California’s 2024 reform of the Private Attorneys General Act (PAGA) is starting to reshape the way parties approach mediation in wage-and-hour disputes. While much of the public discussion has focused on compliance incentives and early procedural tools, the most immediate impact is happening at the mediation table—where parties assess value, test arguments, and weigh resolution against continued litigation.
The reforms don’t eliminate PAGA claims, but they do change how they are evaluated, defended, and ultimately settled. For counsel and mediators alike, the negotiation landscape has shifted.
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1. Penalty Exposure Is More Heavily Contested
Even before the reform, PAGA penalties weren’t fixed. The $100 or $200 per pay period structure served as a default, but courts retained discretion to reduce those penalties when they were considered unjust, arbitrary, or oppressive. The 2024 legislation codifies and expands that discretion by allowing significant reductions where employers can show proactive compliance.
Under the new framework, penalties may be reduced by up to 85% if the employer took “all reasonable steps” to comply with the Labor Code before receiving a PAGA notice. If efforts were taken within 60 days after notice, the reduction may still reach 70%.
In mediation, these provisions have opened up new lines of argument:
- Employers are documenting audits, manager training, self-audits, or policy revisions as evidence of reasonable efforts to comply.
- Plaintiffs are challenging the timing, scope, or effectiveness of those efforts, or asserting that compliance measures were inadequate or reactive.
- Mediators are often asked to weigh how a court might evaluate those arguments, which in turn affects settlement positioning.
The upshot is that the penalty range is no longer as tightly tethered to a mathematical formula. Exposure is more negotiable, which creates both complexity and opportunity for resolution.
2. Standing Arguments Are Narrowing the Scope
The reform also introduced a more stringent standing requirement. A PAGA plaintiff must now have personally experienced each specific Labor Code violation they are seeking to pursue on behalf of others. This change is beginning to affect how cases are framed and resolved in mediation.
This issue tends to arise in two key ways:
· Defendants may argue that certain categories of claims—such as wage statement or rest period violations—should be excluded if the named plaintiff did not experience the alleged violation directly.
· Plaintiffs may offer additional factual support for their standing on particular claims or agree to limit the scope of representative allegations.
This doesn’t necessarily eliminate a case, but it may reduce its size, value, or complexity. In mediation, this can result in more focused negotiations, narrower releases, and potentially lower settlement ranges, depending on how standing issues are resolved.
3. Early Evaluation May Delay or Redirect Mediation
One of the more novel features of the 2024 reform is the creation of an Early Evaluation Conference (EEC), available in certain cases involving employers with 100 or more employees. The EEC, conducted under court supervision, provides an early-stage opportunity to assess the legal and factual merits of the case, and it triggers a temporary stay of litigation.
While not mandatory, this new process introduces a procedural tool that may affect mediation dynamics:
· Employers may consider pausing or postponing mediation to pursue an EEC, particularly where they believe it could lead to a narrower view of the claims or a lower potential recovery.
· Plaintiffs may weigh the strategic risks of waiting versus settling before judicial input potentially weakens their leverage.
Although the use of the EEC process is still developing, its mere availability introduces a new variable into mediation strategy—especially in larger cases where the parties are sensitive to judicial signaling.
4. Settlements Are Becoming More Tailored
Because the valuation of PAGA claims is now more contested—and because standing and penalty mitigation are fact-sensitive—settlements are no longer as formula-driven. Parties are exploring more customized agreements that address the specific contours of the case.
Emerging trends in mediated resolutions include:
· Agreements that combine monetary relief with non-monetary terms, such as compliance monitoring, training programs, or policy revisions.
· Tiered settlements that account for alternative outcomes based on how a court might evaluate reasonable compliance or standing.
· Narrowed releases that focus only on the claims the plaintiff has clear standing to pursue, rather than global representative settlements.
These more tailored resolutions reflect a growing recognition that one-size-fits-all approaches are less effective under the new law. While settlement is still very achievable, it increasingly depends on thoughtful structuring and clear communication of litigation risk.
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Final Thoughts
The 2024 PAGA reform has added legal and procedural layers that are directly influencing the way cases are being mediated. With reduced penalties now tied to employer compliance, and standing requirements narrowing the scope of representative claims, mediations are less formulaic and more fact-specific.
For employment lawyers and mediators, the changes are creating both new friction points and new opportunities. Mediations now demand a deeper understanding of the statute’s revised provisions, as well as the flexibility to adapt to a broader range of possible outcomes. The incentive to settle remains strong—but how settlements are reached, and what they look like, is evolving.