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California’s Private Attorneys General Act (PAGA) has long created significant potential liability for employers. But a recent California Court of Appeal decision serves as an important reminder: the maximum statutory penalty is not necessarily the penalty a court will impose, particularly when an employer demonstrates good-faith compliance and takes meaningful corrective action.
In Taduran v. Glidewell, the court upheld a PAGA penalty award that was approximately 99% lower than the maximum penalties sought by the employee. The decision highlights why employers should take compliance concerns seriously and act promptly when potential Labor Code violations are identified.
Since 2004, PAGA has allowed employees to pursue civil penalties for California Labor Code violations on behalf of themselves, the State of California, and other allegedly aggrieved employees.
Claims may involve violations such as:
PAGA establishes civil penalties for Labor Code violations, although some provisions of the Labor Code contain their own specific penalty amounts.
Importantly, Labor Code section 2699 also gives courts discretion to reduce PAGA penalties when the maximum penalty would result in an award that is unjust, arbitrary, oppressive or confiscatory.
Abraham Taduran brought a PAGA action against his former employer alleging multiple Labor Code violations, including violations involving wage statements, overtime pay and rest periods.
While the parties agreed to many of the facts surrounding the violations, a major issue at trial was the appropriate amount of civil penalties.
Taduran sought approximately $55.9 million in statutory penalties, along with approximately $1.57 million in attorneys’ fees.
The employer argued that imposing the maximum penalties would be inappropriate given the nature of the violations and the circumstances surrounding them.
The trial court agreed.
Instead of awarding the approximately $55.9 million requested, the court awarded $515,955 in PAGA penalties, roughly 99% less than the maximum amount sought. The court also awarded $733,440 in attorneys’ fees.
Why Were the Penalties Reduced?
Several factors influenced the court’s decision.
The employer had taken corrective action after the PAGA claim was filed, including correcting its wage statements. The employer also demonstrated a willingness to address other identified violations and compensate employees who had been underpaid.
The trial court further concluded that many of the violations were relatively technical and narrow and resulted in limited actual harm to employees.
The Court of Appeal upheld the reduced penalty award and confirmed that trial courts have broad discretion under Labor Code section 2699 to award a lesser amount of PAGA penalties when appropriate. The court also confirmed that trial courts are not required to follow a particular mathematical formula when determining the appropriate reduction.
The decision provides an important lesson for California employers: how an employer responds to a potential violation that can matter.
When an employer receives a PAGA notice or otherwise learns of a possible Labor Code violation, it should consider taking immediate steps to:
Corrective action does not automatically eliminate PAGA liability, but Taduran demonstrates that an employer’s good-faith response, the nature and severity of the violations, and the actual harm to employees may influence the ultimate penalty assessment.
Although the PAGA reforms enacted in 2024 did not govern the violations at issue in Taduran, those reforms make proactive compliance efforts even more significant for California employers.
Under the reformed PAGA framework, employers may qualify for substantial limitations on potential penalties when they take “all reasonable steps” to comply with the Labor Code.
Depending on the circumstances and timing, reasonable steps may include conducting periodic payroll audits, maintaining lawful written policies, training supervisors, correcting identified problems and taking appropriate corrective action.
The reforms therefore give employers another reason not to wait until a PAGA notice arrives before reviewing their practices.
The biggest takeaway from Taduran is not that employers should expect courts to reduce PAGA penalties by 99%. The outcome of every case depends on its individual facts.
Instead, the decision reinforces the value of maintaining a documented record of good-faith compliance.
Employers should periodically review their:
Identifying and correcting a problem before it develops into a larger claim can significantly reduce risk. And when an issue does arise, an employer that can demonstrate prompt investigation, corrective action and an ongoing commitment to compliance may be in a much stronger position than an employer that ignored the problem.
PAGA continues to be a significant compliance concern for California employers, even after the 2024 reforms. Regular wage-and-hour reviews can help employers identify potential problems before they become costly claims.
Centralize HR can assist employers with proactive HR compliance reviews, wage-and-hour practices, policy development, supervisor training and other preventative compliance measures.
If your organization has questions about its current employment practices or would like assistance reviewing areas of potential exposure, contact Centralize HR to discuss how we can help strengthen your compliance efforts.
This article is provided for general informational purposes only and is not intended to constitute legal advice. Employers facing an actual or threatened PAGA claim should consult qualified California employment counsel.
