PAGA Reform: What Employers Need to Know in 2026

If you run a business in California, PAGA has probably kept you up at night at some point. The Private Attorneys General Act has been one of the most powerful and, frankly, unpredictable tools used against employers in this state for over two decades. But 2024 brought the most significant overhaul the law has seen since it was first enacted, and the effects of those changes are now fully playing out in 2026.

At Brereton, Mohamed & Korte LLP, we work closely with California employers navigating exactly these kinds of shifts. Whether you are facing a wage and hour dispute, a retaliation lawsuit defense, or a broader workplace investigation, understanding how the updated PAGA rules apply to your business is no longer optional. It is necessary.

Here is what you need to know.

What Changed With PAGA in 2024, and Why It Matters Now

California's Legislature passed SB 92 and AB 2288 in June 2024, creating a reformed version of PAGA that took effect immediately. The reforms addressed some long-standing employer complaints while keeping the law's core enforcement mechanism intact.

The most important changes include:

Standing requirements tightened. Under the old version, any aggrieved employee could file a PAGA action on behalf of a broad group of workers, even if their own experience was minimally connected to the violations alleged. Under the new rules, a plaintiff must have personally experienced the Labor Code violations they are suing over. This change meaningfully limits the scope of representative actions.

Penalty caps introduced for good-faith employers. Employers who take reasonable steps to comply with California labor law can now cap their PAGA exposure at a lower tier of penalties. Specifically, if you have a compliant written policy and can show that the violation was isolated or inadvertent, the financial consequences are significantly reduced.

Cure periods expanded. Employers now have a more structured opportunity to fix violations before a lawsuit proceeds. This includes a 65-day cure period after receiving a PAGA notice, during which you can proactively address the problem, potentially avoiding litigation altogether.

Injunctive relief added. Courts can now order injunctive relief in PAGA cases, not just monetary penalties. This means courts can require employers to change practices, not just pay fines.

Increased LWDA share. The Labor and Workforce Development Agency now receives 65 percent of PAGA penalties, up from 75 percent going to workers in some prior structures. The split now more directly funds state enforcement priorities.

What Has Not Changed

Despite the reforms, PAGA remains a serious legal exposure for California employers. Here is what stayed the same:

• Employees can still sue on behalf of themselves and other current or former employees for a wide range of Labor Code violations

• Attorneys' fees continue to be available to prevailing plaintiffs, meaning the economics still strongly favor employee-side litigation

• There is no cap on the number of employees a single PAGA action can cover

• Wage and hour violations, including missed meal periods, rest breaks, and overtime miscalculations, remain the most common triggers

If you receive a PAGA notice, do not treat it as a formality. It is a litigation threat that deserves immediate attention from an employer retaliation attorney or employment defense counsel.

How PAGA Connects to Wrongful Termination and Retaliation Claims

This is where employers often get caught off guard. Many PAGA actions do not arrive alone. They are frequently accompanied by individual claims, including wrongful termination claims and claims of employer retaliation.

Here is a common scenario: An employee files a complaint internally about unpaid overtime. The employer, frustrated, disciplines or terminates that employee. Now you have a PAGA action tied to the underlying wage violation AND a retaliation lawsuit defense situation on your hands. These claims can reinforce each other, making the overall case harder to resolve.

Working with wrongful termination defense lawyers who also understand PAGA is important precisely because these cases so often overlap. You need a coordinated defense strategy, not separate siloed responses.

The Role of Workplace Investigations

One of the most underutilized tools in an employer's toolkit is the timely, well-documented workplace investigation. Under the reformed PAGA structure, employers who can demonstrate they responded promptly and in good faith to internal complaints have stronger footing when negotiating penalty reductions or cure provisions.

A proper workplace investigation does several things:

It creates a contemporaneous record. If a dispute later becomes a PAGA action or a retaliation claim, having documentation of what you knew, when you knew it, and what you did in response is enormously valuable.

It signals good-faith compliance. Courts and opposing counsel notice when employers have taken complaints seriously. That record influences settlement negotiations and, if the case goes to hearing, the judge's view of your conduct.

It protects against retaliation claims. One of the fastest ways to turn a wage claim into a retaliation lawsuit is to mishandle the investigation process. Treating the complaining employee differently after they raise a concern is the kind of fact pattern that drives employer retaliation law cases. A structured investigation, handled properly, reduces that risk.

Practical Steps Employers Should Take Right Now

Given where the law stands in 2026, here is what we typically advise employer clients:

First, audit your wage and hour practices. Many PAGA claims are based on technical violations that employers did not even realize were happening. Meal period timing, rounding policies, expense reimbursements, and piece-rate calculations are all common problem areas.

Second, review your employee handbook and written policies. Under the reformed law, having documented, legally compliant policies supports your ability to seek reduced penalties.

Third, take PAGA notices seriously from day one. The 65-day cure period is an opportunity, but it is also a deadline. Missing it can cost you the chance to resolve the matter before litigation begins.

Fourth, train your managers. Most retaliation claims and wrongful termination defense situations trace back to a manager who reacted badly to an employee complaint. Training on how to respond appropriately when an employee raises a concern is one of the best risk-reduction investments you can make.

Fifth, consult with an employer defense attorney before you respond to any PAGA notice. The response you give, including how you characterize the alleged violations and what remedial steps you take, can affect your legal exposure significantly.

Working With Brereton, Mohamed & Korte LLP

Our employment team has worked with California employers across industries, from small businesses to mid-size companies navigating complex labor disputes. We handle employer defense matters including PAGA litigation, retaliation lawsuit defense, wrongful termination defense, and workplace investigations.

If your business has received a PAGA notice, is facing a retaliation claim, or simply wants to get ahead of compliance risks before they become litigation, we are here to help. Contact our Santa Cruz office at 831-429-6391 or reach out through our website to schedule a consultation.

Frequently Asked Questions

1. What is PAGA and why does it affect my business?

PAGA stands for the Private Attorneys General Act. It allows employees to file lawsuits on behalf of themselves and other workers to recover civil penalties for California Labor Code violations. Instead of waiting for a state agency to act, employees become private attorneys general. For employers, this means any wage and hour misstep can become a representative lawsuit covering your entire workforce.

2. What changed in the 2024 PAGA reforms?

The 2024 reforms tightened standing requirements, so plaintiffs must have personally experienced the violations they are claiming. They also introduced tiered penalty structures that reward employers who have compliant policies, expanded cure periods to 65 days, and added the ability to seek injunctive relief. These changes give compliant, good-faith employers real tools to limit their exposure.

3. Can I still be sued under PAGA even if I fix the violation?

Potentially, yes, depending on timing. If a PAGA notice has already been filed and you fix the violation after the cure period has passed, the lawsuit can still proceed. This is why responding quickly to a PAGA notice during the cure window is so important.

4. How are PAGA penalties calculated?

Penalties under PAGA are generally $100 per employee per pay period for an initial violation and $200 per employee per pay period for subsequent violations. In a workplace with many employees and ongoing violations, these figures can add up to millions of dollars quickly. The 2024 reforms introduced reduced penalty amounts for employers who can show they had compliant policies and took good-faith steps to comply.

5. What is the difference between a PAGA claim and a class action?

PAGA actions are representative claims, but they are not the same as class actions. Class actions require court certification and have procedural protections for defendants that PAGA lacks. PAGA allows a single employee to represent all current and former employees without a certification process. The 2024 reforms introduced some limitations, but PAGA remains procedurally easier to file than a class action.

6. What triggers a retaliation lawsuit after a PAGA complaint?

Under employer retaliation law in California, it is illegal to discipline, demote, or terminate an employee because they filed or participated in a PAGA action, complained about Labor Code violations, or cooperated with a workplace investigation. If a manager responds negatively to an employee who raised a wage complaint, even informally, that can become the factual basis for a retaliation claim layered on top of the original PAGA action.

7. How can wrongful termination defense lawyers help in a PAGA case?

Wrongful termination defense lawyers can help employers evaluate whether a termination decision might be characterized as retaliatory in the context of a PAGA claim. They can also help you build a record showing the termination was based on legitimate, documented reasons unrelated to any protected complaint. The earlier you involve experienced defense counsel, the more options you typically have.

8. Does having an employee handbook really reduce PAGA exposure?

Yes, significantly. Under the 2024 reforms, employers who can demonstrate they had a written policy addressing the alleged violation and that the violation was isolated rather than systemic are eligible for reduced penalty tiers. A legally reviewed, up-to-date handbook is one of the most cost-effective forms of liability protection available to California employers.

9. What should I do if I receive a PAGA notice?

Do not ignore it and do not respond without legal advice. Review the notice carefully to understand exactly which Labor Code violations are alleged. Contact an employer defense attorney immediately to evaluate whether the cure period applies, what steps you can take to remediate the issue, and how to respond strategically. Your response in the first 65 days can materially affect your exposure.

10. How is employer retaliation law applied in California in 2026?

California's retaliation protections remain among the broadest in the country. Employees are protected when they report violations internally, file PAGA notices, cooperate with government investigations, or even informally complain to a supervisor. Adverse employment actions taken close in time to protected activity raise a presumption of retaliation that employers must rebut with clear, documented evidence of a legitimate reason for their decision.