The PAGA Notice: California Employers’ Obligations and Relevant Deadlines

‍What is a PAGA notice?

For California business owners without prior litigation experience, the receipt of a Private Attorneys General Act (“PAGA”) notice is likely to engender alarm and confusion. This notice comes in the form of a letter addressed both to the Labor and Workforce Development Agency (LWDA) and the employer that is being named as a defendant. It will likely include a citation to the California Labor Code, including § 2699.3, which sets forth the requirements of a PAGA notice.

‍The statutory purpose of a PAGA notice is to alert the LWDA to the employer’s alleged violations of the Labor Code so that the LWDA may determine whether to investigate the violations and subsequently issue a citation. However, if the LWDA notifies the employee and employer of its intent not to investigate the alleged violations within 60 days, or if it fails to provide notice of its intent within 65 days, the employee is authorized to file a civil lawsuit against the employer on the basis of the alleged violations in court. A second purpose of the PAGA notice is to enable the employer to voluntarily cure certain Labor Code violations to avoid penalties.

In practice, the PAGA notice typically results in no action by the LWDA, thus enabling the employee’s civil lawsuit to proceed in court.

How should employers respond to a PAGA notice?

Engage legal counsel. A PAGA notice and accompanying lawsuit are driven by plaintiffs’ attorneys, not unsophisticated employees. The defense of such a legal proceeding should be undertaken by experienced counsel who can best evaluate the employer’s potential liability and formulate a strategic response. Counsel should be engaged promptly, as a civil lawsuit is likely to follow the PAGA notice within 65 days of its postmarked date. Indeed, a class action lawsuit with allegations mirroring the PAGA claims may be filed in advance of this date.

Institute a litigation hold. The receipt of a PAGA notice means that litigation may be reasonably anticipated, thus triggering obligations to preserve relevant evidence. This means the employer’s ordinary document retention policies will need to be altered so that evidence is not inadvertently destroyed. Counsel should help the employer identify record custodians such as payroll and IT departments, including any third-party entities that may possess relevant records over whom the employer exercises control. Litigation hold letters should be distributed to these custodians.

Develop a litigation strategy. The employer should cooperate with counsel in developing a litigation strategy, making employees available for interviews, and providing case-relevant documents. With sufficient information, the employer’s counsel should be able to estimate any potential damages and penalties exposure, the likelihood of success on the merits, and the prospects for early settlement with the plaintiff.

Should employers make use of PAGA’s cure process?

California Labor Code § 2699 and § 2699.3(c) permit employers the opportunity to cure certain types of violations to avoid litigation or reduce potential penalties. The cure process varies depending on the size of the employer and the type of violation sought to be cured. Certain cure deadlines are triggered by the PAGA notice, rendering the prompt engagement of legal counsel all the more critical.

For small employers, defined as businesses that employed fewer than 100 employees total during the one-year period preceding the PAGA notice, a proposal to cure one or more of the alleged violations may be submitted to the LWDA within 33 days of the PAGA notice. The LWDA may act on the cure proposal by, among other things, requesting additional information or setting a conference between the parties. If the LWDA takes no action in response to the cure proposal, the plaintiff may proceed to file a civil lawsuit.

Employers of any size may attempt to cure a violation of Labor Code § 226, which requires certain information to be provided on wage statements. The wage statement violation must be rectified within 33 days of the PAGA notice, and the employer must provide written notice of the cure to the aggrieved employee and the LWDA. If this process is followed, the employee may not commence a civil action for wage statement violations.

Employers of any size may also cure other types of violations in exchange for a reduction in civil penalties. If the employer takes “all reasonable steps to prospectively be in compliance with all provisions identified in the notice” within 60 days of the notice, penalties are capped at 30% of the statutory maximum. A more favorable reduction in penalties, to 15% of the statutory maximum, is available to employers who took such “reasonable steps” before the date of the PAGA notice or employee records request.

The decision whether and to what extent to attempt to cure the alleged PAGA violations is one that should be made with the assistance of experienced legal counsel.

For more information, please contact attorney Tyler Dosaj at tyler@dosajfirm.com or (213)-310-1905.