How many times have you said the following words:
“If I had known this, I would have done things differently.”
That is a common refrain of many small business owners in California.
Many small businesses have grown organically and owners often cobbled together pieces of agreements and policies from your former employers and samples on the internet thinking “if my big employer did this, it must be fine,” and generally “winging it.” It generally works pretty well, sometimes even for years, until it doesn’t.
When given the opportunity to reflect, most business owners will have the nagging feeling that they’re doing something “wrong.” You’re trying your best, paying your employees well, giving them flexibility, and are fair. Unfortunately, that is not enough.
One of these moments that highlights the extreme complexity of having employees in California is when the business receives a letter from a lawyer asking for a copy of an employee’s personnel file and pay records. Upon receiving this letter, you will probably ask:
What documents do I have to make available?
The employee left years ago, do I even have to send the documents over?
and most importantly,
What will they find and could it put it out of business?
These questions reveal the insecurity that many business owners feel about whether they are in compliance with California employment laws. The truth is that if a lawyer or administrative agency comes knocking, they could probably find something out of compliance. Thus, smart and careful California business owners will seek help to ensure that they are in compliance with the technical requirements and help understand what type of exposure is lurking.
One of these areas of exposure is related to wage statements (paystubs). We’ll discuss the requirements of a wage statement or paystub and the requirement to turn them over when asked by an employee below.
What Information Must be on a Wage Statement (Paystub) in California?
California Labor Code Section 206(a) outlines the following requirements:
An employer, semimonthly or at the time of each payment of wages, shall provide employees with an itemized wage statement or paystub in writing with the following information:
(1) gross wages earned,
(2) total hours worked by the employee, except for exempt employees,
(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,
(5) net wages earned,
(6) the inclusive dates of the period for which the employee is paid,
(7) the name of the employee and only the last four digits of his or her social security number or an employee identification number other than a social security 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
What are the requirements regarding providing employees with their employment records and wage statements (paystubs)
– Former and current employees must be given the opportunity to inspect or receive a copy of records pertaining to their employment, upon reasonable request to the employer.
– If the employer provides copies of the records, the actual cost of reproduction may be charged to the current or former employee.
– The deadline to comply with a request for wage statements or paystubs is 21 calendar days from the date of the request.
– There is an exception for household employees and for those whose duties are of a personal and not in the course of the trade, business, profession, or occupation of the dwelling’s owner or occupant.
If an employer fails to permit a current or former employee to inspect or receive a copy of records within 21 days, the current or former employee or the Labor Commissioner could recover a seven-hundred-fifty-dollar ($750) penalty from the employer.
What are the penalties if the for having inaccurate or non-compliant wage statements or paystubs?
The penalty is fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, up to a total of four thousand dollars ($4,000).
Additionally, employees are entitled to an award of costs and reasonable attorney’s fees. Thus, although the individual penalty may max out at $4,000, depending on how far along the dispute goes, attorney’s fees and costs exponentially increases an employer’s exposure.
Other areas that could trigger a violation of the wage statement/paystub violation.
This is a non-exhaustive list:
- Failure to pay for off-the-clock work.
- When an employee is misclassified as an independent contractor.
- Failure to correctly pay overtime.
- Paying employees a fixed daily rate. http://www.andreaparislaw.com/2017/01/paying-employees-a-fixed-daily-rate/
- Failure to correctly pay rest breaks and meal breaks.
- Misclassifying non-exempt employees as exempt. http://www.andreaparislaw.com/2011/09/exempt-vs-non-exempt/
Businesses could prevent the anxiety that comes with receiving a letter from a lawyer requesting access to an employee’s file by speaking with a California employment attorney or conducting an internal audit.
Schedule a call if you have questions or would like a risk assessment.
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