Don’t Skip Steps: PAGA “Reasonable Steps” That Is

As businesses advance into the second quarter of the year, ensuring compliance with the California Labor Code must remain a top priority—particularly in light of the recent reforms to the Private Attorneys General Act (PAGA). These changes present a critical opportunity for employers to take proactive measures, safeguarding against costly Labor Code violations and mitigating exposure to substantial PAGA penalties.

Since its enactment in 2004, PAGA has been a legal minefield for employers, often leading to expensive litigation, operational disruptions, and lingering uncertainty. Even seemingly minor infractions—such as a slight error in the suite number on an employee’s pay stub—can result in significant penalties. However, with the recent reforms, employers now have a comprehensive roadmap to reduce their risk by taking all reasonable steps to ensure compliance with California’s labor laws.

What are Reasonable Steps?

Under the updated PAGA framework, employers can substantially limit their liability by implementing proactive measures designed to comply with the Labor Code. These reasonable steps include, but are not limited to:

• Conducting Periodic Payroll Audits: Regularly reviewing payroll records to identify and correct compliance issues before they escalate into larger, costlier problems.
• Disseminating Clear, Lawful Policies: Ensuring all policies related to wages, rest and meal breaks, overtime, and other key areas are properly documented and effectively communicated to employees.
• Training Supervisors: Educating management and supervisory staff on Labor Code requirements and wage orders to ensure the consistent and correct enforcement of workplace policies.
• Taking Prompt Corrective Action: Addressing any instances of non-compliance by supervisors swiftly to prevent systemic issues and reduce the risk of legal exposure.

The Payoff: Significantly Reduced Penalties

Employers who take these “reasonable steps” prior to receiving a PAGA notice or a request for employment records can cap the PAGA penalties to just 15% of the applicable amount recoverable by an aggrieved employee on behalf of the California Labor and Workforce Development Agency (LWDA). Typically—but not always—these penalties are calculated at $100 per pay period, per employee, dating back one year prior to the PAGA notice.

Even in cases where an employer has already received a PAGA notice (for notices dated June 19, 2024, or later), there is still an opportunity to limit liability. By taking all reasonable steps within 60 days of receiving the PAGA notice, employers can cap recoverable penalties to 30% of the applicable amount.

Key Takeaway

If faced with a PAGA lawsuit, employers who take all reasonable steps to address and prevent Labor Code violations within 60 days of receiving the PAGA notice—or, better yet, proactively before any notice is issued-can significantly reduce the scope and potential financial impact of the PAGA claim.

To seize this opportunity, employers should take a proactive approach by:

1. Auditing employee handbooks and related wage-and-hour policies to ensure compliance, making revisions as necessary.
2. Scheduling and conducting regular payroll audits to identify and resolve any areas of concern.
3. Providing comprehensive training for supervisors, who are often the first line of defense in ensuring adherence to lawful practices.

By adopting these measures, employers can avoid the pitfalls of costly legal litigation, minimize penalties, and protect their financial interests. In today’s ever-changing legal landscape, compliance is not merely a recommendation—it is an essential cornerstone of any successful and sustainable business strategy.

---

Duggan McHugh is proud to be a CEA Partner. If you have questions about PAGA, or other employment law issues, please contact us, or visit our website dugganmchugh.com