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Wage and Hour Policies Amid Rising PAGA Filings

At Meyers Nave, we prioritize assisting our clients in establishing and maintaining wage and hour policies that comply with legal standards. This includes implementing effective systems and processes to ensure all levels of the workforce are informed and practicing these policies. Unfortunately, we have observed a significant uptick in class action and Private Attorneys General Act (PAGA) lawsuit filings, particularly since the onset of the COVID-19 pandemic.

Last year, California experienced over 5,000 employment-related class-action filings, and the number of PAGA notices filed with the California Labor and Workforce Development Agency has increased annually.

Rising Litigation: Understanding the Causes
Recent rulings from the California Supreme Court have been notably favorable to employee-plaintiffs, subsequently increasing employers’ exposure and liability:

  • Wage Designation: Meal and rest break premiums have been reclassified as “wages,” which has implications for wage statements and final pay penalties.
  • Timekeeping Requirements: Employers must accurately record meal periods and beware of rounding practices and policies. Any discrepancies in time records for meal periods raise a rebuttable presumption of meal period violations.
  • Payment Calculations: Employers are required to pay meal and rest break premiums at the employee’s “regular rate of pay,” rather than the base hourly rate.

Implications of Arbitration Agreements
The California Supreme Court last year upheld that PAGA plaintiffs retain the right to pursue representative claims, even if the individual claim is compelled to arbitration.

Individual Liability Under the Labor Code
California Labor Code Section 558.1 extends potential liability for minimum wage violations to company owners, directors, officers, and managing agents, equating them with the employer in these cases.

Anticipated Changes: The November 2024 Ballot Measure
The upcoming California Fair Pay and Employer Accountability Act seeks to address longstanding criticisms of PAGA since its 2004 enactment. Key features of the proposed initiative include:

  • Doubling statutory and civil penalties for willful violations.
  • Allocating 100% of monetary penalties to the affected employees, compared to the current 25%.
  • Excluding attorney’s fees from awards, which are presently available under PAGA.
  • Mandating that the Division of Labor Standards Enforcement (DLSE) be included in all labor complaints filed to the Labor Commissioner.
  • Ensuring full funding of the DLSE by the state legislature to meet legal requirements.
  • These proposed changes signify a substantial shift in how labor violations could be managed and penalized in California.

Have questions? Contact us. Meyers Nave is committed to keeping our clients informed and prepared for these potential legal landscapes.