A REVIEW OF CA EMPLOYER PAYSTUB REQUIREMENTS
Posted by GibbsGiden Under California Law
Written by Keemia Tabrizi and Matthew Wallin
California employers are required to provide employees with paystubs for each pay period where an employee earned income. Labor Code section 226 (the “Code”) includes very specific information that must be included in every wage statement. Failing to include all of the required information on every wage statement can expose employers to substantial liability, as will be discussed below.
I. WHAT INFORMATION MUST BE INCLUDED:
The Code lists nine categories of information that must be included in every wage statement:
(1) Gross wages (without deductions);
(2) Total hours worked;
(3) All deductions (taxes, 401K contributions, employee-owed healthcare contributions);
(4) Net wages earned;
(5) The days for which the employee is paid;
(6) The name of the employee and the last four digits of the employee’s social security number or an employee identification number;
(7) The full and correct name and address of the legal entity that is the employer;
(8) All applicable hourly rates, including regular and overtime rates; and
(9) The employee’s available sick and vacation leave.
Additionally, the California legislature passed a law in response to the COVID-19 pandemic providing employees with up to 80 hours of paid sick leave. The law currently runs through September 30, 2021, and requires employers to include the amount of available leave on the employees’ wage statement.
II. RISKS FOR NON-COMPLIANCE
Failure to follow the strict paystub requirements can have serious and costly consequences. Employers who fail to comply with the requirements of the code risk class action lawsuits brought on behalf of all similarly situated employees. Damages include $50 for the initial violation and $100 for each subsequent violation, with a maximum damage amount of $4,000. Those damages, however, are available for each impacted employee. Successful plaintiffs are also awarded attorneys’ fees and costs, which can be substantial in class action cases.
An employee may also file an action to recover civil penalties under the Private Attorneys General Act (“PAGA”). A PAGA claim is similar to a class action lawsuit as it can include all similarly impacted employees. PAGA penalties for wage statement violations are potentially as much as $250 for the initial violation and $1000 for subsequent violations thereafter. The statute of limitations on a PAGA action is one-year. If an employee is paid twice per month (24 pay periods per year), PAGA penalties may be as much as $23,250 per employee! The strict wage statement requirements and the various damages and penalties available have made wage statement lawsuits popular in California.
III. COURTS HAVE RECENTLY REJECTED HYPER-TECHNICAL READINGS OF SECTION 226
A pair of recent court decisions concerning California’s wage statement laws provide some welcome relief for employers.
General Atomics v. Superior Court dealt with the requirement that wage statements include the correct rate of pay. The plaintiff in the case, Tracy Green, brought a class action and PAGA lawsuit on behalf of General Atomics employees, arguing that her employer violated section 226 by providing wage statements that did not identify the correct rate of pay for overtime wages. Essentially, General Atomics’ wage statements listed all hours worked during the pay period under the employees’ regular rate of pay. Any hours constituting overtime where then listed in a separate line on the paystub for overtime hours at a rate of 0.5 times the regular rate of pay. Green argued that the wage statement violated section 226 because it should have broken out all overtime hours into a separate category with a rate of pay listed as 1.5 times the employees’ regular rate of pay.
The appellate court disagreed with Green’s argument. General Atomics’ procedure showing only the 0.5 times rate was the most practical way to present the wage statement for its employees and complied with section 226. General Atomics’ wage statements were compliant because they showed the total hours worked, with their standard rate, and the overtime hours worked, with their additional premium rate. The court stated that “the core purpose of section 226 is to ensure an employer documents the basis of the employee compensation payments to assist the employee in determining whether he or she has been compensated properly.” The General Atomics decision is evidence that courts are taking a step back from hyper-technical reading of section 226.
In Santos v. United Parcel Service Inc., the federal district court similarly ruled in favor of the employer when the wage statement provided the necessary information for employee verification of accuracy. The plaintiff/employee Emilia Santos claimed that her employer, United Parcel Service Incorporated (“UPS”), violated Labor Code section 226 because the meal period premium payments were displayed on her wage statement in a lump dollar sum. Santos argued that the wage statements were too ambiguous and did not provide enough detail because the statements failed to show the number of premiums paid or the corresponding rate.
The district court disagreed and held that employees could perform “simple math” by dividing the lump sum premium pay amount by their current pay rate to determine the number of premium payments they were receiving for a particular pay period. The court, therefore, granted UPS’s motion for summary judgment and ruled there was no section 226 violation. Courts have previously applied a “simple math” standard to evaluate wage statement violation claims, and the Santos case is further support that there is no wage statement violation when employees are able to easily assess that they were accurately compensated.
While the General Atomics and Santos cases provide some needed relief for employers, the fact remains that wage statement lawsuits are pervasive in California. Employers must ensure that their paystubs comply with all of Labor Code section 226’s requirements.
For more information contact:
Matthew Wallin is a senior associate in the Los Angeles office where he practices labor and employment law. He has extensive experience defending private business and public entities in litigation and advising clients on labor compliance issues.
Keemia Tabrizi can be reached at firstname.lastname@example.org
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