The California Labor Code and the Orders promulgated by the Industrial Wage Commission impose various wage and hour requirements on employers for the benefit of their employees. This article addresses California wage statement requirements for employers which include specific detailed information employees must receive from their employers concerning the wages they are paid, and the penalties which may be imposed on an employer for failure to provide that information. As pointed out by our employment law attorneys, below, employers are well-advised to follow these legal requirements in order to avoid potentially devastating penalties which may be assessed against them.
What Information Must the Wage Statement Contain?
Pursuant to California Labor Code Section 226(a), employers must provide the following information to their employees at least twice a month, and at the time of each payment of wages:
(1) The gross wages earned by the employee during the pay period;
(2) The total hours the employee worked during the pay period (except for “exempt” employees who are paid a salary and who are not entitled to overtime compensation);
(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 from the employee’s gross wages;
(5) The net wages earned by the employee;
(6) The dates of the pay period for which the employee is being paid;
(7) The name and address of the employee and the last four digits of his social security number;
(8) The name and address of the employer; and
(9) The hourly rates in effect during the pay period, and the number of hours worked at each pay rate during the pay period.
Penalties for Failure to Provide an Accurate and Complete Wage Statement
California Labor Code Section 226(e) provides that any employee who suffers injury as a result of a knowing and intentional failure by the employer to comply with its obligation to provide wage statements containing all of the information referenced above is entitled to recover the greater of his actual damages or $50 for the first violation by the employer. Labor Code section 226(e)(1). The employee is also entitled to recover $100 for each violation in a subsequent pay period, not to exceed an aggregate penalty of $4,000. Id. Significantly, the employee is also entitled to recover his costs and reasonable attorney’s fees incurred in enforcing his right to these penalties, which could far exceed the $4,000 maximum penalty under this section of the code. Id.
In the event an employer provides an employee with wage statements which do not contain all the necessary information, or simply fails to provide any wage statements to the employee, it is likely that failure is a matter of practice and applies to all pay periods. In this case, if the employee works for the employer for at least 40 pay periods (40 weeks if the employee is paid weekly), the employee would be entitled to the full $4,000 penalty plus costs and attorney’s fees.
Significantly, in addition to the penalties employees may recover from an employer who provides deficient wage statements, an employer who violates Section 226(a) is also subject to a civil penalty of $250 per employee per violation for a first citation by the Labor Commissioner, and $1,000 per employee for each violation in a subsequent citation. Labor Code section 226.3.
The Requirement that the Employee “Suffer Injury”
Whether or not an employee can prove actual injury as a result of a wage statement violation, an employee is deemed to suffer injury for purposes of Section 226(e) if the employer fails to provide a wage statement, or (1) provides a wage statement that does not provide accurate and complete information required by any of the nine items referenced above, and (2) the employee cannot promptly and easily determine from the wage statement alone any of the nine items identified in Section 226(a), with the exception of net wages earned. Labor Code Section 226(e)(2).
This provision is particularly important for an employee who is entitled to overtime pay, but does not receive it, or is entitled to overtime pay in an amount in excess of what he is paid. Any such failure by the employer to pay overtime as required, or in the amount required by law, also constitutes a failure to provide a statement of “gross wages earned” in violation of Section 226(a)(1).
The Employer’s Violation Must be “Knowing and Intentional”
In order for the employer to be liable for a violation of Section 226, his failure to provide any of the information required by Section 226(a) must be “knowing and intentional.” However, an employer’s failure may not be “knowing and intentional” if no complaints have previously been made to the employer that his wage statements violate the law.
As also noted above, Section 226(a) provides for a penalty of $50 for an initial violation of that section, and $100 for each subsequent violation. As one court recently stated:
The word “subsequent” has a specific meaning under the California Labor Code. ‘Until the employer has been notified that it is violating a Labor Code provision . . . the employer cannot be presumed to be aware that its continuing underpayment of employees is a “violation” subject to penalties.’ (Citations omitted, Emphasis added). However, after the employer has learned its conduct violates the Labor Code, the employer is on notice that any future violations will be punished as…willful or intentional – i.e., they will be punished at twice the rate of penalties that could have been imposed or that were imposed for the initial violation.
Patel v. Nike Retail Services, Inc. (N.D. Cal. 2014) 58 F. Supp. 3d 1032.
From the perspective of employees, unless there is evidence the employer is aware that his wage statements are lacking any of the information required by Section 226(a), employees are well advised to inform their employer in writing of any alleged wage statement violations so additional penalties may be assessed against their employer for any continuing wage statement violations. From the employer’s perspective, the deficient wage statements should be corrected immediately in order to avoid imposition of penalties for continued violations of the statute.
Interestingly, Section 226(e)(1) provides for the double penalty of $100 for each violation “per employee,” indicating that, if the employer’s violation of Section 226(a) is “knowing and willful,” the employer can be found liable for every deficient wage statement given to every employee. This is based on the Private Attorney General Act (“PAGA”) set forth in Labor Code sections 2698 and 2699.
The Private Attorney General Act (PAGA)
The PAGA provides that, after certain conditions are met, an employee can sue an employer for violations of Section 226(a) on behalf of all employees and former employees who have received deficient wage statements, and not just on his own behalf. These certain conditions include written notice by employees of the deficiency(s) of the alleged wage statement violations to the Labor and Work Force Development Agency and the employer. Labor Code section 2699.3(a)(1). The Agency will then notify the employer and the employee whether it intends to investigate the alleged violation(s). If the Agency informs the employer and the employee that it does not intend to investigate, or does not provide any notice to the employer and employee within 33 days of the employee’s written notification to the agency, the employee may file suit against the employer on behalf of all employees and former employees who, within the year prior to the lawsuit, received deficient wage statements. (The statute of limitations for filing an action for a penalty is one year. California Code of Civ. Proc. Sec. 340).
The penalty that will be assessed against the employer under the PAGA will be $100 “for each aggrieved employee per pay period” for the initial violation and $200 “for each aggrieved employee per pay period” for all subsequent violations. Labor Code section 2699(f)(2). Thus, for instance, if the employer has been warned that its wage statements are deficient and the employer does not cure them, it will be subject to a penalty of $200 for each pay period in which employees and former employees received a deficient wage statement within the preceding year.
As an example, assume that the employer has 100 employees and they are paid weekly. There would be 5,200 non-compliant wage statements during this one-year period, and at $200 per violation, the penalties would be $1,040,000. This example underscores the importance to employers of ensuring compliance with California wage statement requirements.
An employee who prevails in any action under the PAGA is also entitled to an award of reasonable attorney’s fees and costs, which provides significant incentive to employment law attorneys to accept these types of cases on a contingency fee basis. Labor Code section 2699(g)(1).
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The employment law attorneys and wage and hour lawyers at Gehres Law Group handle a variety of employment-related matters, including wage and hour violations on behalf of both employers and employees. There is no charge for initial consultations and some cases can be taken on a contingency fee basis. For more information, contact us or browse our employment law practice areas page of this website.