California Court of Appeal Confirms that Itemized Wage Statements Need Not Include Accrued Vacation Pay

The California Court of Appeal last week held that California employers are not required to list the value of accrued vacation on wage statements provided to employees.  Soto v. Motel 6 Operating L.P. (2016) __Cal.Rptr.3d__, 2016 WL 6123927 (Fourth District).

Plaintiff Lidia Soto, a former employee of Motel 6, alleged that Motel 6 violated California’s itemized wage statement statute (Labor Code section 226) by failing to include the monetary value of accrued vacation on the wage statements Motel 6 issued to Soto and other employees.   Soto filed the lawsuit on behalf of herself and as a representative of all other aggrieved employees of Motel 6 under the Labor Code’s Private Attorneys General Act (“PAGA”) of 2004.  The trial court dismissed Soto’s claims by sustaining Motel 6’s demurrer to the complaint without leave to amend. The Court of Appeal affirmed the trial court’s decision.

The Court of Appeal, in the first published opinion on this issue, concluded Motel 6 was not required to include the monetary value of employees’ paid time off or vacation wages on the wage statements provided to its employees.  The court analyzed Labor Code section 226 which specifies nine items that must be reflected on an employee’s wage statement.

Labor Code section 226(a) requires that these items be listed on each wage statement provided to an employee: (1) gross wages earned; (2) total hours worked by the employee, except for any exempt employee who is paid on a salary basis; (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; (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 his or her social security number or employee identification number other than a social security number; (8) the address of the legal entity that is 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.  California employers must also include available sick time under Labor Code section 246 either on the wage statement or on another document provided at the same time at the wage statement.

Soto argued that earned vacation wages must be included on employee wage statements under either or both the “gross wages earned” and “net wages earned” requirements of Labor Code section 226.  The court noted that employers need only quantify vested vacation wages when the employee’s employment ends, at which time the employer must pay out the vested vacation wages.

This case suggests additional points to consider with respect to itemized wage statement litigation. Wage claim cases typically include alleged payroll reporting violations. Little consideration has been given to the good faith dispute defense, which, even in proceedings before the Labor Commissioner, can bar penalties, including Labor Code section 203 waiting time penalties. Time will tell whether such basic due process principles will affect this aspect of wage and hour litigation.

The Soto decision is a good reminder to employers that itemized wage statements must contain certain specific information to comply with the Labor Code.  A failure to include the required information can result in significant statutory and civil penalties such as those that were sought by Soto. Employers should regularly audit their wage statements to ensure ongoing compliance with California’s technical wage statement requirements.  Should you have any questions regarding wage statement compliance issues, please contact the authors or your usual employment counsel at AALRR.

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