But it is unclear whether there needs to be a finding of a violation (after a trial or administrative hearing) or whether simply being notified of an allegation of wrongdoing is sufficient. 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. temp_style.textContent = '.ms-rtestate-field > p:first-child.is-empty.d-none, .ms-rtestate-field > .fltter .is-empty.d-none, .ZWSC-cleaned.is-empty.d-none {display:block !important;}'; Build specialized knowledge and expand your influence by earning a SHRM Specialty Credential. Another wrinkle in the law is that penalties are assessed per paycheck, Sarchet explained. 2021 Hoge Fenton, Silicon Valley 408-947-2435 | Download v-card, Silicon Valley 408-947-2434 | Download v-card, 411 Borel Avenue, Suite 310 Lab. Calculating PAGA Penalties; PAGA penalties are evaluated per pay period for every violation of any code section listed in Labor Code section 2699.5. (Lab. Luckily, there is a 10-step process you can take if you receive such a notice to put your organization in the best possible position. All Rights Reserved. The Labor Code allows you to cure two types of wage statement violations: (1) failure to include either the start or end date of the pay period (Cal. Lab. 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. There are only approximately 25 decisions, since PAGA's inception, where a court has analyzed PAGA penalties and given guidance . 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. Moreover, for such claims: Taking the same example (50 employees who did not receive compliant wage statements and were not paid 30 minutes of overtime per workday who were each paid $25 per hour) and assuming these violations occurred over the course of four years, the class action liability could be $1,102,500: Combining the class damages with the stacked PAGA claims of $260,000, the potential liability exposure is now $1,362,500. Battle over amount in penalties. The employer's allegedly unlawful practice had ended on June 17, 2007, and hence the one-year statute of limitations for the PAGA claim lapsed on June 17, 2008. How are PAGA penalties calculated? The Private Attorneys General Act (PAGA) allows aggrieved employees to bring claims on behalf of themselves, other employees, and the State of California. In our view, the language of section 558, subdivision (a), is more reasonably construed as providing a civil penalty that consists of both the $50 or $100 penalty amount and any underpaid wages. (Thurman v. Bayshore Transit Mgmt., Inc. (2012) 203 Cal.App.4th 1112, 1145; see also, Lawson v. ZB, N.A. Lab. The employer has 33 days from the date of the letter to make pay stub corrections. This article addresses these issues and discusses different approaches to creating a damages model that can optimize your success at mediation. Code, 512, subd. (c).) Under PAGA, an initial violation carries a $100 penalty per employee per pay period. For more information, contact the author at SLee@fisherphillips.com or (213) 402-9553. When the economy is unstable, employers are faced with difficult decisions around staffing, pay and benefits. The penalty period for actions brought under the Private Attorneys General Act of 2004 (PAGA) is one year prior to the date of filing, plus 65 days for the PAGA notice period. On Friday, Michael Gray of Jones Day painstakingly questioned David Breshears about how he came to that conclusion, asking him about differences between his deposition testimony and earlier reports, and questioning if any court had ever actually confirmed that his method of calculating PAGA penalties was valid. KChkBLViG3>%G!RKW(!9El17S*B2 xPD. endstream endobj startxref (Hernandez v. Towne Park, Ltd. (C.D. The California Supreme Court just made it even more difficult to do business in California. Plaintiffs can assert those individual claims on behalf of themselves, or they can also assert them as a class action on behalf of similarly situated employees. The penalties under California law can add up quickly. (Lab. May 5, 2010, 2010 WL 1838726 at **2-6 [stacking PAGA penalties when calculating amount in controversy].) He used the correct statute of limitations date of October 4, 2015, and multiplied each instance of a termination by $ 250. 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. Copyright The purpose is to provide workers with enough information to verify that they are being properly paid, according to the state Division of Labor Standards Enforcement. (Lab. 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. PAGA Overview. Statute of limitations for most wage and hour violations is four years. (See Mamika v. Barca (1998) 68 Cal.App.4th 487, 492 [Penalties accrue not only on the days that the employee might have worked, but also on non-workdays.]. Cal. The astronomical potential penalties attached to PAGA actions also helps fuel these types of representative actions. Please confirm that you want to proceed with deleting bookmark. 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. It benefits employees to receive a paycheck every week, but employers that pay workers with that level of frequency double their exposure to potential wage statement penalties, he said. The employee must give 75% of the collected penalties to the Labor and Workforce Development Agency, and the remaining 25% is to be distributed among the employees affected by the violations. Code, 1194.) The wage orders can be found online at the Department of Industrial Relations public website. (Lab. Failure to pay overtime, failure to provide meal breaks and failure to provide rest breaks carry an initial PAGA penalty of $50.00, and a subsequent penalty of $100.00. As such, you should demand production of all employee handbooks and standalone policies regarding timekeeping, meal and rest breaks, payroll practices, overtime compensation, and expense reimbursements that were in effect at any time during the applicable damages period. hbbd``b`j@1` ,DF-HO L[@+ N Here is a 10-step process you can take after receiving a PAGA notice to ensure your organization is as well-positioned as possible to minimize or avoid liability. This includes when an employer: When the Labor Code does not already provide a civil penalty, the PAGA default penalty is $100 for each employee per pay period for the initial violation and $200 for each employee per pay period for each subsequent violation. Even then, the Legislature could pass a law clarifying the calculation of the meal / rest period penalty. 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. (Lab. 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. Cal. There are 17 such orders that are also known as IWC Orders, or Wage Orders. (Ibid.) 2023 Fisher & Phillips LLP. Several bills to further reform PAGA are currently making their way through the state legislature, Sarchet noted. The plaintiff brought a wage and hour action alleging various violations of the California Labor . SHRM offers thousands of tools, templates and other exclusive member benefits, including compliance updates, sample policies, HR expert advice, education discounts, a growing online member community and much more. 43.) PAGA Penalties are Properly Assessed at One Hundred Dollars For Each Aggrieved Employee Per Pay Period Prior to the Filing of Lawsuit. This also assumes that there were exactly 50 employees during each pay period during the one-year period. For the typical Class, PAGA, and UCL action, here is what you must know before mediating: 1) total number of employees during the four-year period; 2) total number of workweeks during the four-year period; 3) total number of employees who were terminated and/or quit during the three-year period; 4) total number of employees during the one-year period; and, 5) total number of pay periods during the one-year period. 2 PAGA fines can be significant. For subsequent, willful, or intentional violations, the new law imposes a penalty of $200 plus 25% of the unlawfully withheld amount. (Lab. "Those numbers add up really fast," Ahearn said. 2.PAGA cases are representative claims, which are different than class actions. Code, 218.6; Civ. You have successfully saved this page as a bookmark. San Jose, CA, 95113-2324, 6801 Koll Center Parkway, Suite 210 Prior to commencing a PAGA action, the employee must provide written notice to the Labor and Workforce Development Agency (LWDA) notifying the LWDA of the alleged violations in writing, a copy of which is also sent to the employer. Paga is a city in Ghana, well-known for its crocodile pools. 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. If an employer receives a letter notifying the business about potential violations, the employer should consult counsel right away, Ahearn said. 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. In addition, employees are entitled to an unpaid 30-minute meal break once they work five hours. $('.container-footer').first().hide(); to calculate the hour of premium pay owed when employers fail to provide a compliant meal or rest period. Unpaid overtime: Total workweeks over the four-year period x average hours of unpaid overtime per week x average overtime premium rate. %%EOF AB1654 (Chapter 529, Statutes of 2018), signed into law on September 19, 2018, now exempts employers and employees in the construction industry and under a collective bargaining agreement from . Cal. You should also audit your time and wage records to flag potentially troublesome practices, including: This is not an exhaustive list of the potential wage and hour violations, but you and your counsel should audit your records and identify practices and policies that may give rise to Labor Code violations. Poorly written or facially unlawful wage-and-hour policies can significantly bolster your damages calculations. Yes. (Lab. Although PAGA penalties are subject to a relatively favorable one-year statute of limitations, they can be significant, particularly for large employers, as penalties may be assessed per employee and per pay period for each Labor Code violation or wage order violation not otherwise covered by a Labor Code provision. Example: If the employee is paid minimum wage ($8/hour as of 2008) and works 8 hours per day, the daily penalty is $8 x 8 hours = $64. One employee can bring a PAGA claim on behalf of other aggrieved employees. It also remains unsettled as to whether PAGA penalties for multiple violations in a pay period can be added together, also known as stacking. 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