California passed a new law in October 2015 that provides employers some potential protection against penalties imposed by the Private Attorney General Act of 2004 (PAGA). Employers need to understand the intricacies of PAGA, and the importance of seeking legal counsel immediately upon receiving a copy of the letter a plaintiff must send to the Labor and Workforce Development Agency (LWDA). Today’s Friday’s Five provides five highlights to assist in this understanding, and what potential relief employers are provided under the amendment of the law:
1. PAGA authorizes individuals to collect penalties only previously obtainable by the state’s LWDA.
PAGA (sometimes referred to as the bounty hunter law) was designed by the California Legislature offer financial incentives to private individuals to enforce state labor laws. As the Court noted in its opinion, at the time the legislation passed, the state’s labor law enforcement agencies did not have enough resources or staffing necessary to keep up with the rapid growth of California’s workforce. Therefore, PAGA allows aggrieved employees to act like a private attorney general in collecting civil penalties for Labor Code violations. The employee must give 75% of the collected penalties to the Labor and Workforce Development Agency, and the remaining 25% is to be distributed among the employees affected by the violations.
2. PAGA claims are representative suits, which are very different than class actions.
First, because the plaintiff under PAGA is seeking penalties set out in the statute, a one year statute of limitations applies. This varies drastically from the four year statute of limitations that apply to most wage and hour class actions when a Business and Professions Code section 17200 cause of action is alleged.
Second, the California Supreme Court in Arias v. Superior Court held that a plaintiff does not have to have the class certified as a class action in order to recover damages on behalf of all of the other employees plaintiff seeks to represent.
3. PAGA claims cannot be waived by employees.
The California Supreme Court also clarified that employees may not waive their right to bring a representative action under PAGA (even though the Court held that class action waivers in arbitration agreements are enforceable). The Court held in Iskanian v. CLS Transportation that, “we conclude that an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy.”
4. Before bringing suit, a plaintiff must notify the state of their intention to file suit to recover PAGA penalties.
Employees seeking recovery under PAGA must comply with requirements that place the Labor and Workforce Development Agency and the employer on notice that the employee will be seeking remedies under the Act and give the Agency a chance to investigate itself. If the Agency does not investigate, then the plaintiff can proceed with the claim. As discussed below, this is important because in October 2015, employers now have the ability to cure problems set forth in the plaintiff’s letter to the LWDA, which could bar the plaintiff from obtaining any penalties.
5. In October 2015, legislation was passed to provide employers an additional right to cure defects in pay stubs, and potentially bar plaintiffs from recovering any penalties.
AB 1506 amended PAGA to allow employers the ability to cure certain violations in order to avoid penalties. The law went into effect as of October 2, 2015. The amendments provide that employers can fix paystubs that do not list the inclusive dates of the period for which the employee is paid (required under Labor Code section 226(a)(6)) and the name and address of the legal entity that is the employer (required under Labor Code section 226(a)(8)). In order to cure the defects, within 33 calendar days of the postmark of the notice to the LWDA by the plaintiff, the employer must give written notice by certified mail to the aggrieved employee or their representative, and the LWDA that the violation has been cured, describe the actions taken, and set out that no civil action pursuant to Section 2699 may commence. The employer must also provide a fully compliant itemized wage statement to each aggrieved employee for each pay period for the three-year period prior to the date of the written notice by the plaintiff. It is vital that employers who receive a PAGA notice seek counsel immediately to potentially cure any defects pursuant to this new legislation, and potentially avoid large PAGA penalties.