California’s wage-and-hour landscape just shifted—finally, in a way that gives diligent operators real leverage. In this episode, employment attorney Anthony Zaller breaks down how 2024 PAGA reform can cap exposure for prepared employers, why filings are still hot, and the concrete audits, records, and training that turn a “bet-the-company” risk into a manageable line item. From quarterly payroll audits to 15-minute labor matrices and the right moment to bring HR in-house, this conversation translates legal risk into operational math.
The law fundamentally changes the economics of litigation by capping certain penalties at 15 percent—but only for employers who take proactive steps to comply with wage-and-hour law. That means quarterly audits, updated policies, documented supervisor training, and corrective actions aren’t just best practices anymore; they’re financial lifelines.
Zaller explains that the stakes remain high. “Treat wage-and-hour as bet-the-company litigation. Get that right first,” he says. Before reform, even a mid-sized operator could face multi-million-dollar exposure. For example, 100 employees over a two-year period could generate more than $2 million in penalties for simple per-paycheck violations.
Ironically, the relief has coincided with an uptick in PAGA activity. Public records show filings rose from roughly 3,700 in 2016 to over 10,000 in 2024. The volume hasn’t slowed post-reform. In fact, plaintiffs’ attorneys may be filing more cases to make up for lower per-case recoveries. January 2024 alone saw nearly 800 letters filed with the state labor commissioner.
For operators, this means reform is not an excuse to relax—it’s a call to systematize compliance before the letter arrives.
What does that look like? For starters, Zaller recommends running quarterly payroll audits. These can be handled internally and focus on ensuring time is properly recorded, overtime is calculated, and pay stubs comply with Labor Code §226, which requires nine specific items. Missing even one can result in $200 penalties per employee, per paycheck, a number that quickly snowballs.
Policies also need constant attention. Meal and rest break rules, overtime policies, arbitration agreements, and new-hire documents should be refreshed at least annually. To meet the reform’s 15 percent cap, employers must also train supervisors on wage-and-hour compliance and keep a paper trail—something best done through a learning management system that tracks attendance and issues certificates.
Just as critical is recordkeeping. “Being able to have agreements and training records on the tip of your fingers is huge in defending these claims,” Zaller notes. Gone are the days of rummaging through storage lockers of paper files. Digitized, locked-down personnel records not only save time but also prevent gaps that plaintiffs’ lawyers exploit.
Even as legal risks mount, operators face the equally daunting reality of rising wages. California’s $20 minimum wage for fast food workers, with potential increases on the horizon, has made labor the single largest cost center for many restaurants. Zaller observes that the most successful operators now build labor matrices tied to revenue or entrée counts, forecasting demand in 15-minute increments and enforcing schedule guardrails so managers cannot overshoot.
“Operators are getting super granular,” he says. “And it’s unfortunate, because who really pays the cost of higher wages are the employees whose hours get cut.”
For small operators, the idea of audits, training logs, and digital compliance systems may feel overwhelming. But Zaller points to a headcount threshold as a guide. Around 25 employees, it’s wise to begin outsourcing HR support. By 50 employees, he argues, it’s time to have someone in-house. The complexity of wage laws, paid leave, and local ordinances simply grows too great to manage off the side of a founder’s desk.
Technology is beginning to ease the burden. AI-assisted payroll audits, still in early stages, already show promise in crunching numbers in minutes instead of hours. Learning management systems streamline supervisor training and preserve digital trails. Restaurant management software increasingly integrates labor forecasting with scheduling guardrails.
Still, Zaller cautions against over-reliance. AI may be excellent at math, but “validate outputs against known rules” before relying on them in a legal defense.
The numbers tell a clear story: 10,000+ filings a year, $200 penalties per paycheck, multi-million-dollar exposures—and now a pathway to cap damages at 15 percent. For operators, the opportunity is real, but only if compliance becomes part of the daily routine.
As Zaller puts it, “It’s not a windfall. Employers have to do some active steps to get the benefit. But they should have been doing those steps anyway.”
Connect with Anthony Zaller
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