PAGA Reform Update

On July 1, the business community scored an important win when Governor Newsom signed an essential PAGA reform package into law. While the reforms will greatly minimize the shakedown lawsuits that hurt employers, UCON’s top priority remains an extension of the 2016 bill that allows union-signatory contractors to bargain an exemption from PAGA through the CBA agreements. The safe harbor from PAGA has been a vital benefit for union-signatory contractors and our union partners.  

“PAGA was a badly broken and abused system that harmed employers while doing little to nothing to help workers,” said Emily Cohen, EVP of United Contractors. “While the recent reforms signed by Governor Newsom will go a long way in protecting businesses across the state, what matters most to union-signatory contractors is the right to secure a carve-out through their CBAs. That is a lifetime for our union contractors. We will continue to fight to protect this crucial exemption by urging elected officials to pass and Governor Newsom to sign AB 1034.”

The PAGA reforms signed into law by the Governor include drastically limiting employers' exposure to PAGA penalties by allowing them to take “reasonable steps” to avoid or correct Labor Code violations. Even after receiving a notice of violations, employers can still take specific “reasonable steps” related to the alleged violations to limit penalties, which may include: 

• Payroll audits; 
• Implementation and dissemination of lawful policies related to labor code issues, such as meal and rest breaks, overtime, and timely payment of wages; and 
• Supervisor training and discipline for failure to follow policies or procedures. 

Highlights of the PAGA reform package include: 

• Requires Standing: The employee (plaintiff) must experience the alleged violations brought in a claim personally. 
• Tightens the Timeline for filing a PAGA claim: Alleged violations must have occurred within the last year (previously, there was no time limitation). 
• Caps Penalties: For employers who proactively take steps to comply with the Labor Code before receiving a notice, the maximum penalty that can be awarded is 15% of the applicable penalty amount. 
• For employers who take steps to fix policies and practices after receiving a PAGA notice, the maximum penalty that can be awarded is 30% of the applicable penalty amount. 
• Reduces the maximum penalty where the alleged violation was brief or where it is a wage statement violation that did not cause confusion or economic harm to the employee (i.e. misspelling of company name or forgetting to add “Inc.” on the pay statement). 
• Levels the playing field for employers who pay weekly by ensuring a penalty is adjusted. Presently, such employers are penalized at twice the amount because penalties accrue on a per pay period basis. 
• Employer Right to Cure: Expands which Labor Code sections can be cured, so employees are made whole quickly. 
• To reduce litigation and costs, it protects small employers by providing a more robust right-to-cure process through the state labor department (Labor and Workforce Development Agency). 
• Provides an opportunity for early resolution in court for larger employers. 

Read the full legal analysis. 

United Contractors empowers, advocates for, and supports California’s union contractors. We are relentlessly committed to serving the needs of our members while building the next generation of industry leaders.