Wage Statement Violations Need Not Be Intentional to Recover PAGA Penalties

By Joanne Deschenaux October 13, 2017

An employee's claim for civil penalties under the California Private Attorneys General Act (PAGA) alleging an employer's failure to list required information on itemized wage statements can proceed to trial—even though the employer claimed it did not know it was violating the law, the California Court of Appeal ruled.

Employees who seek damages under the state labor code for wage statement omissions must show that the employer acted "intentionally and knowingly," but no such requirement exists for PAGA claims that seek only civil penalties, the court held.

PAGA was enacted in 2003 to improve enforcement of California labor code violations. The law permits an aggrieved employee to file a representative action on behalf of himself or herself and other current and former employees to recover civil penalties for violations of the labor code that otherwise would be assessed and collected by the state's Labor and Workforce Development Agency (LWDA).

On April 1, 2015, Eduardo Lopez filed a PAGA complaint asserting that his employer, Friant & Associates LLC, failed to include the last four digits of its employees' Social Security numbers or employee identification numbers on itemized wage statements, in violation of a provision of the labor code.

Friant sought to have the complaint dismissed before trial, arguing that the company did not knowingly violate the law and that the court could not award penalties for its inadvertent error. The trial court agreed with Friant and dismissed the case. Lopez appealed.

[SHRM members-only toolkit: Complying with California Wage Payment and Hours of Work Laws]

PAGA Claims Are Different

Civil penalties under PAGA are in addition to any other remedies available under state or federal law. Seventy-five percent of any civil penalty recovered is paid to the LWDA, and 25 percent goes to employees.

Lopez's PAGA claim was based on Friant's alleged noncompliance with a labor code provision that requires employers to provide accurate, itemized wage statements to employees. The labor code sets forth nine elements that must be included in the wage statement, including the last four digits of an employee's Social Security number or employee identification number.

The parties agreed that Friant had issued 5,776 itemized wage statements to Lopez and other employees that failed to include such information. However, because the trial court concluded that Lopez had to show not only a violation of the labor code but also that the violation was "knowing and intentional," it dismissed the lawsuit. The appellate court disagreed and reversed the trial court's judgment.

According to the appeals court, the trial court ignored how a PAGA claim differs from an employee's individual or class claim for damages. PAGA allows an employee to recover civil penalties on behalf of the state. The purpose of PAGA is not to recover damages but to create a means of "deputizing" citizens as private attorneys general to enforce the labor code. The relief is in large part for the benefit of the general public rather than the party bringing the action, the court said.

The statute's language makes clear that the prerequisite that an employee suffer injury because of an employer's knowing and intentional failure to comply with the labor code applies only to "an action for damages" and therefore does not apply to an action for civil penalties under PAGA, the court said.

It added that the legislative history of both the wage statement requirement and PAGA supports the conclusion that the "knowing and intentional" requirement was meant to apply only to actions for damages.

Lopez v. Friant & Associates LLC, Calif. Ct. App., No. A148849 (Sept. 26, 2017).

Professional Pointer: This decision shows that even unintentional omissions of required information from wage statements can subject employers to penalties and therefore reinforces the need to regularly review the statements provided to employees to ensure that they fully comply with labor code provisions.

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


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