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Employer Unintentional Failure to Ensure Wage Statements Comply with the CA Labor Code Can Equate to Costly Penalties Under PAGA

It goes without saying, being an employer is California is tough. There are countless laws in California pertaining to employee wages that must be complied with or the employer may be subject to significant penalties. Employers should be on notice that due to a recent decision of the California Court of Appeals, no intent or injury is required for employees to pursue wage statement claims under PAGA against their employers. As a result, a simple, seemingly mundane oversight can end up being quite costly to an unsuspecting employer.

Recently, the California Court of Appeals reversed a summary judgment ruling that applied the “knowing and intentional” standard of Labor Code Section 226(e) to a Private Attorneys General Act (“PAGA”) claim for violation of California Labor Code Section 226(a). Section 226(a) requires employers to issue wage statements to employees containing very specific information. The court held that PAGA claims based on wage statement violations under Section 226(a) are not subject to the statutory penalty requirements of Section 226(e)(1). See Lopez v. Friant & Associates, LLC (2017) 15 Cal.App.5th 773, 788

Case Facts

The plaintiff in Lopez sought civil penalties on behalf of himself and other aggrieved employees through PAGA. Via PAGA, a private individual alleging violations of the California Labor Code by his or her employer is permitted to collect civil penalties that otherwise could only be pursued by the state. This can be very costly to employers. The plaintiff’s PAGA claim in Lopez was based on a violation of Labor Code Section 226(a)(7), which requires the issuance of wage statements that include either the last four digits of the employee’s social security number, or some other employee identification number. The defendant employer filed a motion for summary judgment against the violation, arguing that its’ failure to include an identification number was not “knowing and intentional” as required for statutory damages or penalties under Section 226(e)(1). The trial court granted summary judgment in favor of the defendant employer, which the plaintiff appealed.

On appeal the plaintiff argued the “knowing and intentional” requirement under Section 226(e) does not apply to a PAGA action based on a wage statement violation under Section 226(a). The Court of Appeal examined the plain language of the relevant statutes, pointing to the “important distinction between the ‘civil penalties’ available under PAGA, and ‘statutory penalties’ recoverable by individual plaintiffs before PAGA was enacted.”  Id. at 780–781. The Lopez court found that the penalties afforded by Section 226(e) have been available in private rights of action, and therefore constitute “statutory” penalties, whereas the penalties sought under PAGA for violations of Section 226(a) are civil penalties, which are regulatory and not available to private plaintiffs outside of a PAGA suit, and therefore are not bound by the same rules. Id. Further, Lopez pointed out that while Section 226(a) is enumerated as one of the available violations for a PAGA claim under Section 2699.5, Section 226(e) is not. Based on such reasoning, Lopez held that since “[S]ection 226(e)(1) sets forth the elements of a private cause of action for damages and statutory penalties, its requirement that a plaintiff demonstrate “injury” resulting from a “knowing and intentional” violation of Section 226(a) is not applicable to a PAGA claim for recovery of civil penalties.” Id. at 785.

What does the Lopez holding mean for CA employers?

Per Lopez, it is now binding on all California trial courts that Section 226(e) requirements that the employer’s failure to comply with 226(a) must be “knowing and intentional” does not apply to Section 226(a) violations brought via PAGA. Therefore, because a plaintiff does not need to satisfy the requirements of Section 226(e), wage statement claims are much easier to prosecute through PAGA than a regular cause of action because all a plaintiff needs to show is that Section 226(a) was not fully complied with by the employer. Whether the plaintiff suffered an injury, or the employer knowingly and intentionally failed to comply with Section 226(a) is irrelevant.

Contact a Pleasanton Employment Attorney

If you are an employer and need advice pertaining to compliance with California wage statement requirements or have a PAGA action threatened or brought against your business, please contact the knowledgeable employment law attorneys at Garcia & Gurney, ALC. Providing legal services relating to employment law matters to clients in the Bay Area and beyond, our attorneys can guide you every step of the way. Contact us today to schedule a consultation.

The information contained in this article is provided by Garcia & Gurney, ALC (“G&G”) and is provided for educational and informational purposes only and should not be construed as legal advice or an offer to perform services on any subject matter. Recipients of this article should not act or refrain from acting on the basis of any information included in this article without seeking appropriate legal advice on the particular facts and circumstances at issue from an attorney licensed in the recipient’s state. G&G expressly disclaims all liability with respect to actions taken or not taken by the recipient based on any or all of the information or other contents in this article. This article not intended to constitute an advertisement for professional services or any other services. Nothing herein is intended to create an attorney-client relationship and shall not be construed as legal advice.

By: Lindsay R. Meyer, Esq.

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