01.05.2011
Are Non-Compliant Wage Statements Putting Your Company At Risk?

In defending numerous wage and hour class action lawsuits, one thing is constant. Such lawsuits nearly always include allegations that the employer failed to provide employees with wage statements (aka check stubs) that comply with Labor Code section 226, which specifies nine items of information that must be stated on each wage statement. Such allegations take one or both of the following forms: (1)allegations that the employer did not pay employees for all hours worked and, therefore, failed to comply with the requirement of Labor Code section 226(a)(2) that wage statements show all hours worked and/or (2)allegations that the employer's wage statements fail to comply with the requirements of Labor Code section 226(a) in some other respect, such as failing to include the full name and address of the legal entity that is the employer as required by Labor Code section 226(a)(8).  

It is not hard to understand why plaintiff attorneys pursue claims for allegedly non-compliant wage statements — the awards of penalties and attorney's fees can be very substantial.  Labor Code section 226(e) states that an employee "suffering injury as a result of a knowing and intentional failure by an employer" to comply with Labor Code section 226(a) is entitled tor recover the greater of his or her actual damages or $50.00 for the initial pay period in which a violation takes place and $100 "per employee for each violation in a subsequent pay period" up to $4,000.00 per employee. In a class action involving 100 employees, those penalties could total $400,000.00.  In a class action involving 500 employees, those penalties could total $2 Million. Plaintiff attorneys typically also seek additional penalties under the Labor Code Private Attorneys General Act of 2004, which provides for penalties of $100.00 "for each aggrieved employee per pay period for the initial violation" and $200.00 "for each aggrieved employee per pay period for each subsequent violation." Again, in a class action, such penalties can add up quickly.  To add insult to injury, in class action cases, courts routinely approve attorney's fees awards to the plaintiff(s)'s attorneys in excess of $1 Million.  

The good news is the risk of being subjected to such awards of penalties and attorney's fees on account of non-compliant wage statements is generally easily avoided. We recommend that employers consult competent employment counsel and take the appropriate steps to make certain that their employees are paid for all hours worked and that the wage statements issued to their employees comply with the requirements of Labor Code section 226.

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