California businesses finally caught a break last summer when Sacramento passed long-overdue reforms to the Private Attorneys General Act — the law that allows employees to sue employers on behalf of the state for Labor Code violations. The reforms were designed to give business owners reasonable opportunities to fix problems before they spiral into costly litigation.

Now, 18 months later, a new report by four of the state’s leading employment law firms confirms what many in the business community hoped: PAGA reform progress in the form of faster settlements, more narrowly focused lawsuits and greater collaboration between employers and employees.”

Some of the early successes, according to the report:

Employers doubled down on compliance

The PAGA reforms created a penalty cap for employers who can demonstrate efforts to comply with the law, according to the report. Employers are doubling down on their compliance efforts, conducting audits more frequently, training managers and updating policies proactively.

Narrower standing reduces frivolous suits

Previously, a plaintiff could pursue PAGA claims even if they did not personally experience each of the alleged Labor Code violations asserted in the lawsuit. Lawsuits are now limited to actual violations experienced — reducing broad, inflated claims.

Employers and defense lawyers report they are now routinely knocking out claims early by proving the plaintiff didn’t experience certain violations and adjudicating individual claims first, dramatically shrinking exposure, according to the report. Claims are resolved faster and for less money because legal disputes are narrower and more manageable.

More money, faster resolution for employees

PAGA reforms increased the employee share of penalties from 25% to 35%, with the state receiving 65%. The early resolution process limits the need for extended and costly litigation. In the first year, the state’s Labor and Workforce Development Agency (LWDA) collected $916,000 for employees through their early resolution process.

Reduced penalties for employers

Defense firms report significantly reduced penalties and better posture during settlement negotiations because of reforms including 15% caps on PAGA penalties for good faith compliance; reduced penalties for wage statement violations; reduced penalties for isolated violations and more.

“With early data already showing reduced litigation and stronger compliance, California’s PAGA reforms are delivering on the promise to improve the system for both employers and employees,” according to the California Chamber of Commerce Alert.