Navigating the Shifting Landscape of Wage & Hour and PAGA Litigation
The year 2025 proved pivotal for employment law, particularly concerning wage and hour disputes and California’s Private Attorneys General Act (PAGA). As we move further into 2026, businesses face a complex legal environment demanding proactive risk management. Recent publications from Duane Morris LLP – the Wage & Hour Class and Collective Action Review – 2026 and the Private Attorneys General Act Review – 2026 – offer crucial insights into these evolving trends.
The Persistent Rise of Wage & Hour Claims
Wage and hour litigation continues to be a significant threat across all industries. The Fair Labor Standards Act (FLSA) remains a primary source of disputes, with misclassification of employees (exempt vs. non-exempt) consistently topping the list of violations. A recent report by Littler Mendelson found that FLSA lawsuits increased by 15% in 2025, largely driven by claims related to overtime pay and off-the-clock work.
Pro Tip: Regularly audit your timekeeping practices and job descriptions to ensure accurate employee classification. Even unintentional misclassification can lead to substantial penalties.
Beyond FLSA, state-level wage and hour laws are becoming increasingly complex. States like New York, California, and Illinois are enacting stricter regulations regarding pay transparency, sick leave, and meal/rest breaks. This patchwork of laws requires businesses with a national footprint to maintain robust compliance programs tailored to each jurisdiction.
PAGA Under Pressure: What Employers Need to Know
California’s PAGA, which allows employees to sue on behalf of the state to recover penalties for Labor Code violations, has faced significant legal challenges. The Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana (2022) initially cast a shadow over PAGA’s viability, but subsequent rulings have attempted to clarify its scope. However, 2025 saw further setbacks for PAGA claims as courts increasingly upheld arbitration agreements requiring individual proceedings.
Despite these challenges, PAGA remains a potent tool for employees. Employers must carefully review their arbitration agreements to ensure they are enforceable and comply with recent case law. A poorly drafted agreement could leave the company exposed to costly PAGA litigation.
Did you know? Even if an employee is required to arbitrate their individual claim, a portion of the PAGA claim – representing penalties owed to the state – may still be litigated in court.
Emerging Trends to Watch in 2026
Several key trends are poised to shape wage and hour and PAGA litigation in the coming year:
- Artificial Intelligence (AI) and Wage Compliance: The increasing use of AI in workforce management – for tasks like scheduling and time tracking – raises new compliance concerns. Bias in algorithms could lead to discriminatory pay practices, and inaccurate timekeeping data could result in wage violations.
- Remote Work and Multi-State Compliance: The rise of remote work continues to complicate wage and hour compliance. Employers must navigate the laws of multiple states, including differing rules on minimum wage, overtime, and paid leave.
- Pay Transparency Laws: More states and cities are enacting pay transparency laws, requiring employers to disclose salary ranges in job postings. These laws aim to address pay equity but also create potential legal risks if pay practices are not consistent.
- Increased Scrutiny of Independent Contractor Classifications: Government agencies are intensifying their efforts to identify misclassified independent contractors. The Department of Labor’s proposed rule on independent contractor classification could significantly impact businesses that rely on contingent workers. Learn more about the DOL’s rule.
Mitigating Risk: A Proactive Approach
To minimize exposure to wage and hour and PAGA claims, employers should adopt a proactive compliance strategy. This includes:
- Conducting regular wage and hour audits.
- Reviewing and updating employee handbooks and policies.
- Providing training to managers and supervisors on wage and hour laws.
- Implementing robust timekeeping and payroll systems.
- Consulting with legal counsel to ensure compliance with applicable laws.
FAQ
Q: What is PAGA?
A: The California Private Attorneys General Act allows employees to sue employers on behalf of the state to recover penalties for Labor Code violations.
Q: What is employee misclassification?
A: Misclassification occurs when an employer incorrectly classifies an employee as an independent contractor or incorrectly categorizes an employee’s exempt status.
Q: How can I stay up-to-date on wage and hour laws?
A: Subscribe to legal newsletters, attend industry conferences, and consult with employment law attorneys.
Q: What are the potential penalties for wage and hour violations?
A: Penalties can include back wages, liquidated damages, civil penalties, and attorney’s fees.
To delve deeper into these critical issues, bookmark or download the Wage & Hour Class and Collective Action Review – 2026 here and the Private Attorneys General Act Review – 2026 here. Staying informed is the first step towards protecting your organization from costly litigation.
What are your biggest concerns regarding wage and hour compliance? Share your thoughts in the comments below!
