Court of Appeal: Wage Statements Need Not Include Vacation and PTO Balances

Labor Code section 226 explains in detail what information must be included in an itemized wage statement, which must accompany paychecks in California.  Here are the section's requirements:

(1) gross wages earned, 

(2) total hours worked by the employee, except for any employee whose compensation is solely based on a salary and who is exempt from payment of overtime under subdivision (a) of Section 515 or any applicable order of the Industrial Welfare Commission, 

(3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis, 

(4) all deductions, provided that all deductions made on written orders of the employee may be aggregated and shown as one item, 

(5) net wages earned, 

(6) the inclusive dates of the period for which the employee is paid, 

(7) 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, 

(8) the name and address of the legal entity that is 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, and 

(9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee and, beginning July 1, 2013, if the employer is a temporary services employer as defined in Section 201.3, the rate of pay and the total hours worked for each temporary services assignment.

The deductions made from payment of wages shall be recorded in ink or other indelible form, properly dated, showing the month, day, and year, and a copy of the statement and the record of the deductions shall be kept on file by the employer for at least three years at the place of employment or at a central location within the State of California. For purposes of this subdivision, “copy” includes a duplicate of the itemized statement provided to an employee or a computer-generated record that accurately shows all of the information required by this subdivision.

Oh, but if you pay a piece rate, you also have to comply with section 226.2:

(a) For employees compensated on a piece-rate basis during a pay
period, the following shall apply for that pay period: * * *  

(2) The itemized statement required by subdivision (a) of Section 226 shall, in addition to the other items specified in that subdivision, separately state the following, to which the provisions of Section 226 shall also be applicable: 

(A) The total hours of compensable rest and recovery periods, the rate of compensation, and the gross wages paid for those periods during the pay period.

(B) Except for employers paying compensation for other nonproductive time in accordance with paragraph (7), the total hours of other nonproductive time, as determined under paragraph (5), the rate of compensation, and the gross wages paid for that time during the pay period.

So, do you see vacation or PTO balances there?  Me neither.  Neither did the Court of Appeal, which rejected the plaintiff's claim in Soto v. Motel 6 Operating LP (opinion here).  The Court wrote:

section 226(a) is highly detailed, containing nine separate categories that must be included on wage statements, and the code section does not identify accrued paid vacation as one of these categories. (See fn. 2, ante.) When a statute omits a particular category from a more generalized list, a court can reasonably infer a specific legislative intent not to include that category within the statute's mandate. (See Blankenship v. Allstate Ins. Co. (2010) 186 Cal.App.4th 87, 94.)
*  *  *  *
[V]acation pay cannot be fairly defined as "gross wages earned" or "net wages earned" under section 226(a)(1) or (a)(5) until the termination of the employment relationship. The employee has vested rights to paid vacation or vacation wages during the time of his employment, but these rights do not ripen and become an entitlement to receive the monetary value of the benefit as wages until the separation date. (Church, supra, at pp. 1576-1577, 1583; see Suastez, supra, 31 Cal.3d at p. 784.) Further, before separation, the amount of vacation pay to which the employee is entitled is not ascertainable. An employee is entitled to obtain the value of unused paid vacation at his or her "final rate." (§ 227.3, italics added.) Because the amount of unused vacation and an employee's final rate may change, an employee's accrued vacation balance depends on the particular circumstances at the employment termination date.

This will help employers not only with claims that vacation / PTO belong on the wage statement, but also with other items not included in section 226.  Section 226 also requires employers to provide a copy of payroll records that include only the above 9 items.  Plaintiff lawyers argue that section 226 requires more than what is listed. This decision in Soto should put that issue to rest. 

One more tip:  employers have to report paid sick leave on the wage statement (or in a separate document) per  Labor Code section 246, subd. (h):

(h) An employer shall provide an employee with written notice that sets forth the amount of paid sick leave available, or paid time off leave an employer provides in lieu of sick leave, for use on either the employee's itemized wage statement described in Section 226 or in a separate writing provided on the designated pay date with the employee's payment of wages.

Therefore, employers that rely on PTO in lieu of mandatory paid sick leave might well have to provide the PTO balance on the wage statement (or in the separate document).  Apparently that was not the case in the Soto case, or no one brought it up.   

Be careful out there.

CA Governor Signs AB 1506, a Bill Granting Limited PAGA Relief Re Wage Statements

Governor Jerry Brown signed AB 1506 (text here), which amends the Private Attorneys General Act, or PAGA.

This law affects only PAGA claims that are based on defective wage statement claims asserting violations of Labor Code section 226. And only those claims were the alleged defects are that the employer does not include on the wage statement:

(6) the inclusive dates of the period for which the employee is paid, 

(8) the name and address of the legal entity that is the employer

So, a PAGA claim based on those two criteria may be avoided if the employer "cures" the defect upon receiving notice from the employee.   How do you cure?

A violation of paragraph (6) or (8) of subdivision (a) of Section 226 shall only be considered cured upon a showing that the employer has provided a fully compliant, itemized wage statement to each aggrieved employee for each pay period for the three-year period prior to the date of the written notice sent pursuant to paragraph (1) of subdivision (c) of Section 2699.3.

So, to "cure" you just have to re-do your wage statements for three years and re-issue them to all employees who received the defective ones.   It also means that the "aggrieved employees" must be "made whole," but it's unclear what that means unless someone has suffered some harm because the proper weeks or employer name were not listed on the wage statement.

The cure must occur after the employer receives notice of a PAGA claim within the 33 day period before the employee can file a lawsuit. If the employee claims the employer has not cured the defect, the employee may appeal to the DLSE. The DLSE has 17 days to rule on whether or not the defect was cured.  If not, the employer has three more days to cure.  If the employee still disagrees, he may appeal to the superior court.  If the DLSE finds the the employer did not cure, then the employee may file suit.

So, this is a very minor amendment to PAGA, but one that may help employers avoid an expensive claim in limited circumstances.

This is an "urgency" measure, which means it takes effect right away. Stay tuned for explanations of some of the other legislation that will take effect in January.

Court of Appeal: Reporting Time Pay and Discharge

The Court of Appeal addressed California's "reporting time" pay requirement in the context of discharge. 
First it explained "reporting time" pay in the Wage Orders.

Section 5(A) of Wage Order Number 5-2001 states: “Each workday an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee‟s usual or scheduled day‟s work, the employee shall be paid for half the usual or scheduled day‟s work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee‟s regular rate of pay, which shall not be less than the minimum wage.” (Cal. Code Regs., tit. 8, § 11050, subd. 5(A).)

The employee was called in for an unscheduled day to be fired. The company paid the employee 2 hours, but the employee wanted four hours' pay.  The Court of Appeal held that only two hours of reporting time pay was due.  In explaining why, the court will help employers in the case of meetings that are scheduled on employees' days off.

If an employee is required to work, reports to work, and is not put to work or does not work half of the employees‟ usual or scheduled day‟s work, the employee is paid a half-shift reporting wage not to exceed four hours. (Cal. Code Regs., tit. 8, § 11050, subd. 5(A).) If an employee is not scheduled to work or does not expect to work his usual shift, but must report to work for a meeting, the employee falls into the regulatory category of those employees called to work on their day off for a scheduled meeting. Price was entitled to the minimum payment, which is what he received.10

* * *

We do not agree with Price that he is entitled to receive more than the two-hour minimum; he did not report to work with the expectation that he would work a scheduled shift, but rather was scheduled to attend a meeting for an unspecified number of hours. Nor do we agree with Price that the term "usual" in the statute means the average of his previously scheduled days‟ worked during his employment at Starbucks. Rather, the term "usual" refers to the employee‟s expectation of the hours in the customary workday, just as, in the alternative, a scheduled work day formalizes the expectation of the hours worked. During his employment, Price's expectations of hours worked was solely based upon his scheduled hours. Price was not scheduled to work on November 16, and his expectation was he had been called to work for a meeting on his day off. He did not lose any pay because of a scheduling error. He was paid for reporting to the meeting consistent with the reporting time pay regulation.

This case also is very good because it, once again, says you have to have an actual injury to recover on a wage statement claim.  No injury, no money.  And a missing piece of information is not an injury.

The case is Price v. Starbucks Corp. and the opinion is here.