California Supreme Court Declines To Review Helpful Court of Appeal Decision Regarding Penalties For Wage Statement Violations

As we previously reported here, in Drake Price v. Starbucks Corporation, the Court of Appeal held, among other things, that a plaintiff does not state a viable claim for Labor Code Section 226.7 penalties merely because a wage statement does not contain all of the required information. 

Labor Code Section 226(a)  requires employers to provide to employees with their paychecks a wage statement (sometimes referred to as a check stub) accurately stating the following nine items of information:  (1) gross wages earned, (2) total hours worked by the employee (except exempt salaried employees), (3) the number of piece-rate units earned and any applicable piece-rate(s) if the employee is paid on a piece-rate basis, (4) all deductions, (5) net wages earned, (6) inclusive dates of the pay period, (7) the name of the employee and the last four digits of the employee's social security number or the employee's identification number other than the social security number, (8) the name and 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.

When an employee suffers injury as a result of an employer's knowing and intentional failure to provide a compliant wage statement, the employee can recover the greater of either the employee's actual damages or $50.00 "for the initial pay period in which a violation occurs" and $100 "per employee for each violation in a subsequent pay period, not exceeding an aggregate penalty of four thousand dollars, and is entitled to an award of costs and reasonable attorney's fees." See Labor Code section 226(e).

Drake Price, who was employed by Starbucks for a total of 13 shifts before he was fired after failing to report to work for a scheduled shift, alleged, among other things, that Starbucks was liable to him and to each member of the purported class for Labor Code section 226.1 damages because, according to Mr. Price, the wage statements Starbucks issued do not list total hours worked, net wages earned, and all applicable hourly rates." Mr. Price contended "'total' means grand total, the sum of the regular and overtime rates." Price contended Starbucks' use of the words "'amount paid' following gross pay and deductions does not comply with the requirement to show 'net wages.'" Mr. Price contended, also, that the wage statements "lists the regular rate of pay, but fails to list the overtime rate of pay, requiring him to ensure that the overtime rate is one and one-half his regular rate of pay."  

Recognizing that a non-compliant wage statement is not actionable without injury, Mr. Price contended he was injured because, according to him, "[t]his lack of information 'caused confusion and possible underpayment of wages due,' required the putative class to file [suit], and forced the putative class to attempt to reconstruct their time and pay records."

Notably, the Court of Appeal distinguished a troublesome decision of the United States District Court for the Central District of California in Wang v. Chinese Daily News, Inc. (C.D. Cal. 2006) 435 F.Supp.2d 1042 essentially holding that injury occurs if the employee must perform mathematical calculations to determine whether he or she was paid correctly. Distinguishing Wang v. Chinese Daily News, the court explained: "Price alleged a 'mathematical injury,' that required him to add up his overtime and regular hours and to ensure his overtime rate of pay is correct, but the allegedly missing information from Price's wage statement is not the type of mathematical injury that requires 'computations to analyze whether the wages paid in fact compensated [him] for all hours worked.'"  Simply put, "[t]he injury requirement in section 226, subdivision (e), cannot be satisfied simply if one of the nine itemized requirements in section 226, subdivision (a) is missing from a wage statement."

On May 12, 2011, the California Supreme Court denied the plaintiff's petition for review of the Court of Appeal's helpful decision. This means the Court of Appeal's decision stands, and it means the District Court's troublesome decision in Wang v. Chinese Daily News now has even less persuasive value than it previously had.

Although the Court of Appeal's decision makes California employers less vulnerable to claims for Labor Code section 226.7 penalties based on essentially non-material violations of the requirements of Labor Code section 226.7, the best defense to claims for such penalties is to make certain wage statements are fully compliant with all of the requirements of Labor Code section 226.7. 

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