Accidental Pay Stub Violations Create PAGA Liability

California Labor Code §226 requires employers to provide employees with pay stubs (or wage statements) containing nine different pieces of information:

— the employer’s name and legal address;

— the employee’s name and employee identification number (or last 4 digits of the employee’s social security number);

— the pay period, including the start date and end date;

— gross wages earned by the employee;

— total hours worked by the employee;

— the hourly pay rates during the pay period;

— all deductions taken from the employee’s wages

— the employee’s net wages after deductions; and

— if the employee earns a piece rate, the number of piece rate units earned and the application rate

If an employer’s failure to provide all of this required information on a wage statement is “knowing and intentional,” then an employee is entitled to recover (1) the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs, and (2) one hundred dollars ($100) per employee for each violation in a subsequent pay period, not to exceed an aggregate penalty of four thousand dollars ($4,000).  See Labor Code§226(e).  In addition, the employee is entitled to an award of costs and reasonable attorney’s fees.

But what happens when an employer inadvertently hands out pay stubs that the employer does not realize are missing some required information?  Well, given that this is California, you can probably guess the answer.  The Court still finds a way to hold the employer liable — not for violating Labor Code §226 but instead for violating California’s Private Attorneys General Act (PAGA).

That’s exactly what happened recently in Lopez v. Friant & Associates, LLC.  In Lopez, California Court of Appeal held that an employer’s inadvertent failure to include the last four digits of the employee’s social security number on his pay stub subjected the employer to liability for PAGA penalties and attorneys’ fees and costs.  PAGA penalties are separate and distinct from any “statutory penalties” outlined in Labor Code §226, and PAGA has no similar requirement that its violation must be “knowing and intentional” in order to trigger PAGA liability.  There’s no requirement under PAGA that the employee suffer any injury either, ruled the Court.  Thus, the employee was entitled to sue the employer for PAGA violations — and to recover penalties and attorneys’ fees.

Wow.  I really don’t like saying “I told you so.”  It’s no fun.  But this case proves the point I make to clients almost every day:  in the card game of California employment law, the deck is stacked against employers.  Even well-intentioned employers who make innocent mistakes that cause no harm can get embroiled in costly, protracted litigation and end up writing big checks.  That’s why it pays — literally — to have a solid HR infrastructure, to take HR seriously and play by the rules, and to conduct regular audits with competent counsel to ensure your infrastructure stays current and compliant.

You can read the Court’s full opinion in Lopez v. Friant & Associates, LLC here.

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