California Labor Commissioner Issues $499,000 Citation For Non-Compliant Wage Statements

As we previously reported here, failing to comply with the requirements of Labor Code section 226 regarding the information that must be contained on wage statements (aka check stubs) can create significant liability for California employers. 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 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 to 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. Plaintiff attorneys typically also seek additional penalties under the California 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."

Further, it is not just private attorneys seeking such penalties. As we previously reported here, we think federal and state agencies charged with enforcement of federal and state employment laws have taken a more aggressive enforcement posture. For example, in a recent press release, the California Department of Industrial Relations announced that Labor Commissioner Julie Su issued a $499,000 citation to an employer of warehouse workers for allegedly failing to issue compliant wage statements. Among other things, Sue stated as follows in the press release: "California law also requires that all employees receive wage statements that explain the basis for their paycheck. This is to help workers identify if they've been cheated out of their hard-earned wages. Proper wage statements were not provided to these workers."Less than a week later, the companies targeted by the Department of Industrial Relations were served with a private class action lawsuit.

California employment law enforcement agencies have recently made it a point to tout such enforcement actions. As we previously reported here, in a press released issued September 12, 2011, the California Department of Fair Employment and Housing touts an administrative award of $846,300 against an employer for allegedly failing to accommodate an employee's medical condition and for allegedly terminating the employee "relying on [an] insufficient travel pretext." As previously reported here, on September 29, 2011, the Department of Industrial Relations issued a press release touting the filing of a lawsuit seeking damages and penalties in excess of $17 Million against ZipRealty for alleged wage and hour violations.

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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