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Amendments to Labor Code §226 Clarify Employers’ Wage Statement Obligations and Add Specific Requirements for Temporary Services Employers

Posted in Labor Law, New Legislation and Regulations, Wage & Hour

By:   Shauna N. Correia

Governor Brown recently approved SB 1255, AB 1744 and AB 2674, amending existing Labor Code section 226 relating to wage statements. Existing law requires all employers to provide employees with accurate itemized statements with specific information, either semimonthly or at the time of each payment of wages. Penalties up to $4,000 or actual damages, plus attorneys’ fees and costs, can be imposed on employers who willfully violate these requirements. Now, wage statements for temporary services employees must contain additional information. New law also clarifies when an employee has suffered an “injury” for purposes of obtaining the penalties, and provides employers with an affirmative defense for inadvertent, one-off violations.

Changes Affecting Temporary Services Employers

Existing law, Labor Code section 226(a), provides that wage statements must include detailed information: (1) gross wages earned, (2) total hours worked by the employee, except for any employee whose compensation is solely based on a salary and who is exempt from payment of overtime, (3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis, (4) all deductions, which may be aggregated, (5) net wages earned, (6) the inclusive dates of the period for which the employee is paid, (7) the name of the employee and the last four digits of his or her social security number or an employee identification number, (8) the name and address of the legal entity that is the employer, and (9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee.

Now, beginning July 1, 2013, AB 1744 amends Labor Code section 226 to require that if the employer is a temporary services employer (as defined in Labor Code Section 201.3), the wage statement must include the rate of pay for each temporary services assignment and the total hours worked for each legal entity.

Existing law also required an employer to provide an employee, at the time of hiring, with the rate and basis of the employee’s wages, and to give notice in writing of any changes within 7 calendar days or to disclose the changes on a timely wage statement.

AB 1744 now additionally requires that temporary services employers provide (1) the physical address of the main office; (2) the mailing address; and (3) the telephone number of the employer for whom the temporary employee will perform work.

Note also that a “willful” violation of AB 1744 is a crime.

Changes Affecting All Employers

Existing law, Labor Code section 226(e), states that an employee suffering injury as a result of a knowing and intentional failure of the employer to provide timely and accurate wage statements is entitled to recover the greater of (i) all actual damages or (ii) a specified sum, not exceeding an aggregate penalty of $4,000, and is entitled to an award of costs and reasonable attorney’s fees.

SB 1255, signed into law, provides some clarification as to when an employee suffers “injury.” The law now clarifies that an employee is “deemed” to suffer injury if either of the following occur: (1) the employer fails to provide a wage statement; or (2) if the employer fails to provide accurate and complete information, and the employee cannot promptly and easily determine from the wage statement alone any of the following: (a) the amount of the gross or net wages paid to the employee during the pay period, (b) the deductions the employer made from the gross wages to determine net wages, (c) the name and address of the employer, or (d) the name of the employee and the last 4 digits of his or her social security number or an employee identification number.

On a positive note for employers, the new law provides a built-in defense for employers in the event of an isolated incident by now specifying that a “knowing and intentional failure” to provide an accurate wage statement does not include an isolated and unintentional payroll error due to a clerical or inadvertent mistake.

What should employers do in response to these changes?

First, be sure to promptly provide accurate wage statements. It is particularly important that if you use a third party payroll processor – especially an out-of-state processor – that you make sure that the payroll processor is aware of the new law and that your California employees’ wage statements are compliant. Temporary services employers should be sure to update the wage statements to separately list each temporary assignment and the hours worked on that assignment.