CALIFORNIA’S EVOLVING PAGA LANDSCAPE: What RIA Employers Need to Know

California’s Private Attorneys General Act (PAGA) continues to reshape the state’s Labor Code enforcement landscape more than two decades after its enactment.  Despite significant statutory reforms in 2024, PAGA litigation is not slowing down—in fact, new records were set in 2024 and 2025.  As employers move further into 2026, understanding PAGA’s trajectory, recent case law, and the impact of statutory amendments is essential for effective human resource risk management.

Surge in PAGA Filings

Enacted in 2004, PAGA filings have grown dramatically since the early years of the statute.  The California Department of Industrial Relations reports that PAGA notices submitted to the Labor and Workforce Development Agency (LWDA) increased from 11 in 2006 to 7,780 in 2023—an exponential rise that underscores the law’s expanding influence.  This surge reflects PAGA’s design: a mechanism that “deputizes” private citizens (thus the act’s title) to sue employers for Labor Code penalties on behalf of themselves, other “aggrieved employees,” and the State.  A major milestone occurred in 2014, when the California Supreme Court issued its landmark ruling in Iskanian v. CLS Transportation Los Angeles.  In that decision, the court held that representative action waivers in arbitration agreements were “contrary to public policy and unenforceable as a matter of state law”.  By shielding PAGA claims from arbitration-based defenses, Iskanian accelerated litigation: filings jumped from 1,606 in 2013 to 4,530 in 2014.

PAGA enables employees to “stand in the shoes of” the state’s Attorney General (again, thus its name) to recover civil penalties for Labor Code violations.  Penalties are distributed such that aggrieved employees collect 25% of the penalties assessed, while 75% is remitted to the LWDA.  No wonder PAGA filings have exploded!  Even minor violations—such as technical pay stub errors—could escalate into high exposure representative claims covering hundreds or thousands of employees.  PAGA’s legal construction effect has, therefore, contributed to frequent, high value settlements.  According to the California Business and Industrial Alliance (CABIA), for the year 2025, the average PAGA settlement was $911,578 on top of the average attorney payout of $305,954.

Judicial Challenges and Reinforcement

The U.S. Supreme Court’s 2022 decision in Viking River Cruises, Inc. v. Moriana marked the first significant challenge to the PAGA framework.  However, this setback for plaintiffs was short lived.  In 2023, the California Supreme Court reinstated PAGA’s broad reach in Adolph v. Uber Technologies, Inc.  There, the court concluded that a plaintiff compelled to arbitration on individual claims retains standing to pursue representative PAGA claims in court—as long as the employee remains an “aggrieved employee”.  By allowing plaintiffs to return to court after arbitration and continue pursuing non individual claims, Adolph turned arbitration agreements into “a mere hurdle rather than a bar” to representative PAGA actions.

2024 Statutory Reforms: Pointing to Pro-Active HR Risk Management

Over the threat of sending the subject to California voters for repeal, Sacramento instituted statutory reforms to PAGA in 2024 PAGA.  The amendments established rewards for employers who proactively comply with the Labor Code, in summation as follows:

1. Now, there are penalty reductions for employers who demonstrate compliance. The statute now caps penalties at:
   • 15% if the employer took “reasonable steps” before receiving a PAGA notice
   • 30% if the employer took those steps after receiving a notice (“source text”)
2. The law now provides opportunities to cure violations for those employers who have taken “Reasonable Steps”. These include:
   • Conducting periodic payroll audits
   • Disseminating lawful written policies
   • Training supervisors
   • Taking corrective action when issues arise (“source text”)

Courts evaluate reasonableness under the totality of the circumstances, including employer size and resources, the severity and duration of violations, and whether systems existed to prevent or correct issues (“source text”).

Practical Steps for Employers in 2026

To minimize risk and take advantage of the new penalty reduction framework, employers should adopt a proactive compliance strategy.  According to the source text, best practices include:

1. Regularly reviewing wage and hour policies and conducting payroll audits.
2. Training supervisors and managers on Labor Code requirements.
3. Maintaining current written policies and ensuring they are implemented.
4. Responding immediately to any PAGA notice received.

These steps not only reduce legal exposure but also support a strong defense under the new statutory standards.

Conclusion

According to the 2024 Small Business Trends Report, 37% of small businesses (defined as employers with fewer than 50 employees) were hit with an employee lawsuit in 2024.  Employment discrimination comprised 45% of all small business lawsuits.  As PAGA filings continue at record highs, employers must adopt robust, proactive compliance programs to navigate the evolving PAGA landscape.  Securing Employment Practices Liability insurance is important – even if you have only one employee – but what is even more critical is having a pro-active approach to managing the risk.  Seek input from a qualified risk management partner.

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