Most California employers don’t realize they’re at risk of a lawsuit until it’s already happening.
One of the biggest reasons? A California-specific law called the Private Attorneys General Act (PAGA). This act isn’t found in any other state, and it alone has cost businesses thousands to millions of dollars.
While that may sound overwhelming, the good news is that this risk is preventable with the right approach. With the right understanding and proactive steps, you can protect your business and reduce the risk of a PAGA lawsuit.
What Is the Private Attorneys General Act (PAGA)?
The Private Attorneys General Act (also known as PAGA), codified at Labor Code section 2699, allows employees to step into the role of the state and pursue penalties against their employer. In other words, if one employee feels they have grounds to raise a claim against a company, they can represent themselves for violations within the past year.
No longer are you facing just one claim. PAGA allows for one aggrieved employee to bring forward tens, if not hundreds, of claims against a company. This act is unique to California law, which means employers in California need to have proactive practices in place and proper documentation to be protected from PAGA cases.
Why PAGA Is So Risky for California Employers
PAGA cases are at an all-time high in 2025. The reason these cases quickly become expensive is that violations stack. What might have started as an overtime pay violation can spiral to include every employee impacted and any other pay or hour tracking violations that occurred in the same period.
PAGA can escalate quickly, and the financial impact of these cases can be significant, especially for small businesses:
- Claims can apply to your entire workforce (and even past employees).
- Penalties are calculated per employee, per pay period.
- Multiple violations can be combined into one case.
- Legal costs add up quickly, even if the case never goes to trial.
California law is clear: either you’re in violation, or you’re not.
Without documentation or proper procedures that are followed, it can be hard for businesses to win in a PAGA claim.
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What Changed in 2024 and What Didn’t
In July 2024, Governor Newsom signed two landmark bills, AB 2288 and SB 92, representing the most significant reforms to PAGA in its 20-year history. These changes apply to any PAGA notice filed on or after June 19, 2024, which means if you’re a California employer today, this is the version of PAGA you need to understand. The reforms introduced some meaningful guardrails that benefit employers:
- Tighter Standing Rules: Employees can now only bring a PAGA claim based on violations they personally experienced, and those violations must fall within the standard one-year statute of limitations. This closes a loophole that previously allowed a single employee to sue over violations they never personally encountered.
- Expanded Cure Provisions: Employers now have a real opportunity to fix certain violations before a case escalates into full-blown litigation, if they act fast. Common issues like unpaid overtime, missed meal or rest break premiums, and unreimbursed expenses can potentially be “cured” by making employees whole, which may significantly reduce penalties.
- Penalty Caps for Proactive Employers: If you can demonstrate that your business took all reasonable steps toward compliance before receiving a PAGA notice, penalties may be capped at just 15% of the total amount sought. If you act within 60 days after receiving a notice, that cap rises to 30%. This is a major incentive to get your house in order now rather than waiting.
- Early Resolution Options: Employers can now request an early evaluation conference with a neutral evaluator once a PAGA claim is filed, providing an opportunity to assess the claim’s validity and potentially resolve it before litigation costs escalate.
These changes are genuinely good news for employers who are proactively managing compliance. But here’s the important caveat: PAGA is still very much alive and active. The frequency of PAGA suits has increased since the 2024 PAGA reforms, with 2025 being the worst year yet for PAGA filings. The penalties for violations that aren’t cured remain significant, cases can still stack across your workforce, and businesses that lack documentation or proper procedures will still find themselves in a difficult position. The reforms reward employers who are already doing the right things. They don’t protect those who aren’t.
How a PAGA Claim Actually Happens
Let’s walk through an example case to help you understand what a PAGA case can look like.
Say you run a small business with 30 employees. You pay your people on time, there have been no complaints from your employees, and the business is meeting or even exceeding your goals. All seems to be well.
One day, you have an employee leave, and you don’t think much of it. But as they’re looking at their past pay stubs, they notice some patterns. Meal breaks were missed or late, and premium pay wasn’t consistently given.
It wasn’t malicious, just an operational oversight, but now, there are grounds for the employee to open a PAGA notice.
Now, this single employee has the ability to represent all current and former employees up to one year back. If this is a consistent pattern in the business, you could be charged for every violation per employee. Say the base penalty is $100, and you pay biweekly; suddenly, a single case turns into a six-figure penalty ($100 penalty charge x 30 employees x 26 pay periods = $78,000). And that’s not to mention other violations or claims that might be brought up and the legal fees.
In most PAGA cases, the employer isn’t malicious in their lack of compliance. Many people just don’t consider compliance or HR infrastructure until it becomes an issue, and in a complex legal landscape like California, it can be hard to even know where to begin. But as this example illustrates, an “all is well” mindset until an issue arises can be a very expensive mistake.
How to Reduce Your Risk Before It Becomes a Claim
So what’s the best way to avoid a PAGA notice and reduce your risk? The safest path forward is a proactive one. You don’t want to be caught off guard by a PAGA notice; you and your team should be fully trained to avoid causing a violation in the first place and prepared to handle one with proper documentation if it does arise.
- Have Policies That Are Actually Followed: It’s not enough to simply have an employee handbook or boilerplate policies. You’ll want to develop organizational policies and practices that match the compliance regulations of your area (keep in mind, compliance can vary by city and county) and that are actually followed and enforced by everyone.
- Train Your Managers: Often, risk comes from undertrained managers. Similar to the first point, policies need to be ingrained in your manager’s everyday work so that they’re not accidentally causing risk.
- Regularly Audit Wage and Hour Practice: You may have gaps that you’re not even aware of. Audits can help you identify and correct them before a PAGA notice is ever filed, and under the 2024 reforms, demonstrated audit activity is specifically recognized as evidence of reasonable steps towards compliance, which can help you cap your penalty exposure significantly.
- Document Everything: Strong documentation gives you a defensible position if a claim arises. By keeping thorough reports and documents, you can more easily navigate a PAGA case if it were to arise.
- Work with an HR and Compliance Professional: Navigating California employment law can be complicated and overwhelming. It’s important to reach out for outside support to ensure your policies and practices are actually compliant and meet the needs of your company’s size and location.
You Don’t Have to Navigate PAGA Risk Alone
At HRtoGO, we work alongside California businesses as a proactive compliance partner, helping you identify risks early, build the right systems, and move forward with confidence.
When we work with a business, we start by getting a clear picture of where the real exposure is: your pay practices, your documentation, your manager training, and how all of it holds up under California law. From there, we help you close the gaps before they become a problem.
PAGA exposure is specific to your workforce, your pay practices, and your location. There’s no one-size-fits-all answer. Reach out, and let’s take a look at where your business actually stands.
