Private Attorneys General Act of 2024: Encouraging Employers to Audit and Strengthen Compliance Practices

The Private Attorneys General Act (PAGA) has long been a defining feature of California’s labor laws, empowering employees to act as private attorneys general in holding businesses accountable for labor code violations. For employers, this has often meant navigating a challenging legal landscape where small compliance issues can snowball into costly litigation.

The PAGA reforms of 2024 introduced significant updates aimed at streamlining the law and addressing concerns about its impact on businesses. While these reforms bring some relief, they also underscore the importance of ensuring airtight compliance with California’s labor laws. For employers, this is a critical moment to audit workplace policies and practices to mitigate risks and avoid the penalties that PAGA claims can bring.

Understanding PAGA and the 2024 Reforms

PAGA, enacted in 2004, revolutionized California’s approach to labor law enforcement. By granting employees the right to sue their employers on behalf of the state for labor code violations, PAGA aimed to fill gaps in government enforcement. Employees could pursue civil penalties for infractions, with a portion of the recovered penalties going to the state. However, while the law empowered workers, it also created significant challenges for employers, as even minor technical violations could lead to costly lawsuits.

The reforms to PAGA in 2024 were in response to growing concerns about the law's misuse and its impact on businesses. Some of the most notable updates include:

• Enhanced State Oversight: The reform introduces a stricter review process for PAGA claims, ensuring only valid cases proceed to litigation. This reduces frivolous lawsuits that often burden employers.
• Pre-Litigation Resolution Opportunities: Employers now have expanded opportunities to cure certain violations before facing a lawsuit. This includes extended timelines to address wage and hour issues or meal and rest break discrepancies.
• Simplified Penalty Structure: The reform bill streamlines penalties for common infractions, reducing ambiguities in calculating fines and offering employers greater predictability.
• Employer Protections for Good Faith Efforts: Businesses that can demonstrate proactive compliance measures, such as regular audits and training, may benefit from reduced penalties or dismissal of claims.

While the California Private Attorney General Act reforms offer opportunities to mitigate risk, they also increase the need for accountability. Employers who fail to comply with the updated provisions risk significant exposure to PAGA California claims. The consequences can include:

1. Costly Litigation: Despite the reforms, PAGA lawsuits can still lead to significant financial penalties, especially for repeated violations.
2. Reputational Damage: High-profile claims may damage a company’s public image, making compliance an essential part of maintaining trust with employees and customers.
3. Increased Oversight: Enhanced state review of claims means employers must maintain thorough documentation and demonstrate consistent compliance efforts.

Why Employers Should Audit Compliance Practices Now

Proactively conducting an employer's audit is one of the most effective ways to ensure compliance. Audits allow businesses to identify and address potential violations before they escalate into costly PAGA California claims. Given the heightened accountability introduced by the 2024 reforms, employers cannot afford to overlook gaps in their compliance practices. Regular audits signal a commitment to fair labor practices and demonstrate good faith efforts to comply with California labor laws, which can reduce penalties or even prevent litigation.

Employers often face compliance challenges in areas where California labor laws are particularly stringent. Some of the most common issues include:

• Wage and Hour Violations: Errors in calculating overtime, failing to pay minimum wage, or delays in issuing final paychecks can all trigger PAGA claims.
• Meal and Rest Breaks: Non-compliance with California’s strict requirements for providing uninterrupted meal and rest breaks is a frequent source of litigation. Even minor discrepancies can lead to significant penalties.
• Employee Misclassification: Misclassifying workers as independent contractors instead of employees can result in unpaid benefits and wages, creating grounds for PAGA actions.
• Record-Keeping Deficiencies: Failing to maintain accurate and complete payroll records can make it difficult to defend against claims or demonstrate compliance.

These issues are often unintentional, stemming from outdated policies, inconsistent enforcement, or lack of awareness about changes in employment law. An audit helps pinpoint these vulnerabilities before they lead to claims.

Conducting a thorough audit not only addresses compliance risks but also strengthens your business in several key ways:

1. Risk Mitigation: By identifying potential violations, employers can take corrective action to reduce exposure to PAGA California claims and penalties.
2. Improved Workplace Policies: Audits provide an opportunity to update employee handbooks, training materials, and payroll systems, ensuring they align with the latest labor law requirements.
3. Strengthened Legal Defenses: Demonstrating proactive compliance efforts, such as conducting regular audits, can serve as evidence of good faith in the event of litigation, potentially reducing liability.
4. Employee Trust and Morale: Addressing compliance issues proactively shows employees that their rights are valued, which can enhance workplace morale and reduce turnover.

Strengthening Compliance Practices to Avoid PAGA Claims

Avoiding claims under the Private Attorneys General Act starts with implementing proactive measures to ensure compliance across all employment practices. Employers can take the following steps to strengthen their defenses:

• Train Managers: Equip managers with the knowledge to enforce California labor laws, including wage and hour rules, meal and rest break policies, and anti-retaliation measures.
• Update Employee Handbooks: Regularly review and update your employee handbook to reflect the latest labor law changes and ensure employees understand their rights.
• Conduct Payroll Audits: Regularly review payroll systems to ensure accuracy in wage calculations, overtime payments, and timely issuance of final paychecks.
• Maintain Accurate Records: Keep thorough and up-to-date records of timekeeping, wages, and employee classifications to demonstrate compliance during audits or litigation.

Stay Ahead of PAGA

The Private Attorneys General Act has been a pivotal aspect of California labor law, and the 2024 reforms introduce new challenges and opportunities for employers. Understanding these changes is essential, but the real key to protecting your business lies in taking proactive steps to ensure compliance.

Navigating the complexities of the PAGA reform bill and the broader California Private Attorney General Act requires experience. That’s where White and Bright, LLP, can help. Our experienced employment attorneys are here to guide you through compliance audits, policy updates, and risk management strategies tailored to your unique needs.

Don’t wait for a lawsuit to highlight compliance gaps in your organization. Call (760) 747-3200 or contact White and Bright, LLP, today to discuss how we can help you strengthen your practices, mitigate risks, and safeguard your business for the future.