Employers in California face enforcement of the extensive California Labor Code and regulations from multiple directions. This includes employee-filed suits under the Private Attorneys General Act (PAGA), California Labor Code §§ 2698 to 2699.6. An employer that fails to correct violations alleged in a PAGA claim notice can suffer significant damages awards. Damages exposure related to the complaining employee may initially appear small, but total damages can escalate quickly and significantly.
Immediately identifying and swiftly correcting all violations should be an employer’s goal — the problem is knowing where to start. Missing steps can be costly, so work with experienced PAGA counsel for employers and begin with the steps described below.
What a PAGA Claim Notice Means for Employers
A California employee seeking to enforce labor laws against an employer must give notice of the PAGA claim to both the employer and the California Labor and Workforce Development Agency (LWDA). The notice gives the LWDA and the employer an opportunity to investigate the employee’s claims, but it also starts a clock on taking corrective action. Employers that take immediate steps to validate (or invalidate) an employee’s claims and quickly take corrective action where necessary may, in some cases, avoid any further action or financial penalties. Conversely, failure to take appropriate steps after receiving a PAGA claim notice can result in exorbitant civil penalties, sometimes reaching millions of dollars.
What Is PAGA?
PAGA allows any employee to act as an agent of the California Attorney General to enforce the state’s labor laws and regulations. Employees watch for employer Labor Code violations from inside the organization and can seek civil penalties on behalf of themselves and similarly situated employees. If violations are proved, the State imposes civil fines that are calculated by multiplying the number of violations times the number of affected employees.
Fines may be as low as $100, but they are multiplied by the number of occurrences and the number of employees affected. As a result, these penalties can be extensive. Attempting to remediate and settle PAGA claims can also be costly, with the costs increasing the longer the case is pending. Employees are motivated in no small part by the opportunity for these significant financial gains — a prevailing employee may retain 25 percent of PAGA damages awarded, with the rest going to the State.
Before filing a lawsuit against an employer under PAGA, an employee must complete certain preliminary steps. In particular, the employee must exhaust all administrative remedies and give the employer (and the LWDA) a PAGA claim notice. The PAGA statute establishes particular requirements for the notice, and failure to meet them will render the notice ineffective. In other words, a PAGA lawsuit premised on an insufficient notice is subject to dismissal.
Courts are strict about enforcing the particular requirements of the PAGA statute and regulations. Employers can best protect their businesses only by acting quickly and with experienced professional guidance to identify inadequacies in the employee’s claim and to identify and correct valid claims. The following are some of the essential steps an employer should take to protect itself after receiving a PAGA claim notice.
Consult an Experienced PAGA Defense Attorney
An employer that receives a PAGA claim notice should first engage experienced PAGA counsel for employers. California employer defense lawyers with PAGA experience will quickly know how to investigate alleged violations and identify corrective action to avoid the claim becoming a PAGA lawsuit.
PAGA counsel for employers initially review the claim for potential defenses that can be asserted immediately or wielded later. Such defenses include the following:
- Lack of standing.
- The claim notice is insufficient.
- Failure to exhaust administrative remedies.
PAGA employer defense counsel will also determine relevant deadlines for corrective action or responses to help reduce your exposure. Some PAGA claims can be “cured” despite past violations if corrective action is taken by the relevant deadline. Employers attempting a DIY approach to PAGA claims may miss defense options or significant deadlines.
Investigate the Alleged PAGA Violations
The next step is to investigate the validity of the claims in the notice. Valid claims are often asserted in a PAGA lawsuit, which can expand to include other employee claims in a combined PAGA class action suit. As such, a thorough investigation of the alleged violations and any potential but unnamed violations is critical.
PAGA claims often pertain to wage-hour matters, so checking the following should be an employer’s first step in investigating wage and hour PAGA claims:
- Audit wage statements for the year preceding the notice.
- Audit payroll and timekeeping policies and records.
- Audit meal, break time and commute policies and their application.
- Audit employee classification policies and their application.
If the employee’s allegations pertain to health and safety or other Labor Code violations, the employer should review the relevant policies and files. Your PAGA employer counsel is an excellent resource for defining investigation parameters.
Identify Curable Violations in the PAGA Claim Notice and Take Remedial Action
If your audits validate the employee’s claim of alleged violations, the next step is to take action to correct the violation. For example, if the violation was based on inadequate wage statements, you must correct the inadequacies, reproduce the past wage statements going back the required period of time and deliver the corrected pay stubs to the affected employees.
In some cases, taking action to correct the violation within a statutorily determined period of time may end the employee’s claim.
Review Wage and Timekeeping Policies and Records to Avoid Future Violations
If your audit of company policies, records and practices only addressed the specific allegations in the PAGA notice, now is the time to perform a more extensive audit in other areas as well. Identifying and correcting violations before an employee asserts them saves you significant time and exposure down the road. Include in your review employee complaints for the preceding year that could be used as the basis for a future PAGA claim.
Working closely with PAGA counsel for employers when reviewing your business’s policies and practices is vital. Opinions handed down in lawsuits can change how the law is applied without changing the wording of the relevant statute or regulation. A PAGA attorney can also help you identify hotbed areas such as rounding practices or your treatment of meal and break time for employees.
Preparing Defenses to a PAGA Claim Notice
Best practices dictate that you prepare a defense even if you believe the employee’s claim is not valid. Defending against a claim requires a thorough review of your employee and the employee’s resources. Start with a review of the employee’s personnel file. Also review the employee’s social media accounts for relevant posts, and scour the Internet for advertisements concerning your business and wage-hour or related violations.
You should also use another available resource: other employees. Ask your workers whether anyone external to the company has been asking about employment practices or violations, and encourage them to report such occurrences.
Determining Whether to Settle Claims in a PAGA Claim Notice
Many employers naturally assume that settlement of a valid claim will put an end to the claim for relatively low financial expense. However, the employee who files the notice is seeking 25 percent of a total damages award, which is computed by multiplying the fine for the violation(s) by the number of affected employees and by the number of times the violation occurred. This formula quickly multiplies the value of a case, making an employee less willing to settle for a lesser amount.
Further, settling the claim with the aggrieved employee does not necessarily end the PAGA claim. In March 2020, the Supreme Court of California handed down its decision in Kim v. Reins International California, Inc., holding that the PAGA claims can survive settlement with the individual who filed the PAGA claim notice. Again, working with PAGA counsel for employers throughout the process is essential to avoiding such pitfalls.
Finding PAGA Employer Counsel to Deal with Your PAGA Claim Notice
Employers facing a PAGA claim must take immediate steps to identify and correct alleged violations to prevent a potentially crippling financial strain on the business. Responding quickly and exhaustively to correct violations may head off a PAGA lawsuit, can prevent future PAGA claims and lessen your exposure to damages awards. But employers are not equipped to go this road alone.
The Law Offices of Susan A. Rodriguez, APC has been helping employers defend against PAGA and other labor-related and employee claims for three decades. Susan A. Rodriguez and her team have extensive experience as PAGA counsel for employers, making them your go-to resource. Whether you have received a PAGA claim notice or would like to take preventative action to prevent the same, call us for a consultation at (310) 350-9995 or complete our online contact form.
Posted by Susan A. Rodriguez, Esq.
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