Check your pay stubs for compliance with California Labor Code Section 226.
The latest trend in lawsuits against employers revolves around violations of CA Labor Code section 226 (the pay stub statute). Under previous law, if an employee, or class of employees, wanted to pursue a claim for violation of section 226, they had to prove they suffered an actual injury as a result of an incomplete pay stub. Recently, section 226 was amended to effectively eliminate any requirement that an employee prove injury. Injury is now presumed if the itemized wage statement fails to provide the required information.
Employees and plaintiff-side attorneys have been using this new presumption to defeat employers’ summary judgment motions and force large settlements.
Last month, a temporary staffing agency agreed to pay $8.75 million to more than 19,000 workers over claims it did not provide them with accurate wage statements. This past March, department store Saks & Company lost its motion for summary judgment in a case alleging pay stub violations. The court followed the language of section 226, concluding the employee presented evidence of an injury simply because the wage statement did not contain required information.
While on the surface it may seem relatively simple to provide a pay stub with all the required information, this may not be as easy as it would seem. Section 226 requires an itemized statement that contains up to 9 pieces of information, as well as additional information if the employer is a farm labor contractor or temporary staffing company. Even seemingly minor errors, such as failing to include the start date of a pay period, can subject an employer to a penalty of up to $4,000 per employee, plus litigation costs and attorneys’ fees.
Given the burden and exposure faced by employers, legislation has been introduced to allow employers a grace period to correct pay stub violations. Until such legislation becomes law, employers should carefully review their pay stubs to determine if they comply with section 226. If an employer is using a third party payroll processor, as is often the case, the employer should work with that company to make any necessary corrections to pay stubs. The employer, not the payroll processor, will likely be held liable for any pay stub violations.
RPNA will be pleased to answer any questions you may have about compliance with the pay stub statute. RPNA is also experienced in reviewing employer compensation policies, including pay stub issues, meal and rest breaks, and overtime, as well as defending against employment-related wage and hour claims, including those related to alleged pay stub violations. For more information, contact RPNA here.