The California Labor Code is full of potential penalties for the unwary employer. The penalties arguably exist to ensure compliance by unscrupulous employers but often the penalties result in a windfall to employees for an innocent employer mistake. Labor Code Section 226 provides such a penalty for incomplete or inaccurate wage statements. Employees who file wage and hour actions in court or who file wage claims with the Labor Commissioner’s office routinely include a claim for penalties under Section 226. In addition, if the Labor Commissioner’s office conducts an audit, it frequently includes Section 226 penalties in its penalty calculations. The information required on each wage statement by Labor Code Section 226 is straightforward but a remarkable number of employers nonetheless fail to comply.
Section 226(a)(1)-(9) sets forth specific categories of information that each wage statement must provide to each employee or which the employee must be able to promptly and easily determine from the wage statement alone. The required categories are:
(1) the amount of gross wages or net wages paid during the pay period;
(2) the total number of hours work (if the employee is not exempt-salaried);
(3) the number of piece-rate units earned and the applicable piece rate (for an employee paid on a piece rate);
(4) any deductions made;
(5) inclusive dates of the pay period;
(6) all applicable hourly rates in effect and the number of hours worked at each rate;
(7) the name and address of the employer;
(8) the name of the employee and either an employee identification number or the last four digits of the employee’s social security number.
Prior to 2013, employers often defended against Section 226 penalty claims by arguing the employee had suffered no injury as a result of the incomplete or inaccurate wage statement. In January 2013, Section 226 was amended to state that an employee is “deemed to suffer injury” if a wage statement fails to include each of the items specified by the code section. As a result, penalties for an inaccurate or incomplete wage statement have become essentially automatic.
What Steps Should Employers Take?
Do not assume that your wage statements are compliant because your company uses a well-established payroll provider or because no complaints have been made by employees. Take the time to conduct a simple audit of wage statements to ensure that all of the information required by Labor Code Section 226 is provided. Include different categories of employees (exempt, non-exempt and piece-rate workers) in the audit to make sure all the possibilities are reviewed. A wage statement audit is a simple process that can eliminate a common penalty claim made by any employee challenging the wage and hour practices of the employer.