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Are You Receiving Proper Paystubs/Wage Statements? California Labor Code Section 226 Imposes Strict Requirements And Penalties On Employers

On Behalf of | Jun 9, 2012 | Employment and Labor Law

California Labor Code section 226 sets stringent requirements for employers with regard to employee paystubs.  These documents we are all accustomed to receiving are heavily regulated and many employers neglect or willfully fail to comply with these requirements.  Learn here whether you are receiving proper wage statements and what to do if you are not.

Labor Code section 226 begins, at sub-section (a), as follows:

(a) Every employer shall, semimonthly or at the time of each payment of wages, furnish each of his or her employees, either as a detachable part of the check, draft, or voucher paying the employee’s wages, or separately when 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, except for any employee whose compensation is solely based on a salary and who is exempt from payment of overtime under subdivision (a) of Section 515 or any applicable order of the Industrial Welfare Commission,

(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 the last four digits of his or her 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. The deductions made from payment of wages shall be recorded in ink or other indelible form, properly dated, showing the month, day, and year, and a copy of the statement and the record of the deductions shall be kept on file by the employer for at least three years at the place of employment or at a central location within the State of California.

The California Division of Labor Standards Enforcement (a division of the Department of Industrial Relations) is charged with enforcement of Labor Code section 226 (and a variety of other Labor Code and Wage Order requirements).  They have published a manual that includes a discussion of Labor Code section 226 and is available here.  Scroll to pages 58-60 to learn more about Labor Code section 226, but note that the DLSE’s interpretations of the law are not necessarily determinative.  Courts of law are required to give great deference to the DLSE interpretation, but it is not binding on them like the decisions of an appellate court and they may diverge from them in some situations.

Interplay with other Labor Code Sections

Labor Code section 226 violations often arise in the context of other Labor Code violations.  For example, an employer who fails to provide meal periods as required by Labor Code section 226.7 must provide an additional hour of pay to the employee for that missed meal break.  If the employer fails to provide this compensation and fails to note that it is owed on the paystub, the paystub automatically violates Labor Code section 226 because it does not list all of the compensation due to the employee.  Thus, when an employer violates one Labor Code section, they have usually violated several of them.

What are my remedies?

If the employer fails to provide you with accurate paystubs, you are entitled to both damages under Labor Code section 226 and civil penalties under Labor Code section 226.3.  Labor Code section 226(e) provides that:

(e) An employee suffering injury as a result of a knowing and intentional failure by an employer to comply with subdivision (a) is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not exceeding an aggregate penalty of four thousand dollars ($4,000), and is entitled to an award of costs and reasonable attorney’s fees.”

This section allows for recovery of damages resulting from an employer’s willful failure to comply with section 226, specifying a minimum damages award per violation and capping damages at $4,000.  Note that the statute also provides for the shifting of the plaintiff’s costs and attorneys’ fees onto the Defendant, which is often more costly to the employer than the damages provisions themselves.

Labor Code section 226.3 then provides an additional civil penalty for each violation, stating:

“Any employer who violates subdivision (a) of Section 226 shall be subject to a civil penalty in the amount of two hundred fift dollars ($250) per employee per violation in an initial citation and one thousand dollars ($1,000) per employee for each violation in a subsequent citation, for which the employer fails to provide the employee a wage deducation statement or fails to keep the records required in subdivision (a) of Section 226.  The civil penalties provided for in this section are in addition to any other penalty provided by law.  In enforcing this section, the Labor Commissioner shall take consideration whether the violation was inadvertent, and in his or her discretion, may decide not to penalize an employer for a first violation when that violation was due to a clerical error or inadvertent mistake.”

To enforce these damages and penalty provisions, an employee has two options: (1) retain a lawyer to represent your interests and pursue these claims on your behalf; or (2) file a wage claim with the Labor Commissioner (DLSE) and request that they pursue the case on your behalf (for more information about this option, click here).

One advantage to having an attorney on your side is that, unlike the Labor Commissioner, they typically will not got paid unless you do and that gives them a strong incentive to work hard on your case and push it along quickly.  Additionally, if you have a private attorney, he/she can serve a “Private Attorneys General Act (PAGA)” notice on the employer and Labor and Workforce Development Agency.  If the LWDA fails to act within 33 days, you can file a lawsuit on behalf of yourself and “similarly-situated current and former employees.”  Additionally, if the Labor Commissioner pursues your case, any “civil penalties” collected (such as those described in Labor Code section 226.3) go directly to the State and you do not get a dime of them yourself.  By contrast, if you proceed under PAGA with an attorney you can recoup the penalties on behalf of the State and you get to keep 25% of them for your efforts.

If you want to contact us for a consultation regarding your prospective claims, click here to visit our “Contact Us” page.