Hunton Employment & Labor Perspectives

On Friday October 2, 2015, Governor Jerry Brown signed AB 1506 into law, amending California’s Private Attorneys General Act (“PAGA”) to provide an employer the right to cure certain technical violations of the California Wage Statement Law (Labor Code § 226) before the employer can be sued.  The law sets forth specific steps that must be taken before a technical violation can be cured.

PAGA allows “aggrieved employees” to act as a private attorney general and collect civil penalties for Labor Code violations on behalf of themselves and other current or former employees. Although PAGA allows an employer the opportunity to cure certain Labor Code violations before suit can be brought, in most instances an employer can be sued without that opportunity if the Labor Commissioner declines to bring suit itself.  One commonly asserted PAGA claim that had no cure right (until now) was for violations of Labor Code § 226, which requires that certain specific information be contained on wage statements issued to California employees.  Under the previously existing law, omission of any required item from a wage statement, even if it caused no actual injury to the employees, was considered a serious violation and was not subject to PAGA’s notice and cure provisions.  AB 1506 changes this for two § 226 violations.

Under the new law, which takes effect immediately, if an employee notifies the employer and the Labor Workforce Development Agency (“LWDA”) that their wage statements do not include the beginning and end dates of the pay period or the name and address of the legal entity that is the employer, the employer may “cure” the alleged violation within 33 calendar days of the postmark date of the notice.  This is good news for employers since many companies have paid significant multi-million dollar settlements in the last few years due to these two technical wage statement violations. Unfortunately, however, the statute’s idea of how to cure a violation is likely to carry its own set of burdens for most employers..

To “cure” one of these wage statement violations in compliance with AB 1506, the employer must provide 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.  The employer also must give written notice by certified mail of the cure within the 33 day period.  If the employer properly cures the violation, the employee cannot pursue the claim.  However, if the employer fails to properly cure the violation and the LWDA declines to start its own investigation, the aggrieved employee may initiate a civil lawsuit to recover penalties.  The employer may only avail itself of the notice and cure provision once in any 12-month period for the same violations, regardless of the location of the worksite.

Employers have been trying to scale back PAGA claims since the law was enacted in 2004 and this new law is a step in that direction.  AB 1506 was supported by the California Chamber of Commerce, and was listed on its 2015 list of “job creator” bills.  Supporters of the law believe that AB 1506 will reduce frivolous claims based on technical wage statement violations that do not injure employees.

But, while employers will no doubt applaud this change in the law, many will say it does not go far enough.  AB 1506 does not provide the ability to cure other wage statement violations, such as a failure to show on the wage statement  gross wages earned, total hours worked, the piece rate and piece-rate units earned, all deductions, net wages earned, and all applicable hourly rates and the number of hours worked at each rate. Employers can still face significant PAGA penalties for omitting these items from their wage statements.  The cure provisions in AB 1506 will not eliminate all possible claims under Labor Code § 226 for  the failure to list the inclusive dates of the pay period and the name and address of the legal entity that is the employer – it only eliminates the claims under PAGA.  Employees do not have to bring a PAGA claim.  These claims still can be brought separately by employees as a class action against their employer. But, unlike PAGA claims, the penalties under § 226 for such violations are capped at an aggregate penalty of 4,000 per employee, plus an award of costs and reasonable attorney’s fees.  And, unlike PAGA claims, § 226 class actions can be mitigated through the use of class action waivers.  It remains unclear what impact AB 1506 will have on class action claims under § 226 if the Employer has previously cured the violations under PAGA.

In short, the passage of AB 1506 is a step in the right direction for California employers, but it will not entirely eliminate the risk of wage statement claims under PAGA or the Labor Code.  Employers should use the passage of this bill as another reminder to review their employee wage statements for compliance with each of the requirements of § 226(a).