California’s 2024 reform to the Private Attorneys General Act (PAGA) was intended to ease the burden on employers—but only for those who can demonstrate a real, documented effort to comply with wage and hour laws.

Under the revised law, employers now face reduced penalties if they take proactive steps to comply:

  • 15% of the applicable penalties if the employer took reasonable steps to comply before receiving a PAGA notice or a request for employment records
  • 30% of the applicable penalties if the employer took reasonable steps to comply within 60 days after receiving a PAGA notice

In both cases, the key phrase is “reasonable steps to comply”—and that’s where a PAGA audit comes in.

A thorough internal review, supported by legal counsel if needed, helps employers identify and correct compliance issues before they result in a claim. And if a claim does arise, an audit report and supporting documentation may help reduce penalties and demonstrate good faith.

Our law firm’s PAGA Compliance Audit and Certification Program focuses on many aspects of compliance, and here are five key areas most California employer should evaluate as part of their compliance strategy:

1. Payroll and Timekeeping Practices

PAGA claims frequently target wage-related issues, especially rounding practices, inaccurate time records, or missed overtime. Employers should evaluate:

  • Whether time rounding practices comply with recent court decisions
  • Accuracy of timekeeping systems, especially for remote or mobile workers
  • Proper payment of all hours worked, including split shifts and reporting time pay

A payroll audit can reveal small technical issues that, when repeated across a workforce, lead to significant penalties.

2. Meal and Rest Break Compliance

Missed, short, or late breaks remain one of the most common sources of PAGA exposure. Employers must ensure:

  • Breaks are provided within the legally required windows
  • Premium pay is issued when breaks are not compliant
  • Policies match actual practice, and managers are properly trained

Even minor inconsistencies in this area can add up quickly in class and representative actions.

3. Wage Statement Accuracy

Labor Code section 226 violations are especially dangerous under PAGA because even small formatting or data errors can result in significant penalties. A compliance check should include:

  • Verifying that wage statements list all required items under Labor Code section 226
  • Ensuring that deductions and net pay are clearly and correctly listed
  • Confirming statements are issued in a timely and accessible format

A detailed review can help avoid “gotcha” claims over technical defects.

4. Employee Handbooks, Policies, and Manager Training

Written policies set the tone for compliance—but only if they’re current and enforceable. Employers should audit:

  • Whether policies reflect updated laws, including those from the 2024 legislative session
  • Consistency between the handbook and actual day-to-day operations
  • Manager training about the policies and procedures, and how to implement these in operations legally

Legal review of policies can also strengthen defenses if a claim arises.

5. Termination and Final Pay Procedures

Final pay violations—whether due to late checks, unpaid vacation, or other unpaid wages—can trigger penalties under multiple Labor Code sections. Employers should assess:

  • Timing and accuracy of final pay for both voluntary and involuntary separations
  • Documentation of final wages, including bonuses and unused PTO
  • Whether the process is clearly outlined and followed consistently across locations

An audit of exit procedures can prevent common errors that spark litigation.

Moving Toward Certification

Employers who take the extra step to correct issues identified during a PAGA audit can demonstrate a strong, documented commitment to compliance. Programs like the Zaller Law Group’s PAGA Compliance Audit and Certification not only help identify risks but also provide a certificate of compliance that may serve as a powerful tool in resolving or defending against PAGA claims.

While certification does not immunize a business from lawsuits, it can:

  • Show reasonable steps in court or settlement discussions and cap penalties
  • Support negotiations with plaintiffs’ attorneys
  • Prevent litigation before it arises

Final Thought

With PAGA reform shifting some control back to employers, now is the time to take advantage of the opportunity. Conducting a thorough PAGA audit isn’t just about checking boxes—it’s about building a culture of compliance and reducing risk across the board.

Employers of any size are vulnerable to PAGA claims, but the potential liability really starts to add up for employers with 20 or more non-exempt employees—especially in hospitality, retail, healthcare, and logistics—should consider a proactive review.