Even simple formatting errors can result in penalties, Ahearn noted. You should review wage statements going back one year from the date of the PAGA notice for compliance with the requirements under Labor Code section 226(a), ensuring they provide: gross wages earned; total hours worked; the number of piece-rate units earned and the applicable piece rate if the employee is paid on a piece-rate basis; all deductions; net wages earned; start and end dates of the pay period; the name of the employee and the last four digits of their social security number or an employee ID number; the name and address of the employing legal entity; and all applicable hourly rates and the corresponding hours worked at each hourly rate. SHRM offers thousands of tools, templates and other exclusive member benefits, including compliance updates, sample policies, HR expert advice, education discounts, a growing online member community and much more. PAGA penalties can quickly accumulate given the many possible Labor Code violations and the fact that penalties accrue for each violation (per pay period), which means that employers who do not realize they are doing something wrong face more liability as time goes on. In addition to penalties for labor code violations, employers may face fines under California's Private Attorneys General Act (PAGA). PAGA allows aggrieved employees to sue over alleged labor code violations on behalf of themselves and other employees and to step into the shoes of state regulators to recover civil penalties. Paga is a city in Ghana, well-known for its crocodile pools. Luckily, there is a 10-step process you can take if you receive such a notice to put your organization in the best possible position. PAGA provides for a default penalty of $100 for initial violations and $200 for subsequent violations unless the Labor Code specifically provides for a different penalty. California law The plaintiff can sue on behalf of other employees who suffered different violations than those suffered by the plaintiff so long as the plaintiff suffered at least one violation. (2017) 18 Cal.App.5th 705, 724.). If so, you should advocate for a higher quantifier. 2010) 2010 WL 1838726 at **2-6. Lab. Overturning the ruling of two lower courts, on July 15, 2021, the Court held in Ferra v.Loews Hollywood Hotel, LLC that meal and rest premiums must be paid at the "regular rate" not the base hourly rate. (The terms injury and knowing and intentional failure are further defined in section 226 (e) (2)). If the wage statement violations have been cured, the law bars the employee from bringing a civil action pursuant to Section 2699 against you. Code, 1197.1, subds. If you identify problems, you should immediately correct any missing or inaccurate information on the wage statements. Please log in as a SHRM member. (Lab. What is a meal-break premium? The following formulas can be useful to create high/low scenarios in your damages model for some of the main Labor Code violations. Find the latest news and members-only resources that can help employers navigate in an uncertain economy. Are the policies bareboned or do they fail to adequately inform employees of their rights and/or the employers obligations? Increase or decrease your quantifier accordingly based on the theories of liability you can substantiate through the pay records. Based on our hypothetical, our employee is entitled to $4,800 ($20 per hour x 8 Hours x 30 days). You should consult a seasoned labor and employment counsel to flag potential wage and hour violations and develop a game plan prior to receiving the inevitable PAGA notice. They contain evidence of unpaid wages, unpaid premiums, meal and rest break violations, and unlawful timekeeping practices, such as rounding or auto-deductions, among other things. This does not mean that the wages continue for a 30-day period, but that the employee may be entitled to up to 30 actual days' worth of wages. This will save you and/or your expert a significant amount of time when it comes to analyzing the voluminous records. Moreover, for such claims: Taking the same example (50 employees who did not receive compliant wage statements and were not paid 30 minutes of overtime per workday who were each paid $25 per hour) and assuming these violations occurred over the course of four years, the class action liability could be $1,102,500: Combining the class damages with the stacked PAGA claims of $260,000, the potential liability exposure is now $1,362,500. When asking for the time and wage records, be sure to request them in electronic format, preferably Excel, so that you can search through the records efficiently and, if you know how, utilize macros and formulas to quickly identify search parameters and data points within the records. Specifically, the court in Bernstein decided that heightened penalties for "subsequent violations" under California's Private Attorney General Act (PAGA) cannot be imposed until the Labor Commissioner or a court notifies the employer in question of the Labor Code violation (s) at issue. In addition, employees are entitled to an unpaid 30-minute meal break once they work five hours. Class action certification is not required, but plaintiffs must exhaust their administrative remedies by first notifying the State of the violations to give the State the opportunity to address the violations itself. Lab. The employer has 33 days from the date of the letter to make pay stub corrections. For more information or to opt out, visit our privacy policy. (Ibid.) Code, 218.6; Civ. 4 years x 52 weeks per year x 5 workdays per week = 1,040 days, 1,040 days x 30 minutes of overtime per day = 520 hours of overtime owed per employee, 520 hours of overtime x 50 employees = 26,000 hours of overtime owed. For example, PAGA plaintiffs can seek penalties under Labor Code section 1198 for violations of any IWC Wage Order that regulates conditions of labor. $1,750 + $87,500 = $89,250 in Total PAGA Penalties Code, 226.7, subd. Code, 2802.). Code, 226.7, subd. Calculation of PAGA penalties is based on each employee and each Labor Code violation on a per-pay-period basis. If you do agree to a stay discovery at the defendants request, inform the mediator so that gaps in the record are weighed in your favor. On July 15, 2021, in Ferra v.Loews Hollywood Hotel, LLC, the Supreme Court of California set forth a new rule requiring that premiums for meal, rest, and recovery break violations be paid at the regular rate of pay. This includes when an employer: When the Labor Code does not already provide a civil penalty, the PAGA default penalty is $100 for each employee per pay period for the initial violation and $200 for each employee per pay period for each subsequent violation. PAGA penalties coupled with class action damages can create significant financial liability for an employer. Indeed, it makes most sense for employers to obtain the broadest release possible, since the PAGA claims will be based on wage and hour violations that trigger class damages separate from PAGA penalties. Under PAGA, the default civil penalty for an employer's initial violation is one hundred dollars ($100) per employee per pay period, and two hundred dollars ($200) per pay period for any subsequent violations (though PAGA plaintiffs are required to remit 75% of recovered penalties to the Labor and Workforce Development Agency). Proc., 338.) The Schiller court wrote: For reprint permission, contact the publisher: Advocate Magazine, California Jury VerdictsVerdict searchReport your recent verdict. Code 2699 (f) (2). 2021 Hoge Fenton, Silicon Valley 408-947-2435 | Download v-card, Silicon Valley 408-947-2434 | Download v-card, 411 Borel Avenue, Suite 310 This is a big procedural hurdle for plaintiffs to overcome. The employer's initial labor violationcarries a civil penalty of $100 per employee, per pay period. Note that the California Supreme Court recently held that the de minimis defense is not applicable to off-the-clock wage-and-hour claims. It benefits employees to receive a paycheck every week, but employers that pay workers with that level of frequency double their exposure to potential wage statement penalties, he said. While reviewing the timesheets, ask yourself if the records evince other unlawful wage-and-hour practices. We used one year for purposes of this example. by the author. Lab. 37 0 obj <> endobj The waiting time penalty is an amount equal to the employee's daily rate of pay for each day the wages remain unpaid, up to a maximum of thirty (30) calendar days. 50 employees x 26 pay periods = 1,300 violations. In this case, the penalty calculation could be: 1 violation (non-compliant wage statement) x $100 penalty x 26 affected pay periods x 50 aggrieved employees = $130,000 1 violation (unpaid overtime) x $100 penalty x 26 affected pay periods x 50 aggrieved employees = $130,000 Total: $130,000 + $130,000 = $260,000 (Lab. SHRM Online that even hypertechnical violations may be costly for employers. The court's decision to reduce the PAGA penalties award was driven by its recognition that the retailer had made a good faith effort to comply with Section 226, that it would be unreasonable to penalize the retailer by awarding maximum PAGA penalties for violations stemming from its practice of awarding bonuses that benefit employees, and . Remember that regardless of what the defendant agrees to give you informally, the defense will continue to maintain and exploit its unilateral and complete access to employees, witnesses and relevant records. A1 = Shift duration A2 = Shift start For full functionality of this site, you must consent to the use of cookies. Code, 203.) Cal. One employee can bring a class action on behalf of other employees. Do you maintain or cover the cost of maintaining uniforms? A 30 day penalty is $64 x 30 days = $1,920. Defending against PAGA claims, class action lawsuits, or other legal action, Managing challenging employee situations such as leaves of absence, a remote workforce, or complaints of harassment, Other legal issues related to hiring, compensating, managing, and separating employees. As such, practitioners should review the applicable wage orders to assess whether additional penalties can be levied against the employer for violations extending beyond those enumerated in Labor Code section 2699.5. This article addresses these issues and discusses different approaches to creating a damages model that can optimize your success at mediation. Most defendants will produce these policies without hesitation. PAGA Penalties and Labor Code 226 Claims. The calculation of Labor Code section 210 penalties is different, however, and amounts to $100 for the initial violation and $200 for each subsequent violation (or any willful or intentional violation) plus25% of the amount unlawfully withheld. %PDF-1.5 % "Employers should understand that the penalties for wage statement violations can be very high," he noted. If youve received a PAGA notice, you can count yourself as one of several thousands of California employers who receive one every year. Website Copyright 2023 by Neubauer & Associates, Inc.The articles appearing in Total Statutory and PAGA Damages Sought 203 Attorney Advertising. What information do you need, how do you get it, and, most importantly, how do you go about calculating the damages on behalf of your client and all others similarly situated and/or aggrieved? Posted in Civil rights in the workplace, Employee Rights, Employment Law on April 14, 2014. An experienced PAGA practitioner should be able to chart the best course of action and guide you through the legal terrain. If you agree to a smaller sampling of records, you might consider stipulating that neither side will challenge the representative nature of the sample size used at mediation. var currentLocation = getCookie("SHRM_Core_CurrentUser_LocationID"); For the typical Class, PAGA, and UCL action, here is what you must know before mediating: 1) total number of employees during the four-year period; 2) total number of workweeks during the four-year period; 3) total number of employees who were terminated and/or quit during the three-year period; 4) total number of employees during the one-year period; and, 5) total number of pay periods during the one-year period. Thus, even if an employer issues premiums for meal-period violations, you can still assess PAGA penalties for the violation of Labor Code section 512. To make pay stub corrections, you should advocate for a higher quantifier one employee bring... 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