California’s Private Attorneys General Act, commonly referred to as PAGA, remains one of the most significant sources of litigation risk for employers in the state. Enacted in 2004, PAGA allows an “aggrieved employee” to step into the shoes of the State of California and pursue civil penalties for alleged Labor Code violations. Instead of filing a traditional wage claim limited to their own damages, the employee brings a representative action on behalf of other current and former employees.
Under current law, civil penalties recovered in a PAGA action are allocated 65 percent to the Labor and Workforce Development Agency and 35 percent to the affected employees for notices filed on or after June 19, 2024. Because penalties are assessed on a per employee, per pay period basis, even technical violations can result in substantial exposure when applied across a workforce.
PAGA claims most often arise from alleged wage and hour violations. These include unpaid overtime, missed meal and rest periods, inaccurate wage statements, unreimbursed business expenses, and employee misclassification. One of the reasons PAGA has been so impactful is that it does not require class certification. A single employee may pursue representative penalties on behalf of a broader group, which significantly increases potential liability.
Recent legislative reforms that took effect in 2024 were intended to address concerns about excessive penalties and abusive litigation. Among the most notable changes are revised standing requirements, enhanced opportunities for employers to cure certain violations, and modifications to penalty structures. An employee must now generally demonstrate that they personally experienced the alleged violations in order to maintain standing.
The reforms also created meaningful incentives for proactive compliance. Employers that can establish they took all reasonable steps to comply with the Labor Code before receiving a PAGA notice may have penalties significantly reduced. Those who take corrective action after receiving notice may also limit exposure under certain circumstances. For smaller employers, there is now a structured cure process that allows an opportunity to address alleged violations before litigation proceeds.
Despite these reforms, PAGA remains a high risk area in 2026. Notices continue to be filed at substantial rates, and the potential for attorney’s fees awards adds additional settlement pressure. Courts are still interpreting aspects of the reform legislation, and regulatory guidance from the Labor and Workforce Development Agency continues to evolve. Employers should not assume that reform has eliminated exposure.
The most effective way to reduce PAGA risk is through proactive compliance. Regular policy audits, careful review of wage and hour practices, and accurate documentation are critical. Employers should evaluate timekeeping procedures, meal and rest break compliance, wage statement accuracy, reimbursement policies, and classification decisions. Maintaining clear documentation of compliance efforts can be particularly important if an employer later needs to assert statutory defenses.
When a PAGA notice is received, early review is essential. A prompt evaluation of the allegations, available documentation, and potential cure options can significantly affect the trajectory of the matter. Delayed responses or incomplete internal reviews can increase costs and limit strategic options.
If your business has received a PAGA notice or you would like to evaluate your current wage and hour compliance practices, contact EmployLaw Group LLP at (805) 586-1381.