PAGA Updates in 2026: What California Employers Should Know

California’s wage-and-hour laws are complex, and recent reform surrounding the Private Attorneys General Act (PAGA) makes it more important than ever for employers to take a proactive approach to compliance. This is because recent PAGA reforms provide new opportunities for employers to reduce their liability exposure by taking proactive steps such as conducting audits, maintaining compliant policies, training supervisors, and addressing issues when they arise.

And recently, the California Labor and Workforce Development Agency (LWDA) also proposed new PAGA regulations that may bring employers some additional relief and curb frivolous filings.

Employers should take advantage of the new opportunities by tightening processes in areas like timekeeping, meal and rest breaks, and payroll calculations, ensuring supervisors are trained on wage-and-hour requirements, and keeping their policies up to date.

What is PAGA?

PAGA is a complex California law, but in short, it authorizes aggrieved employees to bring representative actions to recover civil penalties on behalf of themselves, other affected employees, and the State of California for violations of the California Labor Code, such as wage-and-hour violations.

PAGA claims are often initiated when an employee or former employee consults an attorney regarding potential workplace violations. Counsel may review payroll and employment records for issues such as wage statement violations, missed meal or rest breaks, overtime violations, or errors in calculating an employee’s regular rate of pay as common examples. PAGA provides for civil penalties in addition to unpaid wages and other damages owed. Because PAGA litigation can be costly, time-consuming, and potentially expose employers to significant penalties, many employers choose to resolve these claims through settlement.

Since 2004, when PAGA was enacted, employers and business groups have criticized PAGA for encouraging costly litigation and exposing employers to significant penalties, including for technical Labor Code violations that may not have caused substantial harm.

What Are the Recent Amendments?

In 2024, California enacted Assembly Bill 2288 and Senate Bill 92, which reformed PAGA and brought substantial changes to how these representative actions are litigated.

Among other changes, the legislation created new incentives for employers to proactively comply with the Labor Code. Employers that can demonstrate they have taken “all reasonable steps” to comply with applicable labor laws may substantially reduce their potential PAGA exposure. For example:

• Penalties may be capped at 15% of the otherwise applicable amount if the employer demonstrates it took all reasonable steps to comply with the Labor Code before receiving a PAGA notice or a request for personnel records;
• Penalties may be capped at 30% of the otherwise applicable amount if, within 60 days of receiving a PAGA notice, the employer takes all reasonable steps to prospectively comply with the Labor Code provisions identified in the notice.

Additionally, employers who both cure certain violations and take all reasonable steps toward compliance may eliminate penalties for certain cured violations altogether.

Is Your Business Following PAGA’s Reasonable Steps?

What are the “reasonable steps” employers should take to reduce potential PAGA exposure, and is your business implementing them? The statute identifies several examples, including:

• Conducting periodic payroll audits and taking corrective action when compliance issues are identified;
• Maintaining and disseminating lawful written workplace policies;
• Training supervisors on applicable Labor Code and wage-order requirements; and
• Taking appropriate corrective action when supervisors fail to follow company policies.

Importantly, these factors are not exhaustive. Whether an employer has taken “all reasonable steps” is determined based on the totality of the circumstances, including the employer’s size and available resources, as well as the nature, severity, and duration of the alleged violations.

What Else is New with PAGA?

There may be additional good news for employers soon. Earlier this year, the California Labor and Workforce Development Agency (LWDA) proposed the first formal regulations governing PAGA’s administrative procedures, building on the 2024 reforms.

The proposed regulations would require employees to provide more detailed factual support for alleged Labor Code violations, limit the use of boilerplate PAGA notices, expand opportunities for employers to cure alleged violations before litigation, and increase LWDA oversight of settlements. The regulations also create new mechanisms to scrutinize high-volume and frivolous filers, reflecting the agency’s goal of reducing meritless claims while promoting earlier resolution of legitimate disputes. If passed, the regulations would likely be adopted later this year or in early 2027.

Staying Confident and Compliant  

The recent PAGA reforms highlight the value of a proactive approach to wage-and-hour compliance. Employers who regularly evaluate their payroll practices and policies are better positioned to identify potential issues early, make informed decisions, and maintain confidence that their operations comply with California law. CEA’s Wage & Hour Audit: PAGA Prevention Package is designed to provide you with clarity and help you operate your California business with confidence.