| Court Reduces PAGA Penalties by 99% Emphasizes the Impact of 2024 PAGA Reform |
| Since 2004, the Private Attorneys General Act (PAGA) has provided for California employees to sue their employer for Labor Code violations such as unpaid overtime, missed meal and rest breaks, and noncompliant wage statements — and not just on the employee’s own behalf, but on behalf of other aggrieved employees as well. PAGA sets default civil penalties of $100 per employee per pay period, though some violations carry their own specific penalty amounts. Under Labor Code section 2699, courts are allowed discretion to reduce any penalty that would otherwise be unjust or arbitrary. California’s 2024 PAGA reforms expanded employers’ opportunities to have potential PAGA penalties capped by taking proactive steps to comply with the Labor Code and promptly correct violations. Specifically, the PAGA reforms significantly cap penalty exposure for employers who take “all reasonable steps” to comply before receiving a PAGA notice or employee records request. Although these reforms didn’t apply in the recent Fourth District Court of Appeal case, Taduran v. Glidewell, this decision illustrates how courts have long considered employers’ good faith compliance efforts when exercising their discretion to reduce penalties. Considering factors like the nature of the violations, the limited harm to employees and the employer’s good faith corrective actions, the court in Taduran reduced the statutory maximum PAGA penalties by roughly 99%. Case Study In the recent Fourth District Court of Appeal case, Taduran v. Glidewell, Plaintiff Abraham Taduran brought a PAGA claim against his former employer, alleging numerous Labor Code violations, including wage statement, overtime pay and rest period violations. While the parties agreed to most of the facts related to the violations, the main issue at trial was the amount the employer owed in civil penalties. Taduran requested the maximum amount in statutory penalties — approximately $55.9 million — plus $1.57 million in attorney fees. The employer argued for a significant reduction of these penalty amounts. The trial court awarded Taduran a total of $515,955 in penalties — roughly 99 percent less than the maximum penalty requested by Taduran — and $733,440 in attorney’s fees. In explaining its decision to reduce the penalties, the trial court pointed to corrective actions taken by the employer after the PAGA claim was filed. Specifically, the employer corrected its wage statements and was willing to make changes to correct other violations and pay affected employees who were underpaid. The trial court also found the violations to be technical and narrow in nature, resulting in minimal harm to Taduran and not warranting a significant penalty. Lessons Learned Courts having the discretion to reduce civil penalties from PAGA claims can work in an employer’s favor — it certainly did in the Taduran case. Factors like whether the employer acted in good faith or corrected the violation, the severity and nature of the violation, and the actual harm caused to the employee can all influence a court’s decision to reduce penalties. Accordingly, employers who receive a PAGA notice may benefit from taking these steps: Promptly investigate the allegations; Implement corrective measures to remedy employees and prevent future violations; andDocument all compliance steps taken. Employers who receive a PAGA claim notice should immediately consult legal counsel experienced in handling PAGA actions. Red Flag Tips Don’t wait until you’re facing a PAGA claim notice to start building a record of good faith compliance. Proactively auditing pay practices Distribute lawful written policies Train your supervisors Document compliance efforts *If you are interested in have HR NETwork conduct a wage and hour/payroll audit for your organization, please contact your HR Business Partner. |
