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PAGA Amendments Not the Solution Employers Need

Posted in Labor Law, New Legislation and Regulations, Wage & Hour

California employers hoped for significant changes following Governor Brown’s budget proposal that called for the Labor and Workforce Development Agency (LWDA) to have more oversight of claims made under the Private Attorneys General Act of 2004 (PAGA).   The budget proposal noted that the departments tasked with investigation and enforcement of the Labor Code has never “had the staffing and resources to effectively review notices, or choose cases for further investigation.”  This is especially true given that the notices are currently being reviewed by a single employee.

Employers in California were optimistic that Governor Brown’s proposal to establish a PAGA unit and hire new employee would reduce unnecessary litigation and lower the cost of doing business.  Although such investigations may still lead to claims and the payment of civil penalties, employers in California were encouraged by the belief that the LWDA would refuse to impose frivolous actions.  Nor would employers be required to pay for attorneys’ fees anytime civil penalties are due.  Unfortunately, Governor Brown’s original proposals were not enacted.  The amendments to PAGA that were enacted do not alleviate most employers concerns with PAGA.  The amendments focus on the procedure rather than substance.  The amendments became effective June 27, 2016.  The amendments provide five primary changes.J. Schoendienst 20

First, an aggrieved employee must pay a $75.00 filing fee when providing the notice of claim to the LWDA.  Previously, an aggrieved employee was only required to provide notice of his or her claims by certified mail to the LWDA and employer. Employers responding to the claim notices with cure notices must also pay the $75.00 filing fee.  The aggrieved employee or employer may obtain a fee waiver by submitting a Confidential Request to Waive Court Fees (Judicial Council Court Form FW-001) or similar form and submit it online with the notice or response.

Second, all notices, both notices of claims filed by the aggrieved employee and cure notices filed by the employer must be submitted to the LWDA online.  A copy of the employee’s notice or employer’s response must be sent by certified mail to the other party.

Third, the amendments extend the time limit for the LWDA to review the claim notice and notify the parties of its intent to investigate.  The LWDA now has 60 days to review the claim notice from the aggrieved employee, instead of the previous 30 days.  The amendments also allow the LWDA 65 days to notify the aggrieved employee and employer of its intent to investigate instead of the 33 days.  This means that if the LWDA does not provide notice of its intent to investigate within 65 days, the aggrieved employee may file his or her civil action.

Fourth, “any settlement of any civil action” filed under PAGA must be approved by the court.  Previously, the court was only required to approve “any penalties sought as part of the proposed settlement.”  Many courts in California interpreted the previous duty only to allow the court to approve of the amount of the penalties and gave them no authority to question any of the other aspects of the settlement agreement.  Now the statute clearly provides the court with the duty to approve the settlement in its entirety.  It is unclear whether this amendment will make obtaining settlement approval more difficult, but it certainly gives the court greater discretion in scrutinizing PAGA settlement agreements.

Fifth, the amendments require the aggrieved employee to provide a file-stamped copy of the complaint to the LWDA within ten (10) days of filing a PAGA action.  It also requires that a copy of a court judgment or any other order that provides for or denies civil penalties under PAGA be submitted to the LWDA within ten (10) days following entry of the judgment or order.

Overall the PAGA amendments will provide the LWDA with the information that it currently lacks – namely how much PAGA litigation is occurring and how much is being allocated for the settlement of these actions.  This will enable the LWDA and lawmakers to decide what, if any, substantive changes or increased funding would be beneficial to reduce unnecessary litigation under PAGA.  Time will tell whether PAGA will continue to be a substantial risk to California employers.  For now the amendments do not provide a solution for employers who hoped the amendments would result in less unnecessary litigation and lower costs of employing employees in California.