While California employers may be generally aware of the nine requirements for wage statements, a careful review of the nuances of each of those requirements is necessary to ensure compliance under Labor Code section 226.
But the inquiry does not end there. When, how, and what to do to maintain these records is equally important in maintaining compliance and thereby protecting the company against wage statement penalties.
Required Contents—the Basics
We previously covered what California employers need to include on wage statements pursuant to Labor Code section 226(a):
- Gross wages earned;
- Total hours worked;
- Certain information for employees paid on a piece-rate basis;
- All deductions;
- Net wages earned;
- Pay period;
- Employee’s name and either (a) the last four digits of the social security number or (b) employee identification number;
- Name and address of the legal entity that is the employer; and
- All applicable hourly rates.
Nuances
While these nine requirements may seem straightforward, some nuances have prompted substantial litigation.
For example, section 226(a)(8) requires the “name and address of the legal entity that is the employer” This causes confusion as the company name registered on the California secretary of state website is often not the same as what appears on a wage statement. Courts of Appeal have not required such hyper-technicality so long as the wage statement does not confuse the reasonable employee regarding who the employer is.
As another example, while meal or rest period premiums do not expressly appear among the nine items required on a wage statement, a 2022 California Supreme Court case clarified that such premiums are indeed wages and belong on the wage statement.
While a revisit to the basics on complying with Labor Code section 226 is appropriate, it is also important to examine when and how to provide and to maintain wage statements to ensure full compliance
When To Provide Wage Statements
With limited exceptions, Labor Code section 226(a) mandates an employer provide wage statements at least twice a month or each time the employer pays wages. Some employers may choose to pay employees more frequently than twice a month. In either case, with limited exceptions:
- Any wages earned between the 1st and 15th day of any month are due on or before the 26th of the same month.
- Any wages earned in the last half of the month are due on or before the 10th day of the following month.
The limited exceptions include exempt employees, unionized employees whose collective bargaining agreement may override these rules, and employees in certain industries such as stock and poultry workers or household domestic service workers.
How To Provide Them
A copy of the wage statement must accompany the check, draft, or voucher. Employers may elect to provide a written wage statement, or, if an employer issues wage statements electronically, an employee must retain the ability to access easily the electronic wage statement and to convert them into hard copies at no expense.
How To Maintain Compliant Recordkeeping
Employers must keep copies of employees’ wage statements for at least three years following separation from employment. Those copies must remain at the place of employment or at a “central location” within the State of California.
What To Be Aware Of—Employees’ Right To Inspect
While employees may not look at each line item of their wage statements, they have the right to request copies of their statements, even years after separation from their employment. Because of the three-year recordkeeping rule, an employer may not recognize an employee who shows up to the HR office demanding copies of his or her wage statements, nearly three years after that person resigned. This is especially true after a legal name or address change.
In that case, Labor Code section 226(b) provides that an employer may take “reasonable steps” to confirm the identity of that employee and can also charge that current or former employee for the actual cost of reproducing the wage statements.
Upon receipt of such a request, the employer has up to 21 calendar days to fulfill the request. Failure to timely comply with the request exposes an employer to a $750 penalty.
What Can Employees Recover For Non-Compliant Wage Statements?
An employee who discovers that his or her wage statement omitted or incorrectly listed information required under section 226(a) can seek penalties up to $4,000, a penalty that can apply for each affected employee. Additionally, Labor Code section 226(e)(1) provides that the employee is entitled to the costs and reasonable attorney’s fees in bringing a claim.
Tacking on wage statement penalties to just one interrupted or missed meal period is a common approach used by plaintiffs’ attorneys. However, the California Supreme Court confirmed that before an employee is entitled to statutory penalties of $4,000, the employee must show that the employer’s failure to comply with section 226(a) was both knowing and intentional.
This good faith defense to wage-statement claims provides an opportunity for employers to establish that their errors resulted from legal uncertainty regarding pay practices and that their mistakes of law were reasonable.
What Employers Should Do
What may seem like trivial mistakes can lead to millions of dollars in penalties. Consider taking these steps:
- Perform an audit on wage statements issued to each type of employee (if treated differently) and determine whether they meet the requirements in Labor Code section 226(a). If any eyebrows raise concerning nuances, have legal counsel review.
- Maintain copies of the audit and remedial measures taken. Step-by-step documentation on any updating of practices helps prove good faith efforts to comply with the law.
- Review your recordkeeping system and communicate with your IT department to avoid storage issues. Even excellent payroll services may not be able to keep up with California’s stringent requirements.