PAGA PENALTIES AND ATTORNEYS’ FEES SLASHED BY COURT
There are few things California employers dread more than PAGA litigation. The Private Attorneys General Act ("PAGA") generally presents a no-win scenario where employers face substantial legal expenses even when they prevail. Worse yet, employers have no realistic hope of recovering their attorney's fees even when cases are frivolous and brought as money-making schemes.
1. The Taduran Decision
In the May 26, 2026 opinion of Taduran v. James R. Glidewell, Dental Ceramics, Inc., 121 Cal. App. 5th 197, 345 Cal. Rptr. 3d 578 (2026), the California Court of Appeal radically slashed penalties sought by Abraham Taduran, the plaintiff, along with his requested attorney's fees. Even though the case remained costly to defend, it sends a message to plaintiffs' attorneys and mediators that illusions of outrageous penalty and fee requests can be shattered by courts when the facts warrant it. It also offers valuable lessons for employers who wish to mitigate their risks and exposure by implementing aggressive, proactive strategies consistent with their legal obligations.
2. Overview Of Penalties And Fee Reductions
PAGA provides a vehicle for current and former employees to pursue substantial civil penalties against employers for Labor Code violations, even in cases where the alleged violations rely on hypertechnical claims or cause little or no actual economic harm. It is surprising to many that the lion's share of penalty awards is shared by the State of California (which takes 65%) and plaintiffs' attorneys.
In the Taduran case, the trial court exercised its discretion to slash the amount of penalties and attorney fees the plaintiff requested. It reduced the maximum penalty theoretically available under PAGA on a "per employee basis" and rejected the plaintiff's claim that penalty reductions must occur on a "pay period basis." Recognizing that "the Labor Code does not mandate any particular method for reducing a maximum civil penalty," the court radically reduced the civil penalties by over 99% below the maximum allowed by PAGA – which was nearly $56 million.
The court also denied the plaintiff's attorney's request for $1,570,500 in attorney fees, based on a lodestar of $1.047 million and a multiplier of 1.5. The court accepted the lodestar figure, but applied a (negative) modifier of 0.70, resulting in an award of $733,440 in attorney fees. While still substantial, it was less than half the fees requested. The Court of Appeal approved the reduction in requested fees while rejecting the plaintiff's claim that a negative multiplier is impermissible.
Some courts are finally getting a sense that plaintiff's attorneys are hijacking PAGA to exploit a one-sided system that costs businesses billions of dollars that go into the coffers of plaintiff's attorneys and the state, which siphons off 65% of PAGA payments. To benefit from the decision, employers should carefully assess the factors relied upon by the trial court to reduce the penalties and integrate them into their compliance efforts. For greater insights about the law and its built-in biases against employers and businesses, employers are encouraged to read California's Private Attorneys General Act (PAGA) Litigation And Compliance Manual (Fourth Edition) by Attorneys Richard J. Simmons, and Ryan Krueger of Sheppard.
3. Background Facts
In 2018, Taduran filed an amended complaint alleging a single cause of action under PAGA. The lawsuit alleged his former employer, Glidewell, committed eight categories of violations against employees, including violations of California's (1) minimum wage, (2) overtime, (3) rest period, (4) meal period, (5) separation earnings, (6) wage statement, (7) biweekly pay, and (8) record-keeping rules. The plaintiff sought summary adjudication of the wage statement and overtime claims while the employer sought summary adjudication of the wage statement claim.
4. The PAGA Penalty Claims
In 2022, the plaintiff submitted a trial brief asserting that Glidewell was liable on four claims. He asserted that the trial court had summarily adjudicated three issues in his favor, including Glidewell's (1) failure to include information regarding piece-rate pay on wage statements (pay stubs), (2) failure to include the value of non-discretionary bonus pay in the regular rate, and (3) failure to include in overtime pay the value of payments for non-productive time, which was called "Uptime."
a. The Plaintiff Sought Over $55 Million Based On Stipulated Facts
The employer stipulated to liability for rest period violations. The plaintiff thus claimed that the parties had stipulated to all relevant facts and the only remaining issue was the amount of civil penalties to be awarded. He argued that the civil penalties under PAGA totaled $55,985,350. While acknowledging the trial court had discretion to reduce this number, he maintained that the facts did not justify a reduction given Glidewell's failure to pay all wages owed and its significant delay in rectifying admittedly faulty systems.
b. The Employer Sought Reductions In Penalties For "Hypertechnical" Violations
Glidewell had a different view. It argued the court should award a lesser amount than the maximum statutory penalties because the violations were "hypertechnical," "very narrow" and did not warrant a significant penalty. Glidewell framed its penalties reduction arguments by presenting the court options that contextualized penalties so they could be constructed either based on a "per pay period" or "per aggrieved employee" formula.
More specifically, Glidewell proposed that the court award civil penalties of $65 per aggrieved employee on the wage statement issue, for a total award of $100,165. On the rest period issue, it proposed either $0.78 per pay period, for a total of $172,135.86, or $98.91 per aggrieved employee, for a total of $188,819.19. It also proposed either $3.33 per pay period for the uncompensated work time or $6.55 per aggrieved employee, for a total of $29,929.40. As to the bonus pay issue, Glidewell suggested different amounts for the bonus pay, totaling $40,303.89 when calculated per pay period, or $40,300.47, when calculated per aggrieved employee. (A practical observation is warranted. Astonishingly, the amounts proposed by the plaintiff and the employer were far greater than any actual losses experienced by the employees. It also should be pointed out that the greatest beneficiaries of penalty awards are the State of California (which receives a 75% share in PAGA pre-reform cases and 65% in new cases) and the plaintiff's attorneys.)
The plaintiff argued that the reduction requested of more than 99% would be tantamount to an "outright elimination" of the penalty. He argued that Glidewell's violations led to nearly $85,000 in unpaid wages and were continued for months after Glidewell acknowledged liability. He argued that an overly drastic reduction of the civil penalty would frustrate the intent of the law. (This argument was telling. The plaintiff argued that penalties of $56 million (plus over $1 million in attorney fees) were appropriate for an alleged underpayment of $85,000 in wages. The contrast in the harm alleged and the penalty sought is striking.)
5. Trial Court’s Ruling Reduced The Penalties
Following the parties' briefing, the trial court awarded a total of $515,955 in civil penalties for the four Labor Code violations. It provided detailed reasoning for its reduction from the maximum penalty.
As for the wage statement issue, the court noted that the noncompliant wage statements did not result in any unpaid wages. Also, when the incomplete wage statements were supplemented by the production sheets Glidewell provided employees, the combination satisfied the purpose of the Labor Code wage statement requirements. Additionally, the court found that the maximum penalty of $33,199,250 based on $250 per pay period was "enormous" because Glidewell provided weekly rather than biweekly paychecks. Glidewell also corrected the wage statements beginning on March 1, 2019, which was 16 months before the trial court granted summary adjudication. Based on the circumstances, the trial court concluded a penalty above $100,165 would be "unjust arbitrary and oppressive."
On the rest period issue, the court explained this issue was technical. It concerned how Glidewell calculated pay based on fractional rest periods. For example, an employee who took 20 minutes of rest would be credited with 0.33 hours, while an employee who took 40 minutes would be credited with 0.67 hours. Based on rounding, the employee who took 20 minutes of rest would be penalized. Over the relevant five-year period, employees were underpaid an average of $0.26 per pay period, for a total of just $63,464 in unpaid wages. The parties agreed the maximum penalty for this violation was $22,068,700. After finding that Glidewell's method of calculation of rest period wages for piece-rate employees was applied in good faith, it reduced the penalty.
Other facts supporting the reduction included Glidewell's willingness to change the system prior to adjudication and its willingness to pay the affected employees. Based on these circumstances, the court concluded that a penalty of $190,900 (1,909 employees times $100 per employee) was appropriate.
As to the "Uptime" issue, the court explained the violation occurred because Glidewell paid overtime wages based on the regular hourly pay that did not include Uptime pay. Thus, in weeks where the Uptime rate is higher than the regular hourly rate, the overtime wages were underpaid. A total of $7,310 in lost wages occurred translating to $6.55 per employee or $1.11 per pay period. The parties agreed the maximum penalty for this violation is $658,900. The court concluded the relatively "minimal amount of unpaid wages" and Glidewell's "willingness to repay those wages" supported a reduction. It determined a penalty of $167,400 or $150 per affected employee served both the deterrence and punishment functions of the law.
Finally, as to the bonus pay issue, Glidewell did not include the bonuses in the regular rate calculation. A total of $13,433 in lost wages occurred, and the maximum penalty was $58,500. The trial court declined to reduce that penalty.
6. The Attorney Fees Were Also Reduced
The plaintiff requested $1,571,658 in attorney fees, consisting of a 1.5 multiplier on a lodestar amount of $1,047,772, plus $98,138.21 in costs. He argued that higher fees than generated by an hourly rate were warranted based on the alleged "novelty" of his legal theory, counsel's skill and experience, counsel's "lost opportunity" to work on other matters, and contingency risk.
The court awarded $733,440 in attorney fees (less than half the amount sought) and $98,138 in costs. The court accepted the lodestar amount, but noted the amount was based on current billing rates for three attorneys even for legal work performed many years before their billing rates increased. The court looked at billing rates identified in another case that began earlier. The court also considered (1) the relatively straightforward, records-based nature of the claims, (2) the reasonable and expected skill in prosecuting the claims, (3) that the civil penalty award was less than 1% of what the plaintiff sought, and (4) the contingency risk, which weighed in favor of an upward multiplier, but only slightly given that liability of certain claims was established over four years earlier. Based on all these factors, the trial court concluded that a 0.70 multiplier was appropriate to lower the amount.
After a final judgment awarding $515,965 in civil penalties, plus $733,440 in attorney fees and $98,138 in costs was entered, the plaintiff appealed.
7. The Court Of Appeal Agreed With The Reductions In Penalties And Fees
On appeal, the plaintiff argued the court was required to calculate PAGA penalties reductions under Labor Code Section 2699(e)(2) on a per pay period basis, not on a per employee basis. The court of appeal observed that a court may award a lesser amount than the maximum civil penalty specified in the law based on the facts and circumstances of a particular case if to do otherwise would result in an award that is "unjust, arbitrary and oppressive or confiscatory."
The court disagreed with the plaintiff's argument that a reduction must be applied on a per pay period basis because PAGA imposes civil penalties on a per pay period basis. The court determined that Section 2699(e)(2) does not provide a formula for reducing the maximum civil penalty; it merely states that the court may award a "lesser amount." The initial step of calculating the maximum civil penalty is set forth in 2699(f) which provides for calculation on a per pay period basis. However, that does not reference the reduction of a civil penalty, let alone provide any mandatory formula for reduction. Thus, after calculating the maximum civil penalty on a per pay period basis, "the trial court is not precluded from using any reasonable method to reduce that amount, including applying a reduction on a percentage, per pay period or per employee basis."
The plaintiff argued that only a per pay period method deters violations because an employer faced with a per-person award has no incentive to discontinue committing violations because it will be penalized the same whether a violation occurs in one pay period or 1,000 pay periods. The court found this contention unpersuasive. It concluded that the trial court did not abuse its discretion in calculating a reduction on a per employee basis. The court thus affirmed the award of civil penalties.
The plaintiff also challenged the reduction in the attorney fee award and applied a 0.70 multiplier to the requested lodestar. Following a detailed analysis, the Court of Appeal agreed that the trial court properly considered various relevant factors and reasonably arrived at a negative multiplier. It thus affirmed the final judgment.
8. Summary And Practical Thoughts
The business community will not feel sympathy for the plaintiff's attorney who experienced a substantial reduction of more than 99% in the PAGA penalties and over 50% in the attorney fees sought. While the record was ambiguous, it appears that the employer stipulated to liability on a number of issues rather than mounting an aggressive defense of every claim. Although the massive penalties and attorney fees sought were reduced materially, it can be argued that the employer did not challenge the amounts requested by the plaintiff as aggressively as possible.
The decision provides a roadmap that employers can follow when opposing penalties and attorney fees. In this case, the amount of penalties ultimately awarded by the court were less than one percent of those sought by the plaintiff. The Court of Appeal also offered some helpful guidance that can be followed in future cases. It determined that, after calculating the maximum civil penalty on a per pay period basis, a "trial court is not precluded from using any reasonable method to reduce that amount, including applying a reduction on a percentage, per pay period or per employee basis." The language suggests that additional alternatives may be permissible in certain cases.
Overall, the rationales of the trial court and Court of Appeal are important for employers to understand and implement in appropriate cases. The case can also be cited in efforts to settle or mediate cases. Employers confronted with PAGA litigation should consult with their attorneys about the Taduran decision to determine if it may provide arguments they can and should pursue. Employers and their attorneys are also encouraged to consult Castle Publication's leading text on the subject, California's Private Attorneys General Act (PAGA) Litigation And Compliance Manual.
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Richard J. Simmons is a Partner in the law firm of Sheppard, Mullin, Richter & Hampton LLP in Los Angeles. He represents employers in various employment law matters involving litigation throughout the country and general advice regarding state and federal wage and hour laws, employment discrimination, wrongful discharge, employee discipline and termination, employee benefits, affirmative action, union representation proceedings, and arbitrations. Mr. Simmons received his B.A., summa cum laude, from the University of Massachusetts, where he was a Commonwealth Scholar and graduated in the Phi Kappa Phi Honor Society. He received his J.D. from Berkeley Law at the University of California at Berkeley where he was the Editor-in-Chief of the Industrial Relations Law Journal, now the Berkeley Journal of Employment and Labor Law.
Mr. Simmons argued the only case before the California Supreme Court that produced a victory for employers and business in 2018. He was recently recognized as the Labor and Employment Attorney of the Year by the Los Angeles Business Journal and was inducted into the Employment Lawyers Hall of Fame. He has lectured nationally on wage and hour, employment discrimination, wrongful termination, and other employment and labor relations matters. He is a member of the National Advisory Board to the Berkeley Journal of Employment and Labor Law, published by Berkeley Law at the University of California at Berkeley. He was also appointed by the California Industrial Welfare Commission as a member of three Minimum Wage Boards for the State of California.