Why it matters

Employers may want to review their wage statements after Governor Jerry Brown signed a new law that permits them to cure potential violations leading to a lawsuit under the Private Attorneys General Act (PAGA). An employer may be liable under California Labor Code for neglecting to provide certain information, including the name and address of the legal entity that is the employer and the inclusive dates of the pay period, in an employee's wage statement. The new law, AB 1506, provides employers with the right to cure such a violation with a showing that every employee receive a fully compliant, itemized wage statement pursuant to state law. The right to cure is not unlimited, with employers allowed just one opportunity per 12-month period to fix any mistakes and a 33-day window to correct the error before liability attaches. AB 1506—which could save employers sizable verdicts in PAGA suits with potential damages of up to $200 per pay period for wage statement violations, plus attorney's fees and costs—took immediate effect with Gov. Brown's signature on October 2, 2015.

Detailed discussion

Pursuant to the California Labor Code, employers are required to include certain information in employee wage statements. Specifically, Section 226(a)(6) mandates that employers must specify the inclusive dates of the period for which the employee is paid and Section 226(a)(8) requires the name and address of the legal entity of the employer be listed.

Employees may sue employers for violations of Section 226 under the Private Attorneys General Act (PAGA) and recover damages for wage statements lacking the requisite information.

But a new law permits employers to cure some violations. AB 1506 provides employers the right to fix mistakes within 33 days upon notice from an employee identifying wage statement defects under Sections 226(a)(6) and (8). The new law allows an employer to avoid PAGA litigation by demonstrating that each aggrieved employee has received a "fully compliant, itemized wage statement" for each pay period for the three-year period prior to the date of the employee's written notice.

The cure only takes effect if it occurs within 33 calendar days of the postmark date of the employee notice and if the employer provides written notice (by certified mail) within that same time period both to the aggrieved employee (or counsel) as well as the California Labor & Workforce Development Agency. A description of the actions taken by the employer must be included.

Employers may only take advantage of the ability to cure such violations once per 12-month period.

If the employer cures the violation, the employee may not bring a lawsuit under PAGA; if the error goes uncorrected, the employer will remain liable under the California Labor Code for $100 per pay period for an initial violation and the potential for $200 per pay period for each subsequent violation, as well as attorney's fees and costs.

Employers should also note that the new law only applies to the two specific subsections of California Labor Code Section 226(a). The Code requires employers to provide additional information on wage statements including the gross wages earned; the total hours worked by the employee (with an exception for salaried employees); the number of piece-rate units earned, if applicable; all deductions; net wages earned; the name of the employee and only the last four digits of the employee's Social Security number; and all applicable hourly rates in effect during the pay period and number of hours worked at each hourly rate by the employee.

To read AB 1506, click here.