Is Your Company's Pay Stub information Compliant?
Labor Code 226 mandates specific data to be listed on a pay stub. According to a recent employment law presentation at a February SHRM meeting, there has been an uptick in lawsuits filed related to Labor Code 226 violations.
What’s the most common violation? The company name.
Fortunately for California employers, auditing a pay stub for mandatory pay data is not very difficult and making sure the correct legal entity is on the pay stub should be automatic. Unfortunately, it is a commonly overlooked compliance issue leading to real penalties.
California Labor Code 226 lists specific information that needs to be on the pay stub including, “The name and address of the legal entity that is the employer.” This means pay stubs that have a DBA or a branch address not related to the corporate entity are in violation. To illustrate, let’s say there is a hotel, "The Halfway Hotel," that has an actual legal name of “Halfway Lodging Inc.” The name "Halfway Lodging Inc." must be on the pay stub as the legal entity, not the DBA “The Halfway Hotel.
California Labor Code §226 (e) states (1) An employee suffering injury as a result of a knowing and intentional failure by an employer to comply with subdivision (a) 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 every subsequent pay period, not to exceed an aggregate penalty of four thousand dollars ($4,000). Plus the employee is entitled to an award of costs and reasonable attorney’s fees.
Individually, the one claim may not seem large, but if a plaintiff's attorney brings a PAGA claim on behalf of all prior employees, the civil penalties assessed can be very large. The magnifying effect is one reason why these lawsuits are being filed with increasing frequency. If there is an error on one pay stub, logically other employees are probably affected and can be added to the lawsuit.
California employers do have a 33 day period to cure alleged violations of California Labor Code, based on Assembly Bill 1506 (AB 1506), codified in Labor Code Section 2699(d) and signed into law on October 2, 2015. This amendment to the California Private Attorneys General Act (PAGA) provides time for the employer to correct and give written notice to the aggrieved employee by certified mail within the 33 Day time period that the alleged violation has been cured, including a description of actions taken. Once the employer takes these steps, the employee may not commence a civil action pursuant to section 2699 of PAGA.
Two-Minute Pay Stub Data Audit:
Download our Pay Stub Audit Checklist review your current pay stub data to make sure you are compliant with CA labor code 226.
Corrective Action Might Not Be So Easy
If there is an error or omission on your paystub, it's probably time to look for a better solution. Payroll companies and software that are not specialized for California could be outdated for upgrades to meet specific state labor law requirements and might not be able to upgrade or develop a solution within the 33 day grace period for you to be able to take corrective action to get into compliance.
If your current payroll system or provider cannot meet these CA compliance requirements, or you just want a better payroll solution, contact OnePoint HCM. Our web-based payroll solutions can be implemented quickly, are easy to use, and can get you compliant with CA labor codes. Seamless connection to our HR and Time and Labor applications with real-time updates makes it easier to correct compliance issues and document corrective action across the system.