California PAGA Reform Under SB 92 (2024): The Individual/Representative Split and New Settlement Framework
The Private Attorneys General Act of 2004 had by 2024 become one of the most significant and most contentious employment litigation vehicles in California. PAGA allowed any aggrieved employee to bring a representative action on behalf of all similarly situated employees — in state court, without class certification requirements — to recover civil penalties for Labor Code violations, with 75% of recovered penalties going to the California Labor and Workforce Development Agency (LWDA) and 25% retained by the employee-plaintiffs' counsel and the aggrieved employees. The absence of class certification requirements and the breadth of the penalty scheme made PAGA cases enormously valuable for plaintiffs' counsel and enormously expensive for employers.
The 2024 reform legislation — SB 92 and its companion AB 2288, effective June 26, 2024 — made several structural changes in response to years of employer advocacy and the California Supreme Court's Adolph v. Uber Technologies decision, which had held that an employee who arbitrated their individual claims could still maintain a representative PAGA action in court.
The most structurally significant change is the bifurcation of PAGA claims into "individual PAGA claims" (those arising from violations suffered personally by the aggrieved employee) and "representative PAGA claims" (those arising from violations suffered by other employees). The reform creates different procedural tracks for these two categories. Individual PAGA claims may now be compelled to arbitration if the underlying employment agreement contains a valid arbitration clause — closing the gap that Adolph had opened. Representative claims remain in court but may proceed only if the court determines the plaintiff has standing to maintain them after the individual claims are resolved or compelled.
On penalties, the reform created a new category of "cured violations" — violations that the employer corrects within a specified window after notice — that are subject to substantially lower penalties. For certain wage statement violations, the penalty for cured violations is $25 per pay period rather than the standard $250/$1,000 per pay period tiers. Employers who establish that they had compliant policies but misapplied them in isolated instances can also seek penalty reductions on proportionality grounds, a new defense that did not exist in prior PAGA jurisprudence.
The reform also addressed the question of proportionality in penalty awards. Under the new statute, courts must consider the nature, persistence, and gravity of the violation, the employer's size and financial resources, and whether the penalties serve the statute's purposes of deterrence and employee protection. Courts have discretion to reduce penalties below the statutory maximum where a rigid application would result in an award disproportionate to the actual harm suffered. This proportionality review was absent from the prior statute and represents a significant structural shift in how courts will approach penalty calculations at trial.
For pending cases filed before June 26, 2024, the parties and courts must determine which provisions of the new law apply. The California courts have generally applied the new law to procedural provisions in pending cases, while maintaining the substantive penalty standards from the law in effect at the time of the violations. Employment counsel should audit their active PAGA cases for the application date of each new provision and adjust settlement valuations accordingly.