Written by Galen T. Shimoda, Justin P. Rodriguez and Jennet F. Zapata
Under Labor Code section 226, employers must provide their employees with itemized paycheck stubs or wage statements, and any employee who "suffers injury" due to a violation of section 226 may recover damages for each violation, up to $4,000. On September 30, 2012, Governor Jerry Brown signed Senate Bill No. 1255 into law, which clarifies the "suffering injury" component of a wage statement violation claim. Under the new legislation, an employee "suffers injury" if he or she either does not receive a wage statement at all, or is provided an inaccurate, incomplete wage statement and cannot "promptly and easily" determine from the wage statement alone one or more of the following: 1) the gross or net wages paid to an employee during a pay period and the basis the employer used to get to that amount (e.g. total hours, applicable rates of pay, piece rate units earned, etc.); 2) what deductions the employer made to determine net wages; 3) name and address of the employer and, if the employer is a farm labor contractor, the name and address of the legal entity that secured the services of the employer; 4) the name of the employee and only the last four digits of the employee's social security number or the employee's identification number.
Although employers frequently argue that employees cannot suffer injury under Labor Code section 226 for technical violations (see Price v. Starbucks Corp., 192 Cal. App. 4th 1136 (2011)), SB 1255 will make these arguments obsolete. The new legislation provides an objective standard for determining whether an employee can "promptly and easily" determine whether the required information has been provided. A reasonable person must "be able to readily ascertain the information without reference to other documents or information."
Hence, we can see cases involving piece rate and commission employees as prime representatives for Labor Code section 226 claims. Many times employers will not report the number of piece-rate units or amount paid per piece on paycheck stubs; or, they fail to include any information on the commissions earned or the correct regular rate of pay (which should include commissions therein) on paycheck stubs. In both examples, the information an employee would need to understand the basis in which their wages are calculated are not "promptly and easily" determinable under SB 1255.
Another interesting aspect of this legislation is its effect on pending cases and class actions. Whether legislation is retroactive depends on whether the new law is merely a clarification of existing law or a change in the law. See McClung v. Employment Dev. Dep't., 34 Cal. 4th 467, 471 (2004). The legislative history of SB 1255 makes several references to the fact that this legislation is intended to clarify existing law. Interestingly, during the hearings on SB 1255, the California Rural Legal Assistance Foundation ("CRLAF") provided over three hundred published and unpublished court cases to the legislature that split roughly evenly on the proper construction of "suffering injury." Indeed, the variance among the court cases provided by CRLAF support the argument that SB 1255 was, in fact, a mere clarification. This will only add fuel to the plaintiff's bar to push Labor Code section 226 claims even more.