FACT CHECK: Is it true that “Valley employers no longer have to worry about defending themselves against lawsuits related to errors on wage statements”?

Q.     I saw the headline stating, “Governor signs bill to protect employers from ‘frivolous’ lawsuits.” Is it true that “Valley employers no longer have to worry about defending themselves against lawsuits related to errors on wage statements”?[1]

A.     Not really.  AB 1506 simply amends Labor Code section 2699, otherwise known as the Private Attorney General’s Act or “PAGA”, but does not prevent a plaintiff from suing for the same “frivolous” violations. PAGA allows an employee to stand in the shoes of the Labor and Workforce Development Agency (“LWDA”) to bring an enforcement action on behalf of him or herself and other similarly situated employees based on violations of the California Labor Code.  The PAGA recovery is limited to the penalties that could be recovered by the LWDA and does not include other damages that would otherwise be provided directly to an aggrieved employee.  The employees are able to retain 25%  of the recovered PAGA penalty while the remaining 75% of the PAGA penalty must be remitted to the Labor and Workforce Development Board.  PAGA provides a cure provision for some, but not all, Labor Code violations. In those instances, if an employer can cure the violation within 33 days, the plaintiff is precluded from filing a PAGA lawsuit.  The new law (i.e., AB 1506) simply adds a provision to PAGA that states that certain wage statement violations can be cured.

While this is a positive development, it is not much of win for employers because it only amends PAGA and not the underlying Labor Code statute regarding wage statements. In other words, while a plaintiff may be limited in its use of a PAGA cause of action for errors related to wage statements, there is nothing prohibiting a plaintiff from simply alleging a violation of the statute that creates the wage statement requirements in the first place (i.e., Labor Code section 226).  Indeed, PAGA causes of action are rarely alleged by themselves because they are limited to penalties and even those limited penalties must be shared with the LWDA.

Based on the above, it is clear that a plaintiff does not need PAGA to bring a claim. The underlying statute (i.e., Labor Code 226) still provides an avenue for the same frivolous lawsuits.  Specifically, Labor Code section 226(e) provides:

An employee suffering injury as a result of a knowing and intentional failure by an employer to comply [with wage statement requirements] is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and 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), and is entitled to an award of costs and reasonable attorney’s fees.

….

(B) An employee is deemed to suffer injury for purposes of this subdivision if the employer fails to provide accurate and complete information as required by any one or more of items (1) to (9), inclusive, of subdivision (a) and the employee cannot promptly and easily determine from the wage statement alone one or more of the following:

(i) The amount of the gross wages or net wages paid to the employee during the pay period or any of the other information required to be provided on the itemized wage statement pursuant to items (2) to (4), inclusive, (6), and (9) of subdivision (a).

(ii) Which deductions the employer made from gross wages to determine the net wages paid to the employee during the pay period. Nothing in this subdivision alters the ability of the employer to aggregate deductions consistent with the requirements of item (4) of subdivision (a).

(iii) The name and address of the employer and, if the employer is a farm labor contractor, as defined in subdivision (b) of Section 1682, the name and address of the legal entity that secured the services of the employer during the pay period.

(iv) The name of the employee and only the last four digits of his or her social security number or an employee identification number other than a social security number.

In sum, a plaintiff does not need PAGA to bring the same frivolous wage statement lawsuits as before the new law. Labor Code section 226 can be brought without asserting a PAGA claim.  Moreover, Labor Code section 226 claims can be brought as a class action or in an individual capacity.  These claims also provide for attorneys’ fees to a prevailing plaintiff. While, there is no doubt that PAGA is a real issue for employers and any limitation in its use is a positive development, employers need to realize that the new law does not protect them from frivolous lawsuits.  This new law merely removes one small arrow in the plaintiff’s counsel’s quiver of many.

[1] http://www.thebusinessjournal.com/news/legal/20098-governor-signs-bill-to-protect-employer-from-frivolous-lawsuits

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