As the perceived abuses of the system became increasingly evident, a ballot initiative to roll back PAGA gained momentum.
Two years after the California Legislature placed new limits on what was viewed as the abuse of the state’s Private Attorneys General Act (PAGA) by plaintiffs’ attorneys, the Labor Workforce Development Agency (LWDA) has proposed new regulations intending to further those goals and curb the practices that have hindered them despite the legislation. If implemented, these regulations will create much-needed relief for employers.
Background
California’s PAGA was passed more than two decades ago with the goal of allowing individual employees to supplement the limited staffing of the California LWDA. PAGA empowers employees, on an either an individual or representative basis, to seek civil penalties on behalf of the state for violations of the California Labor Code. The result has been what some consider to be one of the most abused statutes in California. While in some circumstances the intent may be to curb unlawful employment practices, it has also been used as a weapon to threaten employers with lawsuits in an effort to cajole them into settlements to avoid the enormous expense usually associated with defending against PAGA claims. An entire cottage industry around threatened PAGA cases has arisen.
PAGA lawsuits cannot be filed without first exhausting an administrative remedy. The aggrieved employee must send a letter to the LWDA enumerating the alleged violations; the LWDA has 65 days to decide whether to address the allegations through an administrative process. If the LWDA does not act within 65 days, the employee may proceed with filing a private lawsuit. Once filed, PAGA permits plaintiffs’ attorneys to immediately seek discovery, including the production of wage statements, time records and contact information for all potentially affected employees. Defending a PAGA action is expensive from the beginning.
2024 Amendments
As the perceived abuses of the system became increasingly evident, a ballot initiative to roll back PAGA gained momentum. With the prospect that the voters would act, labor and business interests worked together to reach a compromise, inking a deal significantly altering PAGA, resulting in the California Legislature quickly passing two bills (AB 2288 and Senate Bill 92). Following their passage, the voter initiative was withdrawn. The two bills included reforms to PAGA’s penalty structure, new defenses for employers, standing requirements limiting the scope of PAGA actions, and a new “cure” process for both small and large employers.
The legislation did not bring change. In the nearly two years since these amendments were passed, the volume of threatened and filed PAGA lawsuits has not slowed. The LWDA noted that nearly 9,000 PAGA notices were filed with the agency in fiscal year 2024-2025—and that nearly one-quarter of them were filed by the same five law firms using formulaic and boilerplate notices that did little more than change the names of the employers and employees. The LWDA thus has created proposed regulations aiming to curb these practices in a way that the legislation so far has not been able to.
Proposed Regulations
The key proposed regulations aim to prevent what are viewed as the most egregious abuses, such as:
More Specificity Required in Pre-Litigation PAGA Notices
Most notices sent to the LWDA simply recite general allegations without specificity. For example, an aggrieved employee might allege that their meal breaks were noncompliant with California law, but will not provide any specifics about how they were noncompliant— such as whether they were outright denied or whether they were prohibited from taking them, unable to take them due to the press of business, instructed to break late or interrupted while taking breaks. Such general allegations make it virtually impossible for the LWDA to assess whether the alleged violations warrant further investigation. The proposed regulations require the LWDA to address vague allegations by creating a template notice to send in response that l requires the allegedly aggrieved employee to provide greater specificity about the nature of the violations. The goal is to reduce the number of boilerplate notices, requiring greater detail that allows both employers and the LWDA to investigate allegations, and a more meaningful opportunity for employers to use the new cure process.
Identification of High-Frequency and Vexatious Litigants
An LWDA investigation has revealed that of the nearly 9,000 PAGA notices sent in fiscal year 2024-2025, five law firms filed over 2,000 of them; three law firms filed more than one PAGA notice a day; five attorneys filed more than 1,500 notices; and ten attorneys alone account for filing more than 2,000 notices. The LWDA noted that these attorneys and firms used template notices that alleged conclusory descriptions of the violations alleged. The new regulations would identify “high frequency filers” who have sent more than 200 such notices in the preceding 12-month period. Such filers would be subject to greater scrutiny by the LWDA, and their filings will need to be certified by both the attorney and client attesting that the allegations are true and are not being made to burden or harass the employer. The regulations also would identify “vexatious” filers, who have continued to file noncompliant notices, frivolous allegations or notices that are intended to burden or harass.
Curing Violations
Perhaps the most beneficial component of the proposed regulations for employers comes in the form of an opportunity to cure. Employers both large and small will be given the opportunity to correct violations to thwart the need for litigation. Small employers (those employing fewer than 100 people within the preceding 12 months) are provided the greatest relief. They will have an opportunity to cure violations involving overtime, meal and rest breaks, and expense reimbursements, which make up the lion’s share of PAGA claims. Employers of all sizes will be given the opportunity to cure violations involving inaccurate wage statements. Employers would be able to submit confidential cure proposals within 33 days of the receipt of the LWDA letter that would not be able to be used against them if litigation followed. In addition, the LWDA would be able to hold a conference with the employer to try to resolve the issue without the need for litigation. See our blog for greater detail on the cure process.
Next Steps
The regulations remain proposed, with the public comment stage recently closed. The final regulations may differ following this public comment period.
What This Means for Employers
If the regulations are implemented as currently written, employers, particularly those with fewer than 100 employees, will now have a real opportunity to cure the most commonly alleged violations reducing the fear of expensive litigation. The small number of law firms who target employers indiscriminately with PAGA notices will no longer be able to do so without consequences, and the new template notices will require plaintiffs’ counsel to specify the alleged violations. If adopted, these regulations will prevent unscrupulous attorneys from treating PAGA as a money-printing machine. The proposed regulations serve as a reminder to employers of all sizes to audit their wage and hour practices to avoid becoming victim of a PAGA claim.
For More Information
If you have any questions about this Alert, please contact Lorraine Ocheltree, Brooke B. Tabshouri, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.