For example, PAGA plaintiffs can seek penalties under Labor Code section 1198 for violations of any IWC Wage Order that regulates conditions of labor. In general, these penalties are payable to the State of California.56 However, an employee can sometimes recover up to 25% of the penalty by bringing a lawsuit under the Private Attorneys General Act.57 These are called "PAGA" claims. In fact, 2018 saw a record number of PAGA claimsover 5,700, a 15 percent jump from 2017filed with the Labor and Workforce Development Agency. Wage statement violations: ($50.00 x total number of employees during the one-year period) + ($100.00 x [total number of pay periods in the one-year period total number of employees in the one-year period]). Website Copyright 2023 by Neubauer & Associates, Inc.The articles appearing in A 30 day penalty is $64 x 30 days = $1,920. This means $100 for a first offense and $200 for any subsequent violation on the same infraction. 2) Determine the appropriate penalty (see below). (Lab. Accordingly, each predicate . unlawfully withholds wages or fails to make timely payments ($100 for the initial violation and $200 for subsequent violations). 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. $(document).ready(function () { First, although the majority of courts have held that PAGA penalties can be recovered alongside other statutory penalties (such as meal break premiums), some courts hold that a PAGA penalty cannot be recovered if another penalty is available. Code, 1194.) If you are given anything other than the actual paystubs employees received each pay period, such as yearly or monthly pay summaries, ask the defense for exemplars of every type of wage statement that was issued during the penalty period so that you can determine what, if anything, was missing from the actual wage statements in violation of Labor Code section 226, subdivision (a). You have successfully saved this page as a bookmark. Code, 2699, subd. $('.container-footer').first().hide(); Battle over amount in penalties. ), Failure to reimburse business expenses: Total number of employees during the four-year statutory period x average amount each class member spent on necessary business expenditures. Statute of limitations for most wage and hour violations is four years. Non-Compliant Wage Statements (e.g., non-itemized deductions) for 50 employees for one year (26 pay periods). Due to the prevalence of PAGA lawsuits and the aggressive nature of PAGA penalties, the best way for employers to avoid liability is to ensure compliance with the Labor Code. PAGAprovides civil penaltiesfor violationsof the Labor Code. (Ibid.) Note that the California Supreme Court recently held that the de minimis defense is not applicable to off-the-clock wage-and-hour claims. Thus, the civil penalties recoverable by plaintiffs (25%) and those recoverable by the LWDA (75%) could not be aggregated when calculating CAFA's amount in controversy. The Labor Code may or may not provide a specific civil penalty for the violation. PAGA Overview. Under PAGA, the civil penalty against the company for an individual violation is $100 per worker for each pay period. In addition, employees are entitled to an unpaid 30-minute meal break once they work five hours. This information is readily available for most employers, and the defense should provide the requested data without objection or hesitation in any class or representative action that is headed to mediation. Worse, the Labor Code doesn't need to cover a penalty stipulation, PAGA places fines on anything not covered. When the economy is unstable, employers are faced with difficult decisions around staffing, pay and benefits. Are the shifts or lunch breaks rounded or exactly eight hours or 30 minutes, respectively? The average overtime premium rate is one and one-half times the average hourly rate. (Lab. 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 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). For example, if the PMK admits to an unlawful policy that was implemented on a class-wide basis regardless of job title or job location, increase your quantifier. to calculate the hour of premium pay owed when employers fail to provide a compliant meal or rest period. Code, 2699, subd. Posted on Aug 23, 2016. The Esparza court affirmed the trial court's ruling striking the PAGA claim, because the LWDA notice was sent more than 1 year after the last alleged violation. PAGA Penalties. That could be, for purposes of 203 penalties, the date of your last paycheck, or earlier. Arya Rhodes is an attorney at Schimmel & Parks, APLC, a law firm focusing on employment law, consumer class actions, rehab facility wrongful death, sexual assault and harassment, fires, mass torts, construction defects, and insurance bad-faith litigation. 1) Determine the number of Labor Code violations within the statutory period. 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. A PAGA-only action without class action component will often be turned into a hybrid class/PAGA action for settlement purposes. Code, 226.3; Raines v. Coastal Pacific Food Distributors, Inc. (2018) 23 Cal.App.5th 667, 680.). 3. 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. Bucking the trend of unrelentingly bad news for employers in the state, the California Court of Appeal has held that the default (lower) penalties found in the Labor Code Private Attorneys. The time and wage records are critical to your damages analysis. 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. One employee can bring a class action on behalf of other employees. All Rights Reserved. Requires class action certification to ensure the class representative adequately represents the proposed class. 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. Have you ever paid a meal or rest period premium. by the author. Thus, two late payments of wages totaling $2,000 will result in a penalty of $800 ($100 for the first violation plus $200 for the subsequent violation + $500 [$2,000 x .25]). As such, interest rates can and should be included within your damages workup. Employers need to regularly audit their practices for compliance, Sarchet said, and the audit should cover more than just wage statements. ), Third, there is some uncertainty as to whether multiple predicate violations, and the penalties related thereto, can be stacked each period or if only one penalty can be assessed each pay period regardless of how many predicate violations occurred during that same pay period. If you identify problems, you should immediately correct any missing or inaccurate information on the wage statements. Dubbed the bounty hunter law, PAGA, or the Labor Code Private Attorneys General Act of 2004, is actually a series of statutes codified in Sections 2698 through 2699.6 of the California Labor Code that authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California for Labor Code violations. The employee suing under PAGA acts as the proxy or agent of Californias labor law enforcement agency, the Labor and Workforce Development Agency (LWDA), in policing Labor Code violations. In most cases, the employees counsel will send you a request for the employees personnel file long before any notice is filed with the LWDA. Wage and Hour Class Actions vs. PAGA Lawsuits. Your call to action is often triggered before you even receive a PAGA notice. } (Hernandez v. Towne Park, Ltd. (C.D. 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? If an employer receives a letter notifying the business about potential violations, the employer should consult counsel right away, Ahearn said. Yes. PAGA penalty for non-compliant wage statements is $100 for each employee per pay period for the initial violation and $200 for each employee per pay period for any subsequent violations. 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. 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. 2010) 2010 WL 2793650 at *6; Smith v. Brinker Intl, Inc. (N.D. Cal. Brinker Int'l, Inc. (N.D. Cal. Dont forget to check for second meal periods which must be provided for shifts that are over 10 hours! endstream endobj 38 0 obj <> endobj 39 0 obj <>/ProcSet[/PDF/Text/ImageC]/XObject<>>>/Rotate 0/Type/Page>> endobj 40 0 obj <>stream 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. The response should be kept brief without going into any details about any expired statute of limitations or how the alleged facts and theories are deficient. Failure to pay minimum wages during employment gets $100.00 for the initial penalty and $250.00 for subsequent violations. Please log in as a SHRM member before saving bookmarks. Are the policies bareboned or do they fail to adequately inform employees of their rights and/or the employers obligations? If youve received a PAGA notice, you can count yourself as one of several thousands of California employers who receive one every year. PAGA Penalties and Labor Code 226 Claims. The penalties under PAGA can add up very quickly. PAGA Calculation $50/penalty for first violation x 35/aggrieved former and current employees x 1/first pay period = $1,750. 37 0 obj <> endobj 4 The statute of limitations for non-compliant wage statements is one year. Unpaid overtime: Total workweeks over the four-year period x average hours of unpaid overtime per week x average overtime premium rate. 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. 1132.) Assess whether your client will make an adequate class representative. If the defendant raises any privacy concerns with respect to the time and wage records, offer to stipulate to a protective order or suggest substituting any identifying information, like names and social security numbers, with generically assigned employee numbers. . Code, 226.7, subd. PAGA claims include technical wage statement violationsfor example, a business may face penalties for improperly listing the name under which it does business instead of its legal name. Several bills to further reform PAGA are currently making their way through the state legislature, Sarchet noted. Well, [i]f an employer fails to provide an employee a meal period the employer shall pay the employee one additional hour of pay at the employees regular rate of compensation for each workday that the meal period is not provided. (Lab. Although this appears to be a low threshold, the applicable statute of limitations as to each claim should be analyzed by counsel. Every subsequent violation carries a $200 penalty. What do the two, other than a shared moniker, have in common? PAGA penalties can be staggering, since PAGA provides for penalties per employee per pay period in which a violation occurs. While reviewing the timesheets, ask yourself if the records evince other unlawful wage-and-hour practices. Wage statement violations arguably are calculated at a rate of $250.00 for the initial violation, and $1,000.00 for every subsequent violation thereafter! Given the complexities of the Labor Code and the Industrial Welfare Commission Wage Orders, you should contact your employment legal counsel for guidance on how they apply to your business. 45 0 obj <>/Filter/FlateDecode/ID[]/Index[37 14]/Info 36 0 R/Length 60/Prev 133243/Root 38 0 R/Size 51/Type/XRef/W[1 2 1]>>stream If the employers violation rate is anything less than once per pay period, you should modify the formula to reflect your estimated violation rate. An experienced attorney will help you calculate all of the . violates Wage Orders regulating hours and days of work ($50 for the initial violation and $100 for subsequent violations); fails to pay minimum wages ($100 for the initial violation and $250 for subsequent violations). (Lab. 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. Claims that fall under the default PAGA penalty include: When PAGA was first enacted, plaintiffs argued that if an employee missed a meal break at least one time per pay period, for example, over the course of 26 pay periods, there is one initial violation and 25 subsequent violations. However, it is generally accepted now that for subsequent violations, employers must have notice of a violation for the heightened penalty to apply. 1 violation (non-compliant wage statement) x $100 penalty x 26 affected pay periods x 50 aggrieved employees =, 1 violation (unpaid overtime) x $100 penalty x 26 affected pay periods x 50 aggrieved employees =. Code, 1194.2.). The communiqu is an overview only and should not be construed as legal advice, or advice to take any specific action. And, the penalties for misclassifying workers as independent contractors instead of employees can be severe. If the defense is being difficult or resistant, remind them that class action and PAGA settlements are subject to court approval and that, without a reasonable exchange, any settlement reached might not withstand judicial scrutiny during the approval process. For cases that require deeper investigation, consider producing your client for deposition and/or taking the deposition of the defendants person(s) most knowledgeable regarding its wage-and-hour policies, practices, and procedures. PAGA, California's Private Attorneys General Act of 2004, allows employees to sue their employers on behalf of themselves and other "aggrieved" employees to recover penalties for Labor Code violations. Even then, the Legislature could pass a law clarifying the calculation of the meal / rest period penalty. Even simple formatting errors can result in penalties, Ahearn noted. %PDF-1.5 % Before filing a PAGA action, the aggrieved employee must exhaust specific administrative requirements by filing a written notice of the specific provisions of [the Labor Code] alleged to have been violated, including the facts and theories to support the alleged violation, both online with the LWDA and by certified mail to the employer (Cal. 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 . Code 2698, et seq. (a)(1)-(2).) The regular rate of pay calculation used to calculate the overtime rate should now be applied to any break premiums. An experienced PAGA practitioner should be able to chart the best course of action and guide you through the legal terrain. Lab. Join/Renew Nowand let SHRM help you work smarter. How are PAGA penalties calculated? var currentUrl = window.location.href.toLowerCase(); (Code Civ. In a straight wage-and-hour class action, the damages period is three years prior to the filing of the lawsuit to the present. Members may download one copy of our sample forms and templates for your personal use within your organization. Every subsequent violation carries a $200 penalty. Lab. 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. The average amount of settlements tends to hold steady until 2.5 years after commencement of the lawsuit, after which point the average cost of settlement quickly escalates. Finally, when negotiating the scope of the pre-mediation exchange, keep in mind that a plaintiffs right to statewide discovery is extremely broad in wage-and-hour class and PAGA actions. $("span.current-site").html("SHRM China "); The employee can also seek penalties under PAGA for Labor Code violations that do not carry their own penalties. $("span.current-site").html("SHRM MENA "); Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRMs permission. Have you strictly complied with requirements if adopting an alternative workweek schedule? Further, these fines reoccur per employee per pay period. Many attorneys dont have the resources to conduct an independent analysis of a large production of time and wage records and agreeing to a smaller sample size may be the most practicable approach. 2012) 2012 WL 2373372 at *17; Schiller v. Davids Bridal, Inc. (E.D. In this case, the penalty calculation could be: As evidenced by this example, PAGA penalties can quickly accumulate. In 2019, California collected over $88 million in PAGA penalties from employers. The plaintiff brought a wage and hour action alleging various violations of the California Labor . Labor Code section 226 (e) (1) provides that an employee who suffers injury as a result of a knowing and intentional failure to comply with subdivision (a) is liable for up to $4,000 plus costs and reasonable attorney's fees. You may not require an employee to work for a period of more than five hours per day without providing him/her with a 30-minute unpaid meal break. Many defendants interpret the Amaral decision narrowly to stand for the position that subsequent violations do not trigger until a court or the Labor Commissioner gives notice of the violation to the employer. Legal precedent has established that PAGA provides a "civil penalty." This means that employees can recover both the statutory penalty associated with the Labor Code provision at issue, as well as civil penalties under PAGA, thereby creating a stacking of penalties against the employer. Cal. For example, 10 employees each with 24 pay periods with a meal and rest period violation in each pay period translates to nearly $95,000 of PAGA exposure. Even though an individual cannot seek penalties, the California Labor Commissioner can take action to recover penalties in the amount of $50 for "each employee or person whose rights under this article were violated for each day or portion thereof that the violation occurred" with a cap of $4,000. %%EOF This article addresses these issues and discusses different approaches to creating a damages model that can optimize your success at mediation. Statutory penalties under the California Labor Code start at $50 for the first violation and rise to $100 for each subsequent violation. If you dont have the resources to go through all the records, do a spot check for unpaid wages and analyze whether any information required under Labor Code section 226, subdivision (a) is missing from the wage statement exemplars. The Schiller court wrote: Code, 226, subd. Do you automatically deduct time for a meal period? Lab. Because Labor Code section 226 violations carry the heaviest penalty amount at $250 for the initial violation and $1,000 for subsequent violations, correcting the wage statements soon after the PAGA notice will allow you to argue that there are only a few subsequent violations for which penalties may be assessed, if at all. When California employers fail to accurately provide certain details on pay stubs, they might incur steep fines under state law. Code, 218.6; Civ. If the plaintiff filed a class action in addition to a PAGA action, the potential exposure to the employer would increase. Youve agreed on a mediator and set the date for mediation. California Labor Code 203 provides that an employer's willful failure to remit payment entitles the employee to one full day's pay, up to 30 days, from the date the employee was terminated until the employee is paid, or files a lawsuit. The number used for the quantifier depends on the overall strength of your case, which is governed by several factors. When dealing with a large class size, the best approach is to agree on a statistically significant random sampling of time and wage records. Regardless of the sample size, going through the records will be time consuming and costly. Under AB 673, these penalties are . Weve Received A PAGA Notice Now What?An Employers 10-Step Guide, the absence of class certification requirements, a series of statutes codified in Sections 2698 through 2699.6 of the California Labor Code, is limited to one year before the date of filing of the PAGA lawsuit. Some of the common predicate violations subject to the default PAGA penalty include failure to provide meal and/or rest break premiums, failure to pay all wages owed during employment and failure to reimburse necessary business expenses. Note that the amount is doubled because employees are entitled to liquidated damages in the amount of the total unpaid minimum wages. Is there any indication that meal periods are automatically deducted from the employees time? For example, an employee who went on disability leave more than a year before the date of the PAGA lawsuit would not have worked within the past year that would serve as the basis for any meal and rest violations. But the . While most of what you need can be acquired through formal discovery, an informal exchange is often the most expedient and streamlined method for collecting everything you need to have a meaningful discussion regarding numbers at mediation. Pleasanton, CA, 94566-7047, 2023 Hoge Fenton Jones & Appel. 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