee’s name and identification number; and, the employer’s name and address.

Employers now have a limited ability to avoid litigation by curing two types of alleged violations: (1) that the wage statements did not include the inclusive dates of the pay period(s); or (2) that the employer did not provide the name and address of the legal entity that is the employer.

To avoid liability under PAGA, the employer must abate the defects and must provide a fully compliant, itemized wage statement to each aggrieved employee for each pay period within the three-year period immediately prior to the notice. These steps must be taken within 33 days of the notice. Employers may take advantage of this safe harbor only once in each 12-month period.

Any employer who receives a letter claiming violations of any provision of the California Labor Code should immediately seek out competent employment counsel to determine whether any or all of the alleged violations can be corrected to avoid or diminish liability for penalties. Even if the employer cures and avoids penalties, the employer may still face a class action for damages under Labor Code Section 226.

[1] Arias v. Superior Court (Angelo Dairy) 46 Cal. 4th 969, 986 (2009).