PAGA Wage-Statement Claim Doesn’t Require Proof of Injury

Employer may be liable for civil penalties even if employees weren’t harmed

By Joanne Deschenaux June 22, 2018

California employees must show actual injury to collect individual damages in a lawsuit against an employer for failure to provide proper wage statements. However, the California Court of Appeal has ruled that employees need not show actual injury to recover civil penalties from the employer in a Private Attorneys General Act (PAGA) suit for the same wage-statement violation.

PAGA authorizes employees to essentially stand in the labor commissioner's shoes to recover civil penalties for California Labor Code violations. If successful, 75 percent of the recovered penalties go to the state and 25 percent go to the employees—but the employees aren't entitled to the personalized damages available in individual lawsuits.

Coastal Pacific Food Distributors hired the plaintiff as a billing clerk in 1998 and fired her in 2014. She filed suit against Coastal Pacific, alleging, among other claims, that Coastal Pacific failed to provide her and other employees with accurate, itemized wage statements showing the applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate, as required by the California Labor Code. She sought to recover both individual damages and civil penalties on a representative basis under PAGA.

The trial court found that the plaintiff had not suffered an injury, as is required for the individual claim, because the hourly overtime rate could be determined from the wage statement by performing simple math calculations. The court also found that an injury was necessary for the PAGA claim and dismissed both the individual and the PAGA claims before trial.

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The plaintiff appealed, and the appellate court reversed with regard to the PAGA claims, holding that she could proceed to trial on those claims.

No Injury Required

The court first noted that California courts had reached different conclusions as to whether a PAGA claim for a violation of the wage-statement provision of the labor code requires the same showing of injury as an individual claim for damages. It sided with the decisions finding that no injury was necessary.

The court noted that the civil penalties recovered on behalf of the state under PAGA are distinct from the damages to which employees may be entitled in their individual capacities. While the statutory provision authorizing individual damages requires proof of harm, there is no such requirement in PAGA and no reason to incorporate the requirement into PAGA, the court said.

The court noted that damages and civil penalties have different purposes: Damages are intended to be compensatory, meaning to make an injured employee whole. Therefore, there must be an injury to compensate. On the other hand, "civil penalties, like punitive damages, are intended to punish the wrongdoer and to deter future misconduct," according to the court. An act may be wrongful and subject to civil penalties even if it does not result in injury, the court concluded.

The court did note that a trial court has discretion in awarding civil penalties and may reduce the award for technical violations that cause no injury.

Raines v. Coastal Pacific Food Distributors Inc., Calif. Ct. App., No. C083117 (May 22, 2018).

Professional Pointer: California employers should review payroll practices to ensure they comply with the law. As this case shows, even an unintentional, essentially harmless error may result in liability under the labor code.

Joanne Deschenaux, J.D., is a freelance writer in Annapolis, Md.


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