For more than 20 years now, California employers have had to deal with a liability risk unique to the Golden State—the Private Attorneys General Act of 2004 (better known as PAGA). PAGA provides for a special type of lawsuit, in which current or former employees act as a “deputy” or “representative” for the Labor Commissioner. In this role, the employees can sue for penalties on behalf of the Labor Commissioner, not only for themselves but for other affected employees. Any assessed penalties or settlements are split between the state of California and the employees, with the State receiving two-thirds of the penalties and the affected employees sharing the remaining third.
- PAGA vs. Class Actions
Most PAGA cases are based on wage-and-hour violations, and they share many qualities of a wage-and-hour class action. However, in class actions, unlike PAGA cases, the employee must demonstrate to the court that the claims can be reliably and efficiently tried on behalf of other employees before being allowed to proceed. This process, known as “certification,” can act as a barrier against weak or frivolous employee claims. Unfortunately, that procedural barrier does not exist under PAGA. While courts may limit the scope of a PAGA claimant’s claims based on manageability factors, the lack of “certification” in PAGA can make it easier for the employee to proceed with their case. Another way that PAGA cases are different is that the remedy for a PAGA violation is a civil penalty that is typically assessed on a per-employee, per-pay period basis.
Despite the lack of certification, other aspects of PAGA may prove more beneficial for employers. One such notable benefit is the ability, in certain cases, for the employer to “cure” or “fix” the underlying violations at issue such that no penalties are assessed. Last year, California implemented much-needed amendments to PAGA, many of which addressed aspects of the law that unfairly penalized employers and often allowed for massive exposure for minor violations. As part of this overhaul, California has expanded employers’ ability to cure violations. While curing can be difficult and administratively costly, an employer who is able to cure alleged violations may dramatically reduce its exposure in a PAGA lawsuit.
- The PAGA “Cure”
So how does curing work? For a PAGA claimant to proceed with their case, the first step is for the employee to provide written notice to the employer and the California Labor and Workforce Development Agency (LWDA) describing the alleged Labor Code violations. The purpose of the notice is twofold—it gives the LWDA the opportunity to investigate the claims (which rarely happens in practice), and, more importantly, it provides the employer information to decide whether it wants to respond to the notice or attempt to cure the violations.
Prior to 2024, the violations that could potentially be cured were somewhat limited. After the amendments, some employers may be able to cure things like unpaid minimum and/or overtime wages, meal and rest break violations, unreimbursed business expenses, and wage statement violations. The LWDA treats proposals from the employer to cure alleged violation as confidential settlement proposals, which may not later be used as admissions of liability.
The procedure to be followed for “curing” a violation depends on the type of claim at issue and size of the employer. As to types of claims, wage statement violations are treated differently. Labor Code § 226 generally requires that employers furnish accurate itemized statements when they pay their employees, which must detail nine categories of information. For PAGA curing, if the violation involves a failure to include the correct name and address of the employer on the wage statement, an employer may cure the violation by giving written notice of the correct information to all affected employees. The employer is not required to issue corrected wage statements, but the notice must give the correct employer name and address and identify all pay periods in which the correct information was not provided. If the violation involves any of the other eight categories of information under Labor Code § 226, the employer must provide corrected wage statements to each affected employee for each pay period for three years from the date of the PAGA notice.
For cures of other types of violations (for example, unpaid wages or expenses), the employer must generally be in compliance with the Labor Code section at issue, which means the employer must fix the practice that resulted in the violation and make the affected employees whole. To make an employee “whole,” the employer must pay: (1) all amounts owing for three years from the date of the PAGA notice; (2) 7% interest; (3) any required liquidated damages; and (4) reasonable attorney’s fees and costs as determined by the LWDA.
- Small Employers—the LWDA Cure Conference
The above cure procedures are available to all employers, but small employers—those with less than 100 employees, including exempt and nonexempt, as well as current and former, in the year preceding the PAGA notice—have the additional option of participating in a special cure process with the LWDA. To do so, the employer must submit a proposal to the LWDA within 33 days of receiving a PAGA notice, detailing how it intends to cure the violations. If the LWDA deems the proposal potentially sufficient to cure the violations at issue, the LWDA will schedule a conference, where the employee and employer can both provide further information to enable the LWDA to decide whether the proposal is in fact sufficient. If sufficient, the LWDA will issue a “cure plan” detailing the actions the employer must take, usually within 45 days of the conference.
If the LWDA issues a cure plan, it is important for the employer to strictly comply. This is because the employer must provide notice, under oath, to the LWDA and employee describing its actions taken under the cure plan. The LWDA will review the notice, and even if it determines sufficient compliance, the employee can challenge this determination. A final decision will then be made by the Labor Commissioner’s Office. Note, regarding the wage statement cure process describe above (available to all employers), the employer must also submit a notice of cure, subject to employee challenge, so it is important for employers to perform all cure efforts with the utmost care.
- Large Employers—Cure Conference in the Courts
The PAGA revisions have one more cure process available specifically for larger employers (100 or more employees), although this process is only available after a lawsuit is filed. Additionally, these proceedings are administrated by the courts, not the LWDA. Under this cure process, the employer can request an “early evaluation conference” in which it can challenge the plaintiff’s claims and/or submit a plan to cure some or all of the violations at issue. The conference is presided over by a third-party neutral (not the judge assigned to the case), and much to the employer’s benefit, the request for an early evaluation can potentially stay all other court proceedings. Similar to the LWDA in the process for small employers, the third-party neutral will consider information from both sides, determine whether cure is possible, and, if a cure plan is ordered, decide if the employer has cured the violations. If the neutral or the plaintiff does not agree the employer has cured the violation, the employer can then file a motion with the judge assigned to the case, who will then determine if the cure was sufficient.
- The Bottom Line
The takeaway for employers is that when faced with PAGA claims, there are new and improved options for resolving such cases early and, potentially, for much less cost. That being said, the various cure processes present other difficulties: tight deadlines, costs associated with ensuring compliance and making employees “whole,” technical and procedural requirements, and challenges from the PAGA claimant or the LWDA/third-party neutral after attempts at cure. Upon receipt of a PAGA notice or PAGA lawsuit, it is therefore vital that employers immediately consult with qualified counsel, so they can adequately assess cure options and ensure no deadlines are missed. For more information on the PAGA cure process and other of last year’s revisions, a detailed FAQ from the LWDA is available here.