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Third District Court of Appeal Holds Higher Penalty Provision Applies to PAGA Claims for Wage Statement Violations

The Private Attorneys General Act of 2004 (PAGA) allows an employee to bring representative claims on behalf of similarly aggrieved employees to recover "civil penalties" previously only recoverable by the Labor and Workforce Development Agency (LWDA) for violations of various Labor Code sections. If there is no existing civil penalty, PAGA also provides a default penalty provision. As such, in determining potential exposure with respect to a PAGA claim, it is critical to determine the applicable civil penalty. But in recent years, California and Ninth Circuit courts have issued a number of conflicting decisions in this area. With respect to wage statement violations, however, a recent decision by the Third Circuit Court of Appeal indicates a growing consensus.

In Raines v. Coastal Pacific Food Distributors, Inc., 2018 Cal.App. LEXIS 468 (May 22, 2018), the plaintiff brought a PAGA action for, inter alia, violation of Labor Code section 226(a), which requires employers to provide employees with accurate itemized wage statements including nine specific pieces of information. Section 226.3 provides that any employer who violations section 226(a) shall be subject to a civil penalty in the amount of $250 per employee per initial violation and $1,000 per employee for each subsequent violation. However, the plaintiff sought recovery not under section 226.3, but under the default PAGA penalty provision set forth in section 2699(f), which provides for $100 per employee per initial violation and $200 per employee for each subsequent violation.

In determining whether section 226.3 or section 2699(f) applied to the plaintiff's claim, the Raines court rejected older Ninth Circuit cases that read section 226.3 as applying only to those instances when an employer failed to provide any wage statement or keep required records and instead followed the reasoning in Culley v. Lincare, Inc. (E.D. Cal. 2017) 236 F.Supp.3d 1184, 1194, a 2017 decision holding that 226.3 sets forth the civil penalty for all section 226 violations. As the Raines court reasoned, "Section 226(a) is intended to require employers to provide an adequate wage statement, itemizing the information to be included, 'to assist the employee in determining whether he or she has been compensated properly.' Section 226.3 provides the civil penalty for failure to comply. [If a PAGA plaintiff was] prohibited from seeking civil penalties for a grossly inadequate wage statement simply because the employer did provide a statement . . . the purpose of the statute would be thwarted." Raines, 2018 Cal.App. LEXIS 468 at *11.

While greater certainty as to applicable penalties is helpful in assessing potential liability for wage statement violations, the Raines court's holding that PAGA plaintiffs may recover the higher $250/$1,000 penalty underscores the importance of ensuring that that wage statements fully comply with the requirements of section 226.

If you have any questions about the foregoing or other employment related concerns or questions, please contact Brianna L. Frazier or any of the other attorneys at Shulman Hodges & Bastian LLP at (949) 340-3400.

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