What Is Involved in a PAGA Lawsuit?

PAGA lawsuits allow employees to file claims for labor code violations on behalf of themselves and others in California. Employers can face significant penalties, prompting many to settle to avoid costly judgments.

By Douglas Wade, Attorney

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Table of Contents

1. What does PAGA do?

2. What Does It Mean to Be an “Aggrieved Employee”?

3. Under PAGA, what kinds of claims are possible?

4. Notice requirements for employees

5. Has the employee tried all available administrative options?

6. Time Restrictions

7. Two Basic Responses to Violations

8. Staying Ahead of Potential PAGA Disputes

What does PAGA do?

Employers have received more than 35,000 PAGA notices in the past 15 years. PAGA allows aggrieved workers to file claims under the Private Attorneys General Act (PAGA) on behalf of themselves, other workers, and the State of California.

The fines for PAGA can be quite high. Many small and medium-sized businesses choose to settle out of court to avoid the possibility of a significant judgment. Two years ago, Walmart received a $102 million judgment in federal court after defending against a PAGA claim about wage statements that did not include overtime calculations.

Disgruntled former employees frequently seek legal counsel in order to initiate PAGA claims. The attorney may request a copy of the employee’s pay stubs, which could reveal an error in the employer’s name or address. Because the mistake violates the state’s labor code, the lawyer can file a PAGA claim. The attorney can pursue relief on behalf of all employees, not only the one who first contacted them, regardless of whether they choose to engage in PAGA proceedings or not. In order to force the corporation into a settlement, the attorney may try to drive up the litigation costs during discovery.

A quarter of any PAGA settlement or judgment goes to the wronged workers, while three quarters go to the Labor and Workforce Development Agency (LWDA). The lawyers for the wronged workers usually ask for a third of the money.

Accordingly, a three hundred thousand dollar PAGA settlement will usually yield a hundred thousand dollars for the lawyers, one hundred fifty thousand dollars for the LWDA, and only fifty thousand dollars for the employees. In this case, the legal team representing the wronged workers gets twice the amount their clients do. In California, some businesses have advocated for the elimination or reduction of PAGA.

What Does It Mean to Be an “Aggrieved Employee”?

Employers can only be sued under PAGA by aggrieved employees. An aggrieved employee is defined as any individual who was working for the alleged violator and experienced one of the alleged violations.

It is not uncommon for employees to file separate wage and hour claims alongside PAGA claims. In the past, some employers would settle each claim in the hopes that the employee would no longer have the legal right to pursue PAGA claims. The California Supreme Court ruled in Kim v. Reins International California, Inc. that an employee can still bring PAGA claims for the same labor code violations that were released on an individual basis, even if the claims were settled in an individual settlement that did not include PAGA claims.

Since many settlement agreements fail to specifically exclude PAGA claims in the release, Kim v. Reins may have less of an effect. It is advisable for employers to think about incorporating a non-participation or non-filing promise in settlement agreements reached with former employees.

Under PAGA, what kinds of claims are possible?

Employees have the right to sue for civil penalties under PAGA in the event that their employer violates the California Labor Code. Statutory damages, which employees may seek individually, are separate from these penalties.

The three most common types of PAGA claims are:

To start, CA Labor Code Section 2699.5 lays out the specific sections of the code that employees can use to file PAGA claims. Violations of the labor code can take many forms, including but not limited to: retaliation or discrimination against employees, late or nonexistent wage payments upon termination, inadequate meal and rest breaks, an absence of itemized wage statements, and more. Section 2699.5 lists more than a hundred infractions of the Labor Code that are subject to PAGA.

Secondly, under the California Occupational Safety and Health Act of 1973, there are specific grounds for a PAGA claim. These grounds include, but are not limited to, the following: failing to provide a safe and healthy workplace; failing to provide safety devices and adopt safe practices; and failing to establish an effective program to prevent injuries.

It’s worth noting that employers can be held liable under PAGA if they retaliate against workers who voice concerns about workplace safety or health, either verbally or in writing. Moreover, if they fire or lay off an employee who refuses to work in a workplace where there is a violation, then the worker can pursue a PAGA claim.

Last but not least, an unhappy worker can file a PAGA claim for any infraction not covered by section 2699.5 or California Occupational Safety and Health Administration (OSHA). This broad category includes many other infractions not previously mentioned in the labor code, such as failing to offer paid sick days, willful incorrect classification of an employee as an independent contractor, and infractions of labor code regulations for specific professions (e.g., mining, door-to-door sales, lumber, and theater), among many others.

It is not possible to use PAGA to bring certain claims. Firstly, PAGA claims cannot be filed for any violation of a notice, posting, filing requirement, or agency reporting of this code, save for where the reporting or filing requirement entails required workplace injury or payroll reporting. Also, PAGA is not applicable when it comes to the recovery of civil and administrative penalties concerning worker’s compensation.

Notice requirements for employees

When an aggrieved employee intends to bring a civil action related to violations of Section 2699.5 of the Labor Code, they or their representative needs to first provide notice in writing. They must give this notice to the LWDA, as well as to the employer via certified mail. In this notice they must include the specific parts of the Labor Code that have allegedly been breached. They must also include the theories and facts that support the claim of a breach. There is a $75 filing fee. If the employer wishes to respond to the notice, they must also pay a filing fee of $75.

If an aggrieved employee is filing a civil action related to an OSHA violation, they need to provide notice by filing online with the Division of Occupational Health and Safety. They must also notify their employer by certified mail. A copy must also be provided to the LWDA. All these notices must include the specific parts of the California Occupational Safety and Health Act of 1973 that were supposedly violated. There must also be an account of the theories and facts that support the employee’s claim.

For any other civil actions that may not be found in Cal/OSHA or LC 2699.5, the employee or their lawyer must give written notice to the LWDA online, as well as to the employer via certified mail. This notice needs to include the theories and facts that support the employee’s claim of a labor code breach. There is a $75 filing fee for the employee, as well as for the employer should they wish to respond to the notice.

If an aggrieved employee does not fulfill the notice requirements, they may not be able to pursue a PAGA claim. In the case Khan v. Dunn-Edward’s Corp, a former worker gave notice to the employer and the LWDA that did not mention any other former or current employee — only the one giving the notice. The court ruled that the employee was not in compliance with PAGA’s administrative requirements. The worker did not inform the employer or agency of the other involved individuals. Thus, the court found in favor of the employer.

The court in Alcantar v. Hobart Service ruled that a written notice presently only legal conclusions does not fulfill the notice requirements of PAGA. In this case, it was because the notice did not have enough theories or facts to support the employee’s position.

Has the employee tried all available administrative options?

In order for an employee to be able to file a PAGA claim, specific administrative conditions set out by statute must be satisfied. For instance, it is necessary to provide the LWDA or the Division of Occupational Safety and Health an opportunity to determine if they should initiate an investigation.

Regarding 2699.5 documented infractions:

If the LWDA does not plan to investigate the suspected violation within a period of sixty days of the postmark date of the notice, it will notify the employer and the employee or representative via certified mail after the worker has correctly given notice. If the LWDA fails to notify the aggrieved employee within 65 days, or if the employee receives notice within 60 days, the employee may proceed with the PAGA claim. Within 65 calendar days of the postmarked notice, the LWDA will notify the business and the offending worker or representative of its decision to investigate the alleged violation.

After that, the LWDA has 120 days to investigate the claim of violation and levy a citation if necessary. If the LWDA chooses not to give a citation, it will send a certified mail notification to the employer and the employee within five business days. The employee who feels wronged may file a PAGA claim after receiving notice that there will be no citation issued. Furthermore, the wronged worker can also file a PAGA claim if the LWDA does not provide notice within the allotted time frame of either 65 calendar days or 120 days thereafter.

When it comes to California Occupational Safety and Health Standards (Cal/OSHA), the Division of Occupational Safety and Health will conduct an inspection or investigation into the suspected violation following the protocols laid out in Section 6300, et. seq. of the California Labor Code. The employee is not permitted to pursue a PAGA action if the division chooses to issue a citation.

If the division does not issue a citation by the end of the specified time in section 6317 and the employee is dissatisfied with the decision, they have the option to challenge it in superior court.

No agency investigation is necessary for violations not covered by 2699.5 or Cal/OSHA, as long as the employer and LWDA are notified. Later in this article, we will discuss the cure provisions that apply to violations not listed in 2699.5 or Cal/OSHA.

Time Restrictions

Claims under PAGA are subject to a one-year statute of limitations. Therefore, within one year following the occurrence of a violation, an employee is required to submit notice to the LWDA. To illustrate the point, the California Court of Appeal ruled that the plaintiffs in Esparza v. Safeway, Inc. could not bring their PAGA claims as of June 17, 2008, because they were based on violations that happened before that date. It was not until July 2008 that the plaintiffs filed notice with the LWDA or asserted a PAGA claim. There was a statute of limitations on the PAGA claims, the court ruled.

Two Basic Responses to Violations

Under PAGA, businesses are able to fix specific infractions. In order for an employment dispute to be considered “cured,” the following must be met: 1) the employer must remedy every alleged violation; 2) the employer must comply with the underlying statutes as stated in the employee’s notice; and 3) the employee who suffered an injury must be compensated in full. For specific infractions involving itemized wage statements, there are unique remediation criteria.

You can’t fix the violations that are mentioned in section 2699.5. Cures are only available for infractions not specifically mentioned in section 2699.5. In the event that the Division of Occupational Safety and Health does not conduct an investigation following notification, it is possible to remedy Cal/OSHA violations as well.

If an employee or representative files a notice of alleged violation with their employer, the company has thirty-three calendar days from the time of the notice’s postmark to cure the violations. Within that time frame, the employer is required to inform the affected employee or representative in writing via certified mail of the remedial actions taken and submit a written notice to the agency online.

This notice must detail the alleged violation and how it was remedied. Following the completion of the 33-day remediation period, the wronged employee is no longer authorized to seek redress through a PAGA lawsuit. If the infractions are not remedied within the allotted 33 days, the employee has the option to pursue PAGA claims.

No matter where the business is located, employers are limited to a maximum of three opportunities per calendar year to remedy the infraction(s) detailed in the employee’s notice. The employer is limited to one opportunity per year, irrespective of the location of the workplace, to rectify any infractions related to the requirement that itemized wage statements include the dates of the employee’s pay period and the address and name of the company. If the employee is still dissatisfied after disputing with the appropriate agency, they can take their case to the superior court.

Employers may be able to reduce the severity of the fines levied by the court by taking swift action to remedy the alleged infractions, even if such infractions are not covered by PAGA’s cure provisions. It is within the discretion of the courts to reduce the amount of the civil penalty if doing so will prevent a judgment that is unfair, unreasonable and cruel, or confiscatory.

According to the court’s ruling in Fleming v. Covidien Inc., a PAGA penalty is unfair when a defendant was not aware that their action violated the law and they acted quickly to fix the problem after being notified.

It is prudent to address any infractions as soon as notice is given in order to show, during trial, that reduced penalties should be applied for a PAGA claim; this is true regardless of whether the infractions are curable by law or not.

Staying Ahead of Potential PAGA Disputes

To avoid possible PAGA claims, employers should collaborate with their HR department and legal advisors to establish appropriate procedures. Also, they need to keep track of everything they do to stay in compliance with the law. This includes recording training sessions, emails showing their efforts to comply, and any updated policies because of changes in the law.

Take a look at the following examples of precautionary measures:

Make sure workers get their allotted meal and rest breaks. Make it a habit to check in with workers on a regular basis to see if they are taking their lunch breaks when they should be.
When workers are unable to take their required meal and rest breaks, compensate them with premiums for those times.
Pay employees for overtime in a timely manner.
It is important to classify employees correctly.
Your employment policies must be in line with the laws that are in effect at the moment.

You might want to think about providing severance packages to workers who were let go or quit after registering a grievance.

It is important to compensate employees for any missed meal or rest periods as soon as possible if they make such a claim when they are leaving their position.

Make sure that the payroll records reflect the total number of hours worked by each employee, their wage amount, and the amount of piece-rate units earned and paid out. The law requires businesses to retain this information for a minimum of three years.
Verify the company’s compliance with the law regarding any rounding policies it may use. California does permit, with certain limitations, rounding policies for timekeeping. It is not permissible to round up meal periods when working in California, according to the Supreme Court’s decision in Donohue v. AMN Services, LLC.
Workers are required to take a 30-minute lunch break for every five hours put in.
Make sure that employees are receiving accurate itemized wage statements with each paycheck.
Take a look at your health and safety policies and procedures to make sure they meet Cal/OSHA requirements.

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What does PAGA do?

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Notice requirements for employees

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