Good News for California Employers – PAGA Reform Is Here!

Jaimee Wellerstein, Esq., Bradley, Gmelich & Wellerstein, LLP, CALSAGA Legal Advisor

California employers can breathe a sigh of relief (for once)! On June 27, 2024, California Gov. Newsom signed Assembly Bill (AB) 2288 and Senate Bill (SB) 92, significantly reforming the 20-year old Private Attorneys General Act of 2004 (PAGA). While employers may not have gotten rid of this one-sided adversary, they’ve finally been given some tools to defend PAGA claims. As a result of this new law, the November ballot initiative to repeal PAGA has been withdrawn.

The PAGA reform will apply to civil actions brought on or after June 19, 2024, and will not apply to matters in which notice was filed before June 19, 2024.

Here are the highlights about PAGA reform:

Standing

AB 2288 provides that a plaintiff must have personally suffered each Labor Code violation they seek to pursue on behalf of other aggrieved employees within one year of filing the required administrative notice (PAGA Notice) with the California Labor & Workforce Development Agency (LWDA). This is a significant win for employers as previously, any employee that suffered even one Labor Code violation was entitled to file a PAGA lawsuit for all alleged violations, even for those the employee did not suffer.

PAGA Penalties

AB 2288 reforms PAGA’s penalty structure by incorporating new caps and reductions, as follows:

1. For employers who proactively take steps to comply with the Labor Code before receiving a PAGA notice, the maximum penalty that can be awarded is 15% of the applicable penalty amount.
2. For employers who take steps to fix policies and practices after receiving a PAGA notice, the maximum penalty that can be awarded is 30% of the applicable penalty amount.

Examples of such reasonable steps include, but are not limited to, conducting periodic payroll audits and taking action in response to the results of those audits, disseminating lawful written policies, training supervisors on applicable Labor Code and Wage Order compliance, and/or taking appropriate corrective action with regard to supervisors as needed. Whether or not the employer took reasonable steps will be a decision left to the discretion of the court, which can take into account factors such as the size and resources available to the employer, and the nature, severity and duration of the alleged violations.

3. Penalties for wage statement violations under Labor Code Section 226 that do not cause injury (i.e. misspelling of company name or forgetting to add “Inc.” on the wage statement) will be capped at $25 per employee per pay period. Note: there is no cap on penalties for a failure to provide wage statements.
4. The penalty for isolated errors that do not extend beyond the lesser of 30 days or four consecutive pay periods will be capped at $50.
5. Penalties will be reduced by 50% for employers who pay employees on a weekly basis (such as private patrol operators).
6. Creates a new penalty ($200 per pay period) if an employer acted maliciously, fraudulently, or oppressively. However, this penalty will be assessed only after (1) a court or agency “has issued a finding or determination to the employer that its policy or practice giving rise to the violation was unlawful” within the 5 years preceding the allegation violation, or (2) the court determines an employer acted maliciously, fraudulently or oppressively.
7. Employees may not receive penalties for “derivative” violations (in other words, PAGA penalties when an employee has already received penalties for the underlying violation) for (1) failure to timely pay wages at termination (i.e., Labor Code §§ 201-203); (2) failure to timely pay wages during an employment (i.e., Labor Code § 204) if the violation was neither willful nor intentional; or (3) wage statement violations (i.e., Labor Code § 226) that are neither knowing or intentional, or a failure to provide a wage statement.
8. The allocation of penalties to the LWDA will decrease from 75% to 65%.
9. The allocation of penalties to the aggrieved employees will increase from 25% to 35%.

Employer Cure Provisions

The reform contains various cure provisions and separate processes for small and large employers, as follows:

Small employers (with fewer than 100 employees during the period covered by the PAGA Notice) may submit a confidential proposal to LWDA to cure the alleged violations. If deemed necessary, the LWDA will have the ability for a conference with the parties. The employer will be provided time to complete the cure, and the employee will be given an opportunity to respond. All proceedings will be deemed confidential.

Large employers (with at least 100 employees during the period covered by the PAGA Notice), will be able to request an early evaluation conference, which will include a statement regarding whether the employer intends to cure any or all of the alleged violations, and a request for a stay of court proceedings. While the proceedings are stayed, the parties will work with a neutral evaluator assigned by the court through a multistep process designed to help resolve the dispute.

Importantly, an employer may only use the notice and cure provisions once in any 12-month period for violations of the same provisions set forth in the PAGA Notice. 

Strengthening Enforcement Agency

The Administration will pursue a trailer bill to give the California Department of Industrial Relations (DIR) the ability to expedite hiring and filling vacancies to improve and expedite enforcement of employee labor claims.

Judicial Discretion (Manageability)

AB 2288 expressly provides the courts with the power to manage PAGA claims, including the discretion to limit the evidence to be presented at trial or “otherwise limit the scope of any claim filed pursuant to this part to ensure that the claim can be effectively tried.”

Injunctive Relief

For the first time, AB 2288 allows PAGA plaintiffs to seek injunctive relief.

Employer Takeaway

PAGA reform should be viewed as an opportunity – employers are given the chance to lower and cap potential exposure, and in some cases, cure the violations before penalties even arise. The new law is intended to incentivize employers to be proactive and stay compliant, so you are encouraged to take action immediately.

Employers should become familiar with the new law. Take reasonable steps to become compliant, including conducting regular audits, ensuring policies and procedures are lawful and disseminated to employees (and documented), train (and retrain) supervisors on all applicable wage and hour issues, pay employees correctly, and correct/modify/change anything, as needed.

If you have any questions about how this new law may affect your business or need assistance conducting audits, preparing compliant policies or revising your practices or policies, please contact your attorneys at Bradley, Gmelich & Wellerstein LLP. We are here to help.

Jaimee K. Wellerstein, Esq. is a Partner and the firm’s Employment Team Head. Representing employers in all aspects of employment law, Ms. Wellerstein collaborates with her clients to develop proactive business and legal strategies to try to avoid workplace conflict and employment disputes. She provides legal advice and counsel to numerous businesses, including conducting individualized training programs for both management and employees.

Ms. Wellerstein performs internal audits of her clients’ employment practices to ensure compliance with the rapidly-changing world of employment laws, and guides investigations of employee allegations regarding harassment, discrimination, and employee misconduct. When litigation cannot be avoided, Jaimee K. Wellerstein aggressively defends her clients against employment law claims in the state and federal courts, as well as at administrative hearings, arbitrations, and mediations. Having defended numerous representative and individual lawsuits on behalf of her clients, Ms. Wellerstein is a skilled litigator and negotiator with a broad spectrum of experience upon which to draw.

A frequent speaker on numerous topics, including employment law and contract law, Ms. Wellerstein regularly conducts training seminars and programs for managers and employees in all areas of employment practices and policies.

Navigating California’s Updated Sick Time Policy with Ease

Jordan Wallach, Belfry Software, CALSAGA Associate Member

Managing paid sick leave in the security industry can be complex. Staying up-to-date on state laws is critical to maintain smooth operations for your California security business.

As of January 1, 2024, California law mandates that employers provide at least 40 hours, or five days, of paid sick leave per year. This applies to full-time, part-time, and temporary workers who:

• Work for the same employer for at least 30 days within a year
• Complete a 90-day employment period before taking any paid sick leave

Common reasons for paid sick leave include recovery from physical/mental illness or injury, seeking medical diagnosis, treatment, or preventative care, and caring for an ill family member.

The new policy is an increase from the previous required paid sick leave of 24 hours or three days. This change requires security companies to adjust their systems to ensure operations aren’t disrupted while complying with the new requirements.

Security firms typically handle numerous contracts, each varying in pay rates, schedules, and qualifications, making sick leave management an added challenge. Typically, companies use multiple systems for scheduling, time tracking, and payroll, leading to manual data transfers that increase the risk of errors and consume significant time. This manual process not only makes compliance more challenging, but also affects employee satisfaction and can lead to higher turnover.

An integrated system would be immensely helpful. By streamlining processes, companies can eliminate unnecessary steps in managing time off and reduce human error.

Belfry’s all-in-one software platform addresses these challenges by integrating scheduling, time tracking, and payroll, simplifying the management of new sick leave requirements – including the granular requirements around accruals and waiting periods.

Employees can request time off through Belfry’s user-friendly interface, and managers can approve these requests and adjust schedules accordingly. Automated time tracking ensures accurate recording of hours worked and sick leave taken, reducing administrative burden and minimizing errors.

Just because the updated California sick leave policy adds complexity for security firms doesn’t mean you have to add extra complexity to your operations. Belfry’s comprehensive platform enables businesses to navigate these changes smoothly — ensuring compliance, reducing errors, and enhancing overall efficiency.

Jordan Wallach is the Co-Founder and CEO of Belfry, the modern operating system for security guard services companies and a CALSAGA Member. Prior to founding Belfry, Jordan was a consultant at McKinsey & Company and a Product Manager at Microsoft, building software used by millions of people worldwide. He has a bachelor’s degree in Data Science from Stanford University.

How a 24/7 Dispatch Service Revolutionized My Role as a High-Level Manager in the Security Industry

Jacqueline King, Guardian Secure Solutions LLC, CALSAGA Member

As a high-level manager in a security company that operates around the clock, my phone never seemed to stop ringing. From early morning until late at night, our 24/7 line was inundated with calls. Employees calling out from their shifts, seeking information about their posts, notifying us of incidents on site, and inquiring about their paychecks and 401k, among other HR and operational inquiries. The constant stream of calls made it challenging to focus on larger projects, expand our business, and, quite frankly, to sleep.

However, everything changed when we hired a U.S. based 24/7 dispatch service. This decision has been a game-changer for our company, both professionally and personally.

Streamlining Operations and Enhancing Efficiency

Our partnership with a technology based Security Operations Center (SOC) service has taken over a substantial portion of call management. They screen calls and handle many of them directly, accessing our shared platforms to provide employees with site information, dispatch calls for our patrol division, and log all employee communications meticulously. This has streamlined our operations and significantly reduced the volume of calls that reach me and other managers.

The ability to handle a wide range of inquiries means that our employees receive the information they need promptly, and issues are resolved quickly. This efficiency has not only improved our operational workflow but has also enhanced our employees’ satisfaction and productivity.

Data-Driven Insights for Better Decision-Making

One of the standout benefits of our dispatch and SOC partnership is their capability to provide detailed statistical data. They track peak call volume times for clients, employees, and business inquiries. This data has been invaluable in helping us understand patterns and trends, enabling us to make informed decisions about resource allocation and process improvements.

With these insights, we can anticipate busy periods and ensure we have adequate coverage, thereby maintaining our service quality and meeting our clients’ expectations consistently.

Focusing on Growth and Innovation

With our qualified SOC operators managing routine and emergency calls, I have been able to redirect my focus to more strategic initiatives. I now have the bandwidth to work on expanding our business, exploring new market opportunities, and developing innovative security solutions. This shift in focus has already started to pay off, as we have been able to secure new contracts and enhance our service offerings.

Reclaiming Personal Time

Perhaps the most significant change has been in my personal life. The reduction in after-hours calls has allowed me to reclaim precious family time and, importantly, to get a good night’s sleep. The peace of mind that comes from knowing that a reliable team is handling our 24/7 line cannot be overstated.

I now have the energy and clarity to tackle the challenges of each day, both at work and at home. The balance I have achieved has made me a more effective leader and a happier individual.

Hiring a U.S. based Security Operations Center as our 24/7 dispatch service has revolutionized my role as Chief of Staff. The operational efficiency, data-driven insights, and personal time reclaimed have been transformative. This partnership has not only freed up my time but has also positioned our company for growth and innovation. If you’re in a similar high-pressure role, I highly recommend considering a dispatch service. It might just be the change you need to take your business and personal life to the next level.

This was written by Jacqueline King, Chief of Staff with GPF. Just one of our happy clients here at Guardian Secure Solutions LLC. If you are ready to learn more about how a shared Security Operations Center can revolutionize your role, visit us at https://www.guardiansecuresolutions.com/ or follow us on instagram (https://www.instagram.com/guardiansecuresolutions?igsh=OGQ5ZDc2ODk2ZA%3D%3D&utm_source=qr) 

Private Equity Investments in the Security Industry

Joe Yacano, TEAM Software by WorkWave, CALSAGA Network Partner

Private equity firms that specialize in buying and managing companies before selling them for a profit have shown increased interest in the security industry due to the resilience security guard companies have shown during recent economic downturns, their recurring revenue model and consistent profitability in comparison to other industries.

Economic researchers who advise private equity firms are predicting a rebound in private equity deals later this year due to subsiding inflation, which means interest rates are expected to fall and could cause the cost of capital to be less expensive for them.

Business owners in the security sector who are thinking of partnering with a private equity firm should consider the kind of support their business may need to execute growth, in addition to accessing capital, experience and connections that could easily set your company on the path to success. In short, working with a PE firm can be beneficial to your business as long as both parties’ goals and values are in alignment.

What is private equity?

Private equity describes investment partnerships that buy or manage companies using a pool of capital from institutional and accredited investors. Those funds are used to support companies that need financial resources to grow, with the end goal of earning a profit.

In most cases, private equity groups (or PEGs) are led by a group of executives who have experience with running large businesses and seek out partnerships where their private equity firm can buy or manage companies that are typically unlisted on a stock exchange.

Typically, these investment firms hold onto companies for about 5 to 6 years before reselling, and unlike venture capitalists, choose to invest in relatively mature companies with a solid business plan.

Partnering with a private equity firm

Security business owners who are thinking about working with a private equity firm should spend time making sure that the investment group is a good fit for both parties. Consider working with firms that would make a good partnership and accomplish that task by getting to know the investors, along with their reputations and values, by promoting transparency whenever possible.

Working with a private equity firm could bring specialized expertise that can help a company looking to expand. For example, private equity firms can offer advice on the business strategy, provide industry connections, introduce tech or facilitate entry into new markets. In some cases, a private equity firm may introduce its own management team, which will be capable of offering support when it comes to pursuing fresh initiatives and updated business plans.

Choosing the right partnership

Knowing your level of involvement will also aid in choosing the right buyer for your business. Most private equity firms will want a majority stake in a business, however. Naturally, full ownership will give a private equity firm full control of business decisions, but some investors will want the business owner to stay on board in a consultative role. Partial ownership could be a good fit for business owners seeking capital investment.

The additional resources gained from partial ownership could take a business to the next level without assuming full financial risk. In this case, the founder would retain some ownership of the business. Alternatively, they may also stay active in the company after the sale is complete.

Although this kind of partnership could set your company on the path to success, it all comes down to making sure both groups are a good fit and that the timing is right. Experts agree, trust your instincts. If you’re not 100% confident in the decision, it’s ok to let potential investors know you’d like to hold off on the decision.

Joe is an experienced Associate Vice President of Sales with a demonstrated history of working in the management consulting industry, and he is an accomplished sales professional skilled in medical devices, biotechnology, healthcare and clinical trial management systems. With his background and experience, he came to WorkWave to develop an enterprise level sales organization and has led the charge on this task for over the past two years.