As we reach the midpoint of 2024, it’s essential for California employers to take note of a few key legal updates that could impact their businesses. From increased minimum wages to new workplace safety requirements, the first half of the year has introduced important legal updates that require attention. This mid-year review offers five reminders on what employers should keep in mind to stay compliant with the latest laws and regulations:

1. Private Attorneys General Act (PAGA) Reform

    California employers will be receiving immediate relief under the new Private Attorneys General Act (PAGA) reform law.  The California Legislature passed AB 228 and SB 92 on June 27, 2024, and Governor Newsom signed both bills into law on July 1, 2024.  Our analysis of the reform is set forth in our previous article here.  This article focuses on what steps California employers should be considering in light of the new reform law.  Because the new law applies to any PAGA cases file on or after June 19, 2024, employers should consider taking steps to limit the penalties that are available under PAGA (read our prior article here to learn more). 

    2. Naranjo v Spectrum Security Services, Inc. – California Supreme Court ruling in favor of employers

    The California Supreme Court’s decision in Naranjo v. Spectrum Security Services, Inc. represents a significant win for employers across the state, providing much-needed clarity on wage statement requirements and the categorization of premium pay for missed breaks. While this ruling alleviates some of the complexities surrounding California’s stringent labor laws, it also serves as a reminder that vigilance in wage and hour issues remains crucial.  The California Supreme Court ruled that if an employer reasonably and in good faith believed it was providing complete and accurate wage statements in compliance with section 226 of the Labor Code, then it has not knowingly and intentionally failed to comply with wage statement requirements.

    3. Fast food minimum wage increase July 1, 2024

    The minimum wage for California’s fast-food operators will increase to $20 per hour on April 1, 2024 under AB 1228.  The new law applies to national fast food chains, which are defined as “limited-service restaurants consisting of more than 60 establishments nationally that share a common brand, or that are characterized by standardized options for decor, marketing, packaging, products, and services, and which are primarily engaged in providing food and beverages for immediate consumption on or off premises where patrons generally order or select items and pay before consuming, with limited or no table service.

    4. Many local cities and counties across California increased their minimum wage requirements on July 1, 2024

    For example, here is a list of a few local cities and counties new minimum wage requirements effective July 1, 2024:

    • West Hollywood – $19.08
    • Los Angeles City – $17.28
    • Los Angeles County – $17.27
    • Malibu – $17.27
    • Pasadena – $17.50
    • San Francisco – $18.67
    • Santa Monica – $17.27

    See here for full list of the city and county minimum wages across California. 

    5. July 1, 2024 – Deadline for California employers to implement workplace violence prevention plan

    As of July 1, 2024, California employers are required to implement additional measures for workplace safety. This legislation compels most non-health care related businesses to review and develop certain workplace violence measures by mandating the creation, execution, and ongoing maintenance of a Workplace Violence Prevention Plan (WVPP).  For more information, read our prior article about the new requirement here. 

    I am attending VeeCon this week, which is taking place in Los Angeles from August 9 – 11.  VeeCon, the idea of Gary Vaynerchuk, is described as a conference that is a mix between Davos and South by Southwest. Today, a panel discussion titled “Is It Time For Another Look at Blockchain?”  The panel discussed how the blockchain can be used by brands to engage their community of customers through Web3 technologies.  The employment lawyer in me started thinking about whether it would be legal for employers to pay employees in cryptocurrency.  While the interest and attention on the blockchain, web3, and cryptocurrencies has waned over the last couple of years, I’m still bullish on the technology and believe it will be impacting employers in the next couple of year.s Here are five issues employers should understand about cryptocurrencies and the blockchain, and how it will likely impact the employment setting in the next few years:

    1. What is a cryptocurrency and the blockchain?

    Cryptocurrencies, such as Ethereum and Bitcoin, are virtual currencies that exits on the blockchain.  A blockchain is a type of database, but by using blockchain technology it is much more secure than a standard database and allows many different people to access and record transactions at the same time.  At the time of publishing this article, Bitcoin and Ethereum are the two largest cryptocurrencies (“crypto”) by market capitalization.  More information about cryptos can be read here.  A very detailed explanation about cryptos and how blockchains work can be read here.

    2. Can employers pay wages in forms other than U.S. currency, such as in Bitcoin or Ethereum?

    Paying employees in crypto could be used to attract talent or make payments to employees located around the world easier for a multinational company.  But would it be legal?  Under federal law, the Federal Labor Standards Act (“FLSA”) mandates “payments of the prescribed wages, including [minimum wage and] overtime compensation, in cash or negotiable instrument payable at par.” 29 CFR § 531.27(a).  Presumably, one could make the case that a payment to an employee in crypto would be a payment “at par” as long as the conversion rate was equal to the applicable minimum wage rate or other required salary amounts to meet the definition of an exempt employee.  Indeed, the Department of Labor has stated in the past that employers could combine the value of U.S. Dollars and foreign currency “in order to satisfy the minimum salary requirement for the application of the Fair Labor Standards Act (FLSA) executive, administrative, and professional exemption.”  If crypto is accepted as a valid currency, it seems reasonable that crypto should be treated similarly to foreign currencies in this regard.

    Under California law, Labor Code section 200(a) defines wages as “all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation.” There is no specification that wages must only be paid in U.S. Dollars.  California courts have also held that wages are “not only the periodic monetary earnings of the employee but also the other benefits to which he is entitled as a part of his compensation.” Wise v. Southern Pacific Co. (1970).  Wages can include money, room, board, clothing, vacation pay (a form of deferred compensation) and sick pay.

    California Labor Code section 212 also prohibits employers from paying employees in “script, coupon, cards, or other thing redeemable, in merchandise or purporting to be payable or redeemable otherwise than in money.”  This section was designed to make it illegal for employers to pay employees with a coupon that was only redeemable at the “company store”, a past practice documented in the song “Sixteen Tons” written by Merle Travis.

    A California court explained, “The accepted purpose of Labor Code section 212 is to prevent employers from paying wages by giving orders … payable only in goods, or orders of an indefinite nature not payable on demand, but at some future time, or paychecks which cannot be honored because of the drawee’s insufficient funds.”  Brown v. Superior Court (2011).  However, since cryptocurrency is a form of “money,” and Labor Code section 212 does not specifically require U.S. currency, there is an argument that section 212 does not prohibit payment of wages in cryptocurrency.  As set forth above, “wages” under California Labor Code section 200 can take many forms, not just fiat currency.

    Until there is further guidance on this issue under the FLSA and California law, employers who are looking to pay employees in crypto could take a hybrid approach.  The employer could avoid many of these foundational issues by paying the employee minimum wage or the required salary needed to meet an exemption in U.S. Dollars, and then offer the employee additional payment in crypto.  While employers considering this type of hybrid approach would still need to be careful not to run afoul various federal, state, and local regulations, the approach would remove some of the more fundamental issues that the legal system will need time to develop regulations to catch up to the technology.

    3. California’s additional restrictions on forms of wages.

    Employers considering paying employees in crypto would also need to navigate other areas of the California Labor Code.  For example, Labor Code section 212 California requires that wages must be payable without discount.  Therefore, any transaction fees that an employee must pay to redeem or access the cryptocurrency would violate this provision.  Moreover, Labor Code section 212 requires payments by “order, check, draft, note, memorandum, or other acknowledgement of indebtedness” to show the name and address of an establishment within California where the instrument can be redeemed.  Since crypto is virtual, it is an open question regarding how this requirement would apply to payments made to employees.  It also raises the potential argument that since crypto currency is not “negotiable and payable in cash, on demand…at some established place of business in the state,” it is not a valid form of “money” to make payments to employees.  On the other hand, it could be argued that crypto is redeemable anywhere in California with an internet connection, and an employee can “cash” their crypto into their bank account almost instantaneously.

    4. Value fluctuation issues.

    With the volatility of cryptocurrency, there could also be potential issues regarding the value of the cryptocurrency in terms of when it is paid to employees.  Given the volatility of crypto, there could be wide valuation fluctuations even from the end of the payroll period to the time that the employee receives the payment.  There would also be potential calculation issues regarding the appropriate conversion rate employers would need to make if an employee was owed past unpaid wages, or premium wages for missed meal or rest breaks.  What if the crypto currency increased in value over 500% since the time it is determined that an employee was owed a premium wage for a missed meal break?  Could the employer pay the employee the value of the crypto at the time the missed meal break occurred, or would the employer need to pay the current increased value of the crypto?

    5. Future potential of the blockchain in the employment setting.

    Beyond cryptocurrency, the blockchain technology will likely become a part of everyday life and will have many applications in the employment context.  Since a blockchain is like a database that can store private information, the blockchain could be used by employees to prove educational history, work history, and the attainment of certain certifications.  In 2017, Massachusetts Institute of Technology has issued students virtual diplomas recorded on the blockchain, that the students can securely share with whomever they choose.  Likewise, employers could utilize the technology to issue titles, internal certifications, and record dates of employment to create a digital record that employees could chose to share the information with when searching for another job or verifying salary for a loan.

    Parties involved in litigation should always keep an open mind about mediation at every stage of litigation.  Cases that resolve without having to go through a trial or arbitration can potentially save the parties a lot of time and money in litigation.  This article touches on five items employers involved in litigation need to understand about mediation.

    1. Mediation is non-binding.
    Mediation is a voluntary process in which litigants (or even parties prior to litigation) agree to use a private third-party to help settle the case. People sometimes confuse mediation with arbitration. Arbitration is when parties agree to use a private third-party to hear their case, much like a judge, to make decisions about the case, and eventually decide the case. Arbitration can be binding on the parties, and the arbitrator actually decides who is right and wrong as a matter of law. Alternatively, in a mediation the mediator is not deciding any issues about the case, but is simply hearing both sides’ positions, and then works with the parties to see if there is a potential resolution that both parties would agree to. The mediator has no ability to decide issues of the case, or make any binding rulings about the case. The mediator is only an unbiased third-party attempting to get the parties to consider a possible resolution to the case.

    2. Mediation takes place with a private mediator, usually not the court.
    The parties voluntarily agree upon the selection of a mediator. Usually the mediator has expertise in the area of the law that the case involves so that he or she can move quicker into the substance of the parties’ disagreement. There are many retired judges or lawyers that work as mediators. Some mediators are active practicing lawyers that also work as a mediator.
    The mediation usually takes place at the mediator’s office, but since COVID, the trend is to conducted meditations remotely with software like Zoom. When the mediation is in person, the mediator has the parties in separate rooms, and the mediator walks between the two rooms. When conducted remotely, the mediator will usually have each party in a separate Zoom meeting room. Often times the parties will not see other side during the mediation.

    3. Negotiations during the mediation are privileged and cannot be used against either party during litigation.
    California law prevents any of the negotiations or potential admissions made during mediation from being brought up in court or during litigation. The rationale for this rule is that the courts want people to be able to negotiate during mediation, this involves some give and take. Therefore, in order to assist the mediation process, any of the discussions or negotiations during mediation are prevented from being used against the other party. This allows parties to discuss items more freely during mediation in hopes of having a better chance at resolving the case. However, it should be noted that if a party makes an admission during mediation, the other party can still conduct discovery after the mediation and bring that admission into the case through the standard discovery process. So parties should follow their counsel’s advice about which facts to share during the mediation process. But rest assured, the fact that one party agreed to offer a certain amount to settle the case during mediation cannot be brought up to the jury later in the case as a way to establish liability.

    4. The mediator’s only role is to get the case settled.
    The mediator is not there to make friends, tell you if she believes you more than the other side, or make a value judgment about the case or people involved. His or her role is simply to get the case resolved. This usually means that a successful mediator is able to have each party questioning the strength of their case. A successful mediation usually means that both sides are unhappy with the resolution.

    5. Even if the case does not settle at mediation, it could still be a successful mediation.
    The parties need to understand that mediation is a process and it is hard to settle cases in one day – even a long day – of mediation. Sometimes it is clear during the mediation that the parties cannot settle the case. Sometimes it takes the mediator working with the parities for weeks after the mediation to arrive at a settlement. If the case does not settle, it is also beneficial for the parties to realize that maybe they are still too far apart to agree to a settlement and there needs to be further discovery and/or motions filed to narrow down the issues that are being litigated.

    Ensuring timely payment of wages is a crucial responsibility for California employers. Following our recent discussion on final pay for employees, several readers raised further questions about wage payment schedules and the handling of tips. In response, this Friday’s Five highlights key reminders about employers’ obligations to timely pay wages and tips under California law:

    1. Employers must establish pay periods.

      California employers must establish a regular payday and are required to post a notice that shows the day, time, and location of payment. This is usually set forth in the employee handbook as well.

      2. Normal payroll deadlines.

        California law generally requires that employers pay employees at least twice during each calendar month. Paydays must be designated by the employer and posted at the worksite, as required under Labor Code 207. Labor Code section 204 requires the following:

        • Wages earned between the 1st and 15th of the month must be paid no later than the 26th day of the month in which the work was done.
        • Wages earned between the 16th and the last day of the month must be paid by the 10th of the following month.

        If the employer pays on a different basis, such as weekly, bi-weekly, or twice a month, when the pay period is something other than the 1st to the 15th and the 16th to the end of the month, then the employee must be paid within seven calendar days of the end of the payroll period. See Labor Code section 204(b).

        3. Pay due upon termination or resignation.

          An employee who is terminated must be paid all wages and accrued vacation at the time of termination (Labor Code section 201). An employee who quits without giving more than 72 hours of notice must be paid all wages and accrued vacation within 72 hours of quitting (Labor Code section 202). An employee who quits but gives 72 hours of notice before quitting must be paid at the time of quitting. For more information, see our prior article here.

          4. Penalty for late payment of final wages.

            The penalty for non-compliance with Labor Code sections 201 and 202 is that the employee is entitled to the amount of wages he or she would have continued to earn at their normal rate for each day that the employer does not pay the wages. These penalties accrue up to 30 days’ worth of wages (Labor Code section 203).

            5. Payment of tips.

              Generally, employees are entitled to their cash tips when left for the employee. There may be some time required for employers to calculate how much employees are entitled to under a tip pool. However, California Labor Code section 351 requires that payment of gratuities made by patrons using credit cards shall be made to the employees no later than the next regular payday following the date the patron authorized the credit card payment.

              Five reminders about the timing requirements for providing final wages to employees:

              1. An employee who is discharged must be paid all of his or her wages, including accrued vacation, immediately at the time of termination.
              2. An employee who gives at least 72 hours prior notice of quitting, and quits on the day given in the notice, must be paid all earned wages, including accrued vacation, at the time of quitting.
              3. An employee who quits without giving 72 hours prior notice must be paid all wages, including accrued vacation, within 72 hours of quitting.
              4. An employee who quits without giving 72-hours’ notice can request their final wage payment be mailed to them. The date of mailing is considered the date of payment for purposes of the requirement to provide payment within 72 hours of the notice of quitting.
              5. Final wage payments for employees who are terminated (or laid off) must be made at the place of termination. For employees who quit without giving 72 hours’ notice and do not request their final wages be mailed to them, the final wages must be made available at the office of the employer within the county in which the work was performed.

              For any employer who willfully fails to pay any wages due a terminated employee can subject the employer to “waiting time penalties” under Labor Code section 203. Waiting time penalties accrue at an amount equal to the employee’s daily rate of pay for each day the wages are not paid, up to a maximum of 30 calendar days.  The court in Mamika v. Barca (December 1998) set forth that waiting time penalties continue to accrue on a daily basis:

              Under this scheme, unpaid wages continue to accrue on a daily basis for up to a 30–day period. Penalties accrue not only on the days that the employee might have worked, but also on nonworkdays. (Cf. Iverson v. Superior Court (1985) 167 Cal.App.3d 544, 548, 213 Cal.Rptr. 399 [unless otherwise specified, “days” mean “calendar days”].)

              The California Supreme Court ruled in Pineda v. Bank of America (November 2018) that the statute of limitations for recovering waiting time penalties under Labor Code section 203 is three years.  California employers need to review the obligations to timely pay employees their final wages to reduce this potential liability in the form of waiting time penalties, which can add up to a significant amount, even for minimum wage earners.

              California employers will be receiving immediate relief under the new Private Attorneys General Act (PAGA) reform law.  The California Legislature passed AB 2288 and SB 92 on June 27, 2024, and Governor Newsom signed both bills into law on July 1, 2024.  Our analysis of the reform is set forth in our previous article here.  This article focuses on what steps California employers should be considering in light of the new reform law.  Because the new law applies to any PAGA cases file on or after June 19, 2024, employers should consider the following action items as soon as possible:

              1. Conduct periodic payroll audits

              Employers who can show that they took reasonable steps to comply with the Labor Code, PAGA penalties can be reduced by as much as 85%.  The reformed PAGA framework caps the penalties for employers who take reasonable steps to comply with the Labor Code.  If prior to receiving a PAGA notice required under Section 2699.3 or prior to receiving a request for records under Section 226, 432, or 1198.5 from the aggrieved employee or their counsel, the employer takes reasonable steps to be in compliance, the penalty is limited to no more than 15% of the applicable penalty. To establish reasonable steps were taken to comply with wage and hour laws, California employers will need to conduct periodic wage and hour audits to ensure compliance with at least the following:

              • meal and rest break obligations
              • prohibiting off the clock work was being performed
              • correct recording and payment of overtime for all work over 8 hours in a day and 40 hours in a week
              • reimbursement for all work-related expenses to employees
              • all pay stubs provided to employees comply with the required information under Labor Code section 226

              Quarterly audits by an experienced employment law counsel would be a good practice in order to be able to show good faith compliance with the Labor Code. 

              2. Establish compliant policies and handbook policies

              Employers will need to ensure that their wage and hour policies and employee handbooks are current, and continually update them to ensure they follow California law.

              3. Train supervisors on Labor Code compliance

              Training supervisors about the requirements under the Labor Code regarding time keeping, policies prohibiting working off the clock, meal and rest break obligations, among other items will also be evidence of reasonable steps to comply with wage and hour requirements.  The training should be documented, and the employer should record the topics covered, who attended, and date of the training.

              4. Take appropriate corrective actions with supervisors who violate company policy

              In addition to training supervisors on company policies and the Labor Code obligations, employers need to monitor and take corrective action with any supervisors who violate company policy or who violate the Labor Code.  Again, documenting the action taking against supervisors or managers who violate company policy will be evidence of this obligation. 

              5. Implement arbitration agreements with class action waivers

              While the California Supreme Court has ruled that employees cannot waive their right to bring a PAGA representative action through arbitration agreements, arbitration agreements that bar employees from bringing a class action lawsuit are enforceable.  The U.S. Supreme Court has determined that employers can require employees to waive their right to bring class action lawsuits, which remains a significant advantage for employers. Implementing an arbitration agreement with a class action waiver offers substantial benefits for most employers, even though employees can still pursue a PAGA representative action.  Especially given the new reform to PAGA, employers should carefully consider implementing arbitration agreements with class action waivers. 

              Employers need to work with employment counsel in developing enforceable arbitration agreements, consider translating the agreements into common languages spoken at their workplace, and ensure the agreements are stored in a secure and easy to access file system or stored electronically. 

              Expense reimbursement may seem like a small issue in comparison with the other areas of liability facing California employers, but the exposure for not appropriately reimbursing employees can be substantial. In Gattuso v. Harte-Hanks Shoppers, Inc., the California Supreme Court clarified the parameters of mileage reimbursement under California law, as well as the three different methods available for employers to reimburse employees for their mileage reimbursement.  This Friday’s Five post discusses five issues employers need to know about automobile and mileage reimbursement under California law.

              1. Mileage reimbursement based on IRS mileage rate is presumed to reimburse employee for all actual expenses

              The IRS publishes standard mileage rates each year (and sometimes adjusts these rates during the year). The 2024 IRS mileage rate is as follows:

              • 67 cents per mile driven for business use, up 1.5 cents from 2023.
              • 21 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, a decrease of 1 cent from 2023.
              • 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2023.

              2. Mileage reimbursement rates do not necessarily have to be set at the IRS rate, but use caution

              The California Supreme Court held that the reimbursement rate can be negotiated by parties as long as it fully reimburses the employee, and the amount does not have to be set at the IRS mileage rate. The Court also warned that employee cannot waive the right to be fully reimbursed for their actual expenses:

              We agree that, as with other terms and conditions of employment, a mileage rate for automobile expense reimbursement may be a subject of negotiation and agreement between employer and employee. Under section 2804, however, any agreement made by the employee is null and void insofar as it waives the employee’s rights to full expense reimbursement under [Labor Code] section 2802.

              Gattuso, at 479.

              3. Employees who challenge a mileage reimbursement amount set by the employer bear the burden in establishing their actual costs

              If the employee challenges a predetermined amount set by the employer and agreed to by the employee, but then challenges the amount set later on, the employee bears the burden to show how the “amount that the employer has paid is less than the actual expenses that the employee has necessarily incurred for work-required automobile use (as calculated using the actual expense method), the employer must make up the difference.” Gattuso, at 479.

              4. There are different methods employers can use to reimburse mileage

              The Count in Gattuso explained that there are three different methods employers may use to reimburse employees mileage:

              Actual expense method

              In examining the different methods of reimbursement, the Supreme Court held that the actual expense method is the most accurate, but it is also the most burdensome for both the employer and the employee. Gattuso, at 478. Under the actual expense method, the parties calculate the automobile expenses that the employee actually and necessarily incurred and then the employer separately pays the employee that amount. The actual expenses of using an employee’s personal automobile for business purposes include: fuel, maintenance, repairs, insurance, registration, and depreciation.

              Mileage reimbursement method

              The Court recognized that employers may simplify calculating the amount owed to an employee by paying an amount based on a “total mileage driven.” Gattuso, at 479.

              Under the mileage reimbursement method, the employee only needs to keep a record of the number of miles driven for job duties. The employer then multiplies the miles driven by a predetermined amount that approximates the per-mile cost of owning and operating an automobile. The Court recognized that the mileage rate agreed to between the employer and employee is “merely an approximation of actual expenses” and is less accurate than the actual expense method. It is important to note that while this amount can be negotiated, the employee still is unable to waive their right to reimbursement of their actual costs as mentioned above.

              Lump sum payment method

              Under the lump sum method, the employee need not submit any information to the employer about work-required miles driven or automobile expenses incurred. The employer merely pays an agreed fixed amount for automobile expense reimbursement. Gattuso, at 480. This type of lump sum payment is often labeled as a per diem, car allowance, or gas stipend.

              In Gattuso, the Court made it clear that employers paying a lump sum amount have the extra burden of separately identifying and documenting the amounts that represent payment for labor performed and the amounts that represent reimbursement for business expenses.

              5. Don’t forget about other expenses incurred in the “course and scope” of working

              In addition to mileage, employers may also have to reimburse employees for other costs they incurred in driving their personal cars for business under Labor Code section 2802. In making the determination about whether an employee’s actions are in the “course and scope” of their job, courts examine whether the expense being sought by the employee is “not so unusual or startling that it would seem unfair to include loss or expense among other costs of the employer’s business.” Employers need to be mindful about reimbursing employees for cell phone use, printing and office supplies (if employee is required to maintain a home office or use personal printer for work), and other work-related expenses.

              I have published this post since 2015 recognizing the Fourth of July (one of my favorite holidays).  Hopefully I’ll be able to keep publishing it for many years to come.  Wishing you a great Fourth, and hope you have some time to put aside your work for a bit and enjoy some time with your family.  Happy Fourth of July!

              Five things I’m thankful for this Fourth of July:

              1.     For the great risk and sacrifice our Founding Fathers took to establish the country. 

              When learning about the Founding Fathers in high school history class I did not have a perspective about the risks the Founders took in establishing the country.  Only now that I have a business, a family, and am relatively successful, can I realize the huge risks the Founders took.  By all means, they were the establishment, the elite of the American society, and if anyone had an interest in preserving the status quo, it was them.  Their sacrifices of life (theirs and their family members) and their fortunes helped build the foundation we benefit from today.

              2.     The ability to speak freely and practice (or not practice) any religion I want.

              It is great being able to freely speak your mind and believe in whatever you want.  It is also great be free to practice (or not) any religion you want.  We live in a very tolerant society, and it is even better when the government is not telling you how to live your life.  It is important to remember that throughout history, this is the exception for how a government normally behaves.

              3.     Our Country’s ability to attract creative people.

              Creative and productive people want to practice their trade where the government will basically leave them alone and provide a good environment to protect their gains derived from their hard effort (see item #5 below).  The U.S. provides this environment, and that is why so many people come to the U.S. to create a business or to practice their trade.  It is also important to recognize how lucky we are to be in the U.S.

              4.     My right to practice any profession and access unlimited resources to learn required skills.

              No one is dictating what students need to be after they graduate high school or college.  Everyone is free to pursue their interest, and the market decides the value of the effort.  With basically any information freely available on the Internet, anyone can learn almost any skill, and like no other time in human history individuals have an almost free method to sell their services or products over the Internet.  In your mid-40’s and want to make a career change?  Perfect, and you don’t even need to go back to school as the information is freely available on the Internet.  Didn’t finish college and are 20 years old with an idea?  Perfect.  Venture capitalists don’t care about your pedigree, they are only interested if you work hard and don’t give up.

              5.     Our legal system.

              Yes, it sounds trite.  But while I don’t think our legal system is perfect by any means, it is the best system established in the history of mankind.  Everyone living in the U.S. presently is very lucky to have this benefit.  It is a foundation for many of the items I mentioned above.  Because people have a good basis for predicting the outcomes of their actions, such as being able to retain property legally obtained, and knowing if someone breaches a contract there will be repercussions, it creates an environment that attracts hard effort and the best talent from around the world.  This is why the U.S. has been the leader in ideas and new businesses.  However, just because the system is established does not mean our work is done.  We have to be vigilant not to lose the fairness, reasonableness, and lack of corruption in the legal system.

              Happy Fourth of July!

              [Update: The California Legislature passed AB 228 and SB 92 on June 27, 2024, and Governor Newsom signed both bills into law on July 1, 2024.]

              The potential new law reforming the Private Attorneys General Act (PAGA) is set to bring significant changes to California’s labor landscape. If enacted, AB 2288 and SB 92 will apply to civil actions brought on or after June 19, 2024, introducing stringent standing requirements for plaintiffs and reducing penalties for employers demonstrating compliance with the Labor Code. This reform aims to curb frivolous lawsuits and provide more reasonable penalty structures. Key provisions include specific penalty amounts based on the nature of violations, caps on penalties for employers who take proactive compliance measures, and options for early resolution of claims. The proposed bill also emphasizes judicial discretion in managing cases and offers relief for employers who pay on a weekly basis. As the legislative process unfolds, Zaller Law Group will keep you informed on the bill’s progress and its implications for both employers and employees.

              The new law modifying PAGA would apply to civil actions brought on or after June 19, 2024. 

              If passed by the legislature and signed into law by the Governor, the new law would only apply to PAGA cases filed on or after June 19, 2024. 

              New stringent standing requirement.

              Under the proposed bill to reform PAGA, in order to bring a lawsuit against an employer under PAGA, the plaintiff is required to have “personally suffered each of the violations alleged” within the applicable statute of limitations, which is one year.  This is a major limitation, as plaintiffs were permitted to bring PAGA cases on behalf of all employees for violations that the plaintiff did not suffer for violations dating back further than one year. 

              Reduction of PAGA penalties.

              The proposed bill also sets forth specific penalties available to plaintiffs, and reduces penalties for employers who show that they have taken reasonable steps to comply with the Labor Code (thereby reducing frivolous lawsuits for technical wage and hour violations):

              • $25 for each aggrieved employee per pay period for violation of Labor Code Section 226 (wage statements).  If the alleged violation is under paragraph 8 of Section 226 regarding the name and address of the employer, the penalty is $25 only “if the employee would not be confused or mislead about the correct identify of their employer…”
              • $50 for each aggrieved employee per pay period if the alleged violation resulted from an “isolated, nonrecurring event that did not extend beyond the lesser of 30 consecutive days or four consecutive pay periods.” 
              • $200 for each aggrieved employee per pay period if (1) the agency or court issued a finding or determination to the employer that its policy or practice was unlawful or (2) the court finds that the employer’s conduct was “malicious, fraudulent, or oppressive.” 

              Cap on penalties for employers taking reasonable steps:

              The proposed bill also sets forth a framework to cap the penalties for employers who take reasonable steps to comply with the Labor Code.  If prior to receiving a PAGA notice required under Section 2699.3 or prior to receiving a request for records under Section 226, 432, or 1198.5 from the aggrieved employee or their counsel, the employer takes reasonable steps to be in compliance, the penalty is limited to no more than 15% of the applicable penalty.

              Reasonable steps include conducting period payroll audits and taking action in response to those audits, having compliant policies, training supervisors on Labor Code compliance and appropriate corrective action with regard to supervisors. 

              If within 60 days of receiving the notice of violation required by Section 2699.3, the employer takes all reasonable steps to prospectively be in compliance with all alleged violations in the notice, the civil penalty that may be recovered is capped at no more than 30% of the applicable penalty. 

              The proposed bill also clarifies that courts have the discretion to reduce penalties. 

              Prohibit stacking of derivative penalties:

              The proposed bill also provides that an aggrieved employee can only recover one penalty for an underlying wage violation.  For example, an employee alleging that they were not paid all of their wages would be limited to one penalty, and would not be entitled to stack on additional penalties that this one violation would have created under Labor Code Section 201 (timing of payment of wages), 202 (waiting time penalties for late payment of wages), 203 (waiting time penalties for unpaid wages for employees who are terminated or quit), 204 (timing requirements for payment of wages), and 226 (wage statements).

              The proposed bill also sets forth that the civil penalties recovered by aggrieved employees shall be distributed as follows: 65% to the Labor and Workforce Development Agency and 35% to the aggrieved employees. 

              Provides for judicial discretion for trial management.

              The proposed bill also provides powers to courts to limit both the scope of claims and the evidence presented at trial. This provision gives judges the discretion to manage cases more effectively.

              Provides relief for employers who pay weekly.

              The proposed bill also reduces penalties by one-half for employers who pay weekly, rather than biweekly or semimonthly.  Because PAGA penalties are based on pay periods, employers who pay weekly effectively exposed to double the applicable penalties that could be assessed against them, i.e., weekly (52 pay periods) vs. semi-monthly (24 pay periods) or bi-weekly (26 pay periods).  If passed, the bill will rectify this issue for employers who pay weekly. 

              New options for small and large employers to cure alleged violations early in the litigation process.

              The proposed bill establishes a new Early Evaluation Conference that would be available to employers starting October 1, 2024, to resolve PAGA claims early in the litigation process:

              Employers with under 100 employees:

              For small employers, defined as those with fewer than 100 employees during the applicable period, there is an option to address alleged violations by notifying the Labor and Workforce Development Agency (LWDA) with a confidential proposal to cure the alleged violations. Upon notification, the LWDA may decide that the actions to cure were sufficient, or it can organize a settlement conference involving the plaintiff and the employer. The conference with the parties would determine whether the proposed cure is sufficient, what additional information may be necessary to evaluate the sufficiency of the cure, and the deadline agreed upon by the parties for the employer to complete the cure.  If the LWDA determines that the alleged violation has been cured, the aggrieved employee may not proceed with a civil action.

              Employers with 100 or more employees:

              Large employers, those with more than 100 employees, have a different process. They may request a stay and Early Evaluation Conference from the trial court. This request pauses all discovery and responsive pleading deadlines. A neutral evaluator would then review the employer’s plan for addressing the violations, supervise compliance with this plan, and assess the employer’s efforts to mitigate potential penalties. Additionally, employers can file a motion for the court to approve their cure plan, even if the plaintiffs or the neutral evaluator believe the efforts have been insufficient.

              Zaller Law Group will continue to monitor and provide updates as the proposed bill makes its way through the Legislature this week, as it must be finalized by June 27, 2024. 

              On June 18, 2024, Governor Newsom announced a compromise to reform California’s Private Attorneys General Act (PAGA). This announcement follows intense negotiations prompted by a looming ballot measure to repeal PAGA this November. With PAGA cases skyrocketing and average settlements reaching $1.1 million, this reform package introduces crucial changes for California employers. Attorneys Anne McWilliams and Yaron Tilles join me to discuss how this will be impacting employers across the state:

              The reform will likely address the following items (as discussed in the video above):

              1. Employee share of the PAGA penalty
              2. The standing requirements for employees to bring PAGA cases
              3. Caps on the amounts of penalties that employees can recover under PAGA cases
              4. Employers right to cure defects to reduce or eliminate potential penalties
              5. Providing trial courts with discretion to manage PAGA claims during trial

              As of Friday, June 21, 2024, the text of the bill to reform PAGA has not been released yet. It is expected to be published as early as late on June 21 or over the weekend. Stay tuned for our analysis of the text of the bill once that becomes available.