The PAGA reform (click on right here for a full evaluation) caps penalties at 15% or 30% for employers that take “all affordable steps” to adjust to the regulation. This cover is particularly significant when plaintiffs demand seven figures for alleged PAGA violations. Because of this each California employer ought to instantly conduct a [privileged] wage-and-hour audit to benefit from this new regulation and keep away from dealing with probably business-threatening PAGA penalties.
What Does “All Cheap Steps” Imply?
“All affordable steps” contains, however will not be restricted to:
- Conducting periodic payroll audits and taking motion in response to the outcomes of the audit;
- Disseminating lawful written insurance policies;
- Coaching supervisors on relevant Labor Code and wage order compliance; or
- Taking applicable corrective motion with regard to supervisors.
Whether or not the employer’s conduct was affordable is evaluated by the totality of the circumstances and considers the dimensions and assets obtainable to the employer, in addition to the character, severity and length of the alleged violations. It’s potential to take “all affordable steps,’ but nonetheless have proof of a violation.
The “all affordable steps” cap doesn’t apply when a court docket finds the employer acted “maliciously, fraudulently, or oppressively” or the employer’s coverage/observe was discovered to be illegal by a court docket or the Labor Commissioner throughout the final 5 years.
For employers taking “all affordable steps” after receiving an LWDA discover, a court docket might exceed the 30% cap if, primarily based on the details and circumstances of the actual case, to do in any other case would lead to an award that’s unjust, arbitrary and oppressive, or confiscatory.
Of observe, employers that “remedy” alleged violations however don’t take “all affordable steps” to adjust to the regulation will nonetheless have penalties capped at $15 per pay interval.
Take into account the Lawyer-Consumer Privilege for Your Audit
Remember that a wage-and-hour audit that’s not protected by the attorney-client privilege is discoverable. Think about a state of affairs the place the mistaken minimal wage charge is paid (resulting from confusion about the place the town boundary was), and that’s uncovered within the audit. Emails go between firm principals and HR in regards to the difficulty, and the choice is to not repair the problem. All of these communications are discoverable! Nevertheless, if the audit was carried out via counsel, such emails might be shielded from disclosure, and you’ll keep away from giving a roadmap to an keen plaintiff’s lawyer.
With the intention to benefit from the remedy provisions, the employer can present unprivileged paperwork to point out the problems recognized within the audit, and the fixes.
What Are the Situations for the PAGA Caps?
Situation 1 (15%): BEFORE receiving a PAGA discover or a Request for Personnel Data
If an employer can present they took “all affordable steps” to adjust to the regulation earlier than both: (1) receiving a PAGA discover; or (2) receiving a request for personnel data (below Part 226, 432, or 1198.5), PAGA penalties are capped at 15%.
For instance, if an employer has 2,500 pay durations at difficulty in the course of the PAGA interval [less than 100 employees] with a $100 violation in every pay interval, the employer can be chargeable for $250,000 in civil penalties. However, if the employer took “all affordable steps” prematurely of the PAGA discover or earlier than receiving a request for personnel data, civil penalties would lower to $37,500.
Situation 2 (30%): AFTER receiving a PAGA discover [60-Day Deadline]
If an employer can present they took “all affordable steps” to adjust to the regulation inside 60 days after receiving a PAGA discover, PAGA penalties are capped at 30%.
Utilizing the identical instance above (of two,500 pay durations at difficulty), if the employer took “all affordable steps” after receiving the PAGA discover, potential civil penalties lower from $250,000 to $75,000.
Key Takeaway
By conducting a wage-and-hour audit now (ideally a privileged audit), California employers can benefit from the PAGA reform and cap PAGA penalties at 15% (or 30% in the event you’ve already acquired a PAGA discover). This comparatively low-cost motion additionally reduces the chance of particular person wage-and-hour lawsuits in addition to state wage-and-hour investigations. An oz of prevention beats a pound of remedy.
This publish gives basic info and doesn’t represent authorized recommendation to any particular person with respect to any circumstance. This publish doesn’t create an attorney-client relationship with any particular person.
For extra info on this subject, please contact Steven P. Gallagher at [email protected] or a member of the agency’s Labor & Employment Division.
