Introduction to PAGA and Its Evolution
The Private Attorneys General Act (PAGA), enacted in California in 2004, granted employees the power to act as private attorneys general to enforce labor laws that the state’s regulatory agencies may lack the resources to pursue. Designed with the goal of boosting labor law compliance, PAGA enables aggrieved employees to file lawsuits on behalf of themselves and other employees, seeking civil penalties for Labor Code violations. The Nakase Law Firm has closely followed these developments, offering insights and legal guidance to employers navigating the implications of the new PAGA reforms.
The statute of limitations for PAGA claims is one year from the date the employee last experienced a labor code violation. Over time, however, PAGA’s implementation raised concerns about excessive litigation, burdensome procedures, and inequitable penalty outcomes. In response to these challenges, California’s legislature introduced a reform package in 2024—popularly referred to as “PAGA 2.0”—that significantly alters the enforcement framework of the original act.
Signed into law on June 27, 2024, the reforms represent a near-unanimous legislative effort to balance employee protections with procedural fairness for employers. Two bills, AB 2288 and SB 92, jointly redefined various core aspects of PAGA, from who can bring claims to how penalties are calculated and applied. Importantly, these changes only apply to civil actions filed—or based on PAGA notices submitted—on or after June 19, 2024.
This article combines and paraphrases two in-depth discussions on the subject, providing a unified overview of the key changes, processes, and legal timelines that both employees and employers must now consider.
Revised Standing Requirements for Plaintiffs
Perhaps the most transformative element of PAGA 2.0 is the revised standing requirement for plaintiffs. Under the previous regime, an employee who experienced just one labor violation could initiate claims on behalf of others for different violations they did not personally experience. This lenient rule often resulted in expansive, loosely connected claims.
The new law mandates that plaintiffs must have personally experienced each violation alleged in the complaint. This reform aligns PAGA with class action standards, which require class representatives to have actual membership in the class they seek to represent. There is, however, a limited exception: certain long-established nonprofit legal aid organizations that have been representing clients in PAGA matters for at least five years before January 1, 2025, may continue to file broader claims on behalf of workers they represent.
Clarifying the Statute of Limitations
A fundamental principle in litigation is the statute of limitations, which defines the maximum time after an event within which legal proceedings may be initiated. Under PAGA, the standard statute of limitations is one year. The 2024 reforms reaffirm and clarify this time limit, explicitly stating that a PAGA claim is only valid if the plaintiff personally experienced the violation within the one-year limitations period.
This clarification closes a contentious loophole that had persisted following the 2021 appellate decision in Johnson v. Maxim Healthcare Services, Inc. In that case, plaintiffs argued they could pursue claims for violations outside their personal experience or outside the limitations window. PAGA 2.0 shuts down that interpretation by codifying that only violations suffered within the one-year window qualify as grounds for a claim.
Pre-Filing Notification Process
Before initiating a PAGA lawsuit, employees must follow a detailed notification protocol involving both the California Labor and Workforce Development Agency (LWDA) and the employer. This process has not significantly changed under PAGA 2.0, but it remains a critical component of the system.
The aggrieved employee must submit a PAGA notice to the LWDA online and send a physical copy to the employer via certified mail. The notice must outline the nature of the labor code violations, identify the affected employees, and describe the legal basis for the complaint. While a full factual narrative or employee list is not necessary, the submission must go beyond simply listing alleged violations—it must offer enough context to enable investigation.
After receiving the notice, the LWDA has 65 days to decide whether to investigate and potentially take over the claim. If the agency declines or fails to act within that window, the employee may proceed with a representative lawsuit. This delay period is not counted as part of the one-year statute of limitations, effectively pausing the clock.
New Cure Provisions for Employers
PAGA 2.0 introduces robust “cure” mechanisms that offer employers an opportunity to resolve alleged violations and avoid or minimize penalties. These cure provisions vary based on the type of violation alleged and are especially comprehensive concerning wage statement errors under Labor Code § 226(a).
For example, if the only issue is the employer’s failure to include an accurate name or address on wage statements, they can cure this violation by providing written notice of the correct information to each impacted employee. In other cases involving wage statement errors, employers may avoid penalties by issuing fully compliant statements retroactively for each pay period in the preceding three years.
For violations beyond wage statement errors, employers can cure by rectifying the violations, making all impacted employees whole, and paying owed wages dating back three years. They must also include 7 percent interest, any required statutory liquidated damages, and reasonable attorneys’ fees. If these steps are taken, and the employer is found to have made “all reasonable efforts” to comply with the law, the maximum penalty is reduced to $15 per pay period.
Understanding “All Reasonable Steps” Standard
The determination of whether an employer took “all reasonable steps” to comply with the law is central to both the cure provisions and overall penalty calculations. This standard is evaluated by considering the totality of circumstances, including the size of the business, available resources, and the severity and duration of the alleged violations.
Reasonable steps may include actions such as:
- Conducting periodic payroll audits and addressing discovered issues
- Publishing compliant and lawful written employment policies
- Training supervisors and management on labor compliance
- Promptly correcting identified violations by supervisors or HR
If an employer demonstrates such steps before receiving the PAGA notice, penalties may be reduced to 15 percent of the maximum. If these actions are taken within 60 days after receiving the notice, the penalty cap is 30 percent. These measures provide employers with a clear incentive to proactively maintain compliance.
Codification of Manageability and Court Discretion
Another notable change is the inclusion of language allowing courts to manage PAGA claims more effectively. While manageability principles have long been informally applied in litigation, PAGA 2.0 codifies them, granting judges the authority to limit the evidence presented or narrow the scope of claims to ensure a manageable trial.
Interestingly, the statutory language derives not from the landmark Estrada v. Royalty Carpet Mills, Inc. decision of 2024, but from the earlier 2023 case, Woodworth v. Loma Linda Univ. Med. Ctr. The omission of the phrase “at trial” in the codified provision could lead to renewed debates about whether courts can impose case management limits even before trial begins. Regardless, this change signals a shift toward more efficient litigation and offers a potential check on sprawling, unmanageable PAGA cases.
Adjustments to Penalty Structures
PAGA 2.0 revises the default penalty framework to ensure more consistent and equitable outcomes. Previously, where the Labor Code did not prescribe a specific penalty, courts defaulted to $100 per pay period for an initial violation and $200 for subsequent violations. A “subsequent” violation meant that a court or the labor commissioner had already ruled against the employer for the same issue.
Under the new rules, the default remains $100 per pay period unless one of the following conditions applies:
- A court or the labor commissioner ruled in the past five years that the employer’s policy or conduct was unlawful.
- The court finds the employer’s actions were malicious, fraudulent, or oppressive.
If either condition is met, the default penalty increases to $200 per pay period. The goal of this change is to reserve harsher penalties for employers who knowingly or repeatedly violate the law.
Lower Penalties for Technical and Isolated Violations
PAGA 2.0 also introduces tiered penalty reductions for specific technical or isolated infractions. These include:
- $25 per pay period for incorrect employer name or address if the mistake would not confuse the employee
- $25 for wage statement errors where correct information can still be easily determined
- $50 per pay period for violations resulting from isolated, non-recurring events limited to 30 consecutive days or four pay periods
These lower penalty options reflect a more nuanced approach, distinguishing between willful noncompliance and honest mistakes or clerical errors.
Anti-Stacking and Weekly Pay Protections
Previously, employers faced the risk of so-called “stacked” penalties for derivative violations related to late payments (Labor Code §§ 201-203), wage statement deficiencies (§ 226), and wage timing issues (§ 204). PAGA 2.0 expressly prohibits penalties for derivative violations unless they are willful, knowing, or completely lacking compliance.
Additionally, employers who pay employees weekly—rather than biweekly or semimonthly—used to be at a disadvantage, as each pay period represented an opportunity for penalties. The new law corrects this disparity by halving the penalty amount for weekly pay periods, ensuring uniformity across different payroll frequencies.
Revised Distribution of Civil Penalties
PAGA 2.0 also amends how recovered penalties are distributed. Under the previous system, 75 percent of any award went to the LWDA, and 25 percent to the aggrieved employees. The revised allocation now grants 35 percent to employees and 65 percent to the LWDA. This shift increases the financial stake for employees while maintaining agency oversight.
Introduction of Injunctive Relief
A notable addition is the court’s authority to grant injunctive relief. Though ambiguously worded, the provision opens the door for courts to issue orders mandating employer compliance with labor laws. What remains uncertain is whether this relief is only available where a civil penalty is not otherwise provided or if it applies more broadly. Future court interpretations will likely resolve these ambiguities.
Procedural Enhancements in SB 92
While AB 2288 addressed the substantive changes to PAGA, its companion bill, SB 92, introduced procedural reforms. Among the most significant is the creation of an early evaluation program, designed to assess claims before extensive litigation begins. Although not yet detailed, this system could lead to faster resolutions, reduced court congestion, and early settlement opportunities.
Conclusion: What Employers and Employees Must Now Consider
PAGA 2.0 does not repeal the original act, but it significantly reshapes its landscape. Employees retain the power to bring representative actions, but they now face stricter standing requirements and must file claims within a clearly defined one-year window. Employers, on the other hand, gain new tools to cure violations, reduce penalties, and argue for trial manageability.
The new legislation promotes fairness and efficiency, offering both sides clearer guidance and more predictable outcomes. With the enactment of these reforms, California has taken a major step in recalibrating its labor enforcement framework. As these provisions are tested in real-world litigation, stakeholders across the labor spectrum should stay alert for further guidance, evolving interpretations, and best practices in compliance and dispute resolution.
