California Labor Code Section 226 requires employers to provide employees with an accurate itemized wage statement every pay period or every two weeks, which must include the following information:
Employees who do not receive valid wage statements are entitled to an award of $50 for a first paystub violation and $100 for any subsequent violations (up to $4,000). If an employee has to bring a civil action to recover these money damages, the employer is also liable to pay for any court costs and reasonable attorney’s fees.
In addition, employers are required to keep copies of an employee's accurate itemized statement showing deductions for no less than 3 years. And they must allow past and current employees to inspect these records within 21 days of being requested. If an employer fails to provide these records timely to current and former employees, the employer can face a $750 civil penalty.
According to California Labor Code 226, an employer, semimonthly or at the time of each payment of wages, shall furnish to his or her employee, either as a detachable part of the check, draft, or voucher paying the employee’s wages, or separately if wages are paid by personal check or cash, an accurate itemized statement in writing showing (1) gross wages earned, (2) total hours worked by the employee, (3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis, (4) all deductions, provided that all deductions made on written orders of the employee may be aggregated and shown as one item, (5) net wages earned, (6) the inclusive dates of the period for which the employee is paid, (7) the name of the employee and only the last four digits of the employee's social security number or an employee identification number other than a social security number, (8) the name and address of the legal entity that is the employer and, if the employer is a farm labor contractor, as defined in subdivision (b) of Section 1682, the name and address of the legal entity that secured the services of the employer, and (9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee.
Below is an example of an itemized wage statement pursuant to the California Labor Commissioner's Office with accurate and complete information for a hypothetical employee.
Employers must retain copies of employee’s wage statements and records of the deductions must be kept on file by the employer for at least 3 years at the place of employment or at a central location within the State of California. A “copy” includes a duplicate of the itemized statement provided to an employee or a computer-generated record that accurately shows all of the information required under the Labor Code. Employers must provide copies of pay stubs to employees upon written or oral request no later than 21 days from the date of the reasonable request.
Additionally, employers should not rely upon their payroll company to retain copies of employee wage statements. First, the obligation falls on the employer do retain these statement, and many payroll companies do not necessarily save this information for the time required by California law. Second, if the employer changes payroll companies, it may be difficult to access the payroll information from the former payroll company.
The California Labor Commissioner has stated that employers may provide electronic wage statements so long as each employee retains the right to elect to receive a written paper stub or record and that those who are provided with electronic wage statements retain the ability to easily access the information and convert the electronic statements to hard copies at no expense to the employee. Electronic wage statements must incorporate proper safeguards to ensure the confidentiality of employee's confidential information and contain the same required information as a printed wage statement.
Failure by an employer to provide proper wage statements can result in liability for employers. In addition to employees bringing individual lawsuits to recover penalties for non-compliant wage statements for the employees themselves, they can also bring a representative action to recover penalties on behalf of themselves and all other aggrieved employees, under the California Private Attorneys General Act (“PAGA”).
The Private Attorney General Act is a California statute that enables workers to file lawsuits against employers for certain labor violations such as Labor Code Section 226. Employees act as “private attorneys general” who can pursue civil penalties as if they were a state agency. Under PAGA, civil penalties may be recovered through a civil action brought by an aggrieved employee on the employee’s own behalf and on behalf of other aggrieved employees.
Because it is a type of representative claim, the process and the recoverable damages for a PAGA claim are different than a normal lawsuit.
Before filing a PAGA lawsuit, an employee must first file a written notice of the alleged Labor Code violations, both online with the Labor and Workforce Development Agency (“LWDA”) and by certified mail to the employer (this is referred to as the “PAGA notice”). The PAGA filing with the California Labor and Workforce Development Agency has to include at a minimum: the basic facts of the employer's violation(s), which provisions of California’s labor laws have been violated, and a listing of the aggrieved employees.
As an employer, you have the opportunity to “cure” certain Labor Code violations in order to preclude a PAGA action (and thereby avoid the imposition of PAGA penalties), for two kinds of wage statement violations — the failure to include the start and end date of the pay period and the failure to provide the name and address of the employing legal entity.
Specifically, an employer has 33 days after receiving the PAGA notice to cure the wage statement violations, and must give written notice by certified mail to the employee and by online filing with the LWDA within the 33-day period that the alleged violation has been cured, including a description of the action taken.
Wage statement violations will be considered cured only upon a showing that the employer has provided a fully-compliant wage statement to each aggrieved employee for each pay period for the three-year period before the date of the employee’s notice of the violation. Where the alleged Labor Code violations relate to wage statement requirements, an employer has the right to cure the same violations only once in a 12-month period. If an employer cures these violations, it is considered in compliance with the Labor Code and the employee is made whole, in which an employee cannot bring a PAGA suit for these wage statement violations, and PAGA penalties are not recoverable under those Labor Code sections.
If you are an employer who receives a PAGA notice alleging wage statement violations, it is imperative to determine if these violations can be cured, and quickly. If an employer can cure the violations, it can avoid liability and potentially tens or even hundreds of thousands of dollars in penalties.
For employers, the attorneys at Freeburg & Granieri, APC are here to discuss how we can help your organization properly navigate the laws and requirements surrounding itemized wage statements pursuant to Labor Code 226.
Labor Code 226 requires that an employer provide a current and former employees access to inspect or receive a copy of all payroll records within 21 days of an oral or written request (employers may charge costs of reproduction for the copy). If the employer fails to comply with the request within the allowed time, the employee can recover a $750 penalty from the employer through the Labor Commissioner. There is not a private right of action to recover this penalty through a civil action.
Workers who succeed in a lawsuit for PAGA claims are entitled to recover civil penalties. However, most of the penalties recovered in a PAGA lawsuit go to the State of California. This is different than recovering compensation. In a typical wage and hour lawsuit, a worker’s recovery focuses on their unpaid wages. In a claim under the Private Attorney General Act, workers only recover civil penalties provided by the statute. They cannot recover lost wages.
In a PAGA action, 75% of the civil penalties received go back to the State of California. The aggrieved employees are only entitled to recovery 25% of the civil penalties. Prevailing employees in a PAGA action are also entitled to recover reasonable attorney's fees and costs.
Furthermore, a PAGA plaintiff employee does not need to show injury or employer intent when seeking civil penalties. For example, if an employer did not include in the employee’s pay stub the employee’s name and the last four digits of his social security number or employee identification number, the employee could seek a PAGA claim. This claim allows for penalties of $100 for the first violation and $200 for each subsequent violation of the Labor Code where a civil penalty is not specifically provided because PAGA “deputizes” employees to seek recovery on behalf of the state and the public, allowing for the recovery of civil penalties.
For current and former employees, if your employer is violating Labor Code 226, contact the attorneys at Freeburg & Granieri, APC to discuss how we can help you protect yourself.
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