PAGA: Employer Cure Process and LWDA Conference

This is the second of a three-part series addressing the changes in California’s Private Attorneys General Act. You can read more about the PAGA reform and recommended audit steps here.

Below, we discuss an employer’s opportunity to cure alleged PAGA violations:

Notice to LWDA – General

Before an alleged aggrieved employee can pursue a PAGA action, the employee must first exhaust administrative procedures.

Specifically, the aggrieved employee or representative must first provide written notice to the State of California Labor and Workforce Development Agency (LWDA) and to the employer, “of the specific provisions of [the Labor Code] alleged to have been violated, including the facts and theories to support the alleged violation.”

The LWDA may investigate the alleged violations (this rarely happens). If it chooses not to, or if the agency fails to respond within 65 days (this happens often), the aggrieved employee may proceed with filing a PAGA lawsuit against the employer.

When an employer received a PAGA notice in the past, the extremely limited cure options only allowed for cures of specific wage statement violations. Employers have more options now. The amendment significantly expands the right to cure and assigns the LWDA a more active role in resolving PAGA disputes.

33 Days to Cure  

Under Senate Bill 92, and beginning October 1, 2024, employers “that employed fewer than 100 employees in total during the period covered by the [PAGA] notice,” may submit a confidential proposal to cure the violations alleged in the notice, to the LWDA.

Employers must submit the proposal to cure within 33 days of receipt of the PAGA notice.

Since such notice and any cure proceedings are deemed protected under the settlement privilege, the notice to cure should not be admissible at trial as evidence of liability. However, the employee may still use the underlying information if there is a separate wage claim, including a class action.

For alleged Labor Code Section 226 violations (wage statement violations), all employers may cure the alleged violation within 33 days of the postmark date of the PAGA notice, by providing amended paystubs to covered employees.

Within 14 days the LWDA may set a conference to determine whether the proposed cure is “sufficient” or if additional information may be necessary; and may set a deadline to complete the cure. 

Curing is not easy.  It requires meticulous documentation and can be costly.

For example, if the cure pertains to alleged unpaid wages, the LWDA may request the employer place in escrow the amount which will make “each aggrieved employee … whole.” Making employees “whole” requires the employer to pay an amount sufficient to recover any owed wages for the prior three years; pay seven percent interest, liquidated damages required by statute; and potentially, plaintiff’s attorneys’ fees.

Evidence of Cure  

Employers have up to 45 days to complete the cure and must provide a “sworn notification” of completion to the employee and the LWDA. When applicable, the “sworn notification” must include payroll audit and check registry documents.

If convinced the employer cured the alleged violation, the LWDA will provide notice. If the employee challenges that notice, the agency will set a hearing. If, following a hearing, the LWDA issues an order confirming the violation was cured, the aggrievedemployee may not proceed with a PAGA action. The employee may, however, appeal the LWDA’s determination with the superior court.

Considerations for Employers

While information shared as part of the cure process is confidential and privileged, employers still risk sharing details that may be applied in class action litigation (e.g., through the discovery process), which are usually filed along with PAGA suits. Further, not all employers may be able to afford making each employee “whole,” so in reality, this “cure” option may not be a practical choice for many employers.  

Nonetheless, even if not all alleged violations can be cured, correcting other violations, even on a prospective basis, can be helpful in limiting PAGA penalties (see our first blog on the subject).    

Please contact us if you want to know more on limiting potential exposure.

Sue M. Bendavid and Tal Burnovski Yeyni represent California employers.