PAGA penalties can be staggering, since PAGA provides for penalties per employee per pay period in which a violation occurs. A different approach to evaluating damages is to create damages models based on your assessment of the minimum and maximum exposure for each Labor Code violation. Please enable scripts and reload this page. This is the third in a three-part series of articles about California wage statement laws. 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. 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. Under PAGA, Plaintiff may seek penalties in the sum of one hundred dollars ($100) per [*3] aggrieved employee, per pay period for an initial Labor Code violation, and two hundred dollars ($200) for each subsequent violation per aggrieved employee, per pay period. (c).) Statutory penalties under the California Labor Code start at $50 for the first violation and rise to $100 for each subsequent violation. Individual Damages in Addition to PAGA Penalties. 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. The foundational data needed to evaluate damages or penalties in any class or representative action consists of the class size, workweeks, and pay periods during the applicable damages period. (Ibid.) Code 2699(a) (emphasis added). This is particularly essential for companies with large workforces, as social media advertisements carry the potential to reach the widest audience. For example, California Labor Code 226.8 provides that if the California Labor and Workforce Development Agency or a civil court finds willful misclassification, penalties can be assessed between $5,000-$15,000 for each violation. Waiting time penalties: (Total number of employees who were terminated or quit during the three-year period) x (30 x average hourly rate x average number of hours worked per work day). Before filing a PAGA lawsuit, an employee must first file a written notice of the alleged Labor Code violations, both online with . Under PAGA, an initial violation carries a $100 penalty per employee per pay period. Under PAGA, an initial violation carries a $100 penalty per employee per pay period. 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. 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. This includes causes for unpaid minimum and overtime wages in addition to any unpaid premiums for meal/rest break violations. Every subsequent violation carries a $200 penalty. The average overtime premium rate is one and one-half times the average hourly rate. For large employers and/or for continuing violations, these penalties can quickly add up. In a straight wage-and-hour class action, the damages period is three years prior to the filing of the lawsuit to the present. Find the latest news and members-only resources that can help employers navigate in an uncertain economy. PAGA penalties are assessed per pay period for each violation of any code section enumerated in Labor Code section 2699.5. Code 226(a)(6)); and (2) failure to provide the name and address of the employing legal entity (226(a)(8)). The penalty is measured at the employee's daily rate of pay and is calculated by multiplying the daily wage by the number of days that the employee was not paid, up to a maximum of 30 days. } To request permission for specific items, click on the reuse permissions button on the page where you find the item. Please log in as a SHRM member before saving bookmarks. 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. (Lab. Specifically, the court in Bernstein decided that heightened penalties for "subsequent violations" under California's Private Attorney General Act (PAGA) cannot be imposed until the Labor Commissioner or a court notifies the employer in question of the Labor Code violation (s) at issue. 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. You can also demand a Belaire-West administration, which will give you access to putative class members who may provide supporting declarations prior to mediation. 2 PAGA fines can be significant. If the defense does not provide you with the average hourly rate, you can determine that figure by adding all the hourly rates provided in the sampling and dividing that figure by the total number of employees included. Keep up with the latest news and events from Hoge Fenton Close, By Hoge Fenton | Lab. This was the third in a three-part series of articles on California wage statement laws. What Is a PAGA Settlement? $100/ penalty for subsequent violations x 35/aggrieved former and current employees x 25/subsequent pay periods = $87,500. For example, employers should also ensure that they are providing meal and rest breaks, paying employees the required penalties if breaks are missed, and recording the penalty payments on wage statements. Seventy-five percent of the penalties that are recovered go to the state, and 25 percent go to employees. "Those numbers add up really fast," Ahearn said. Essentially, for each employee in the PAGA period, one penalty is given against the employer for each violation that happens within a pay period. The sample relied upon must be representative and the results obtained must be sufficiently reliable to satisfy concerns of fundamental fairness. (Duran v. U.S. Bank Natl Assn (2014) 59 Cal.4th 1, 42.) The plaintiff brought a wage and hour action alleging various violations of the California Labor . 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. The defense has expressed an interest in resolving your wage-and-hour class and/or representative action. (Kirby v. Immoos Fire Protection, Inc. (2012) 53 Cal.4th 1244, 1256.) Proc., 338.) If the employer pays the employee late (a first violation), the employee can recover $400 ($100 penalty plus 25 percent of $1,200, or $300). PAGA penalties can quickly accumulate given the many possible Labor Code violations and the fact that penalties accrue for each violation (per pay period), which means that employers who do not realize they are doing something wrong face more liability as time goes on. Employers should note that they do have an opportunity to correct PAGA violations and avoid penalties. All Rights Reserved. Putative class members are entitled to the full 30 days even if they only would have worked on some of those days. 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. ), Fourth, there is currently a split in the courts as to whether aggrieved employees can recover unpaid wages as a civil penalty under the PAGA. Damages are owed to employees for the violations they suffered. (e)(2). A employee may bring a PAGA claim by filing a civil lawsuit against their employer. (United Parcel Service, Inc. v. Superior Court (2011) 196 Cal.App.4th 57, 69.). Penalties for Missed Meal and Rest Breaks California law requires employers to give employees a paid ten-minute rest break for every four hours worked (or major fraction of four hours). When dealing with a large class size, the best approach is to agree on a statistically significant random sampling of time and wage records. 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. 4 The statute of limitations for non-compliant wage statements is one year. Code, 226.7, subd. 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. An experienced PAGA practitioner should be able to chart the best course of action and guide you through the legal terrain. Gain the intel you need now to successfully anticipate and navigate employment laws, stay compliant and mitigate legal risks. Code, 226.3; Raines v. Coastal Pacific Food Distributors, Inc. (2018) 23 Cal.App.5th 667, 680.). For Labor Code provisions that do not specify the penalty amount, PAGA provides default civil penalties at $100 for every employee for every pay period for the first violation, and $200 for each violation thereafter (though case law may provide an argument that PAGA penalties are limited to violations that occur after the PAGA notice). (Home Depot U.S.A., Inc. v. Superior Court (2010) 191 Cal.App.4th 210, 223-24.) At some point in our careers, we have all heard the adage, I went to law school because Im terrible at math, or words to that effect. The exposure will be doubled for an employer who pays its employees on a weekly basis. Disclaimer | Privacy Policy | Sitemap | A PaperStreet Web Design. Lab. Total Statutory and PAGA Damages Sought 203 Employers may incorrectly assume that pay stub compliance is just a matter of paperwork and can simply be corrected, said Christopher Ahearn, an attorney with Fisher Phillips in Irvine. First, the PAGA provides two tiers of civil penalties an amount for an initial violation and an amount for a subsequent violation. var currentLocation = getCookie("SHRM_Core_CurrentUser_LocationID"); 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? the statute of limitations is generally four years; damages are measured by the number of violations that occurred rather than by the pay period. PAGA penalties are calculated using a two-step process: Non-Compliant Wage Statements (e.g., non-itemized deductions) for 50 employees for one year (26 pay periods)3. 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. Labor Code Section 558 provides the Labor Commissioner authority to collect a civil penalty for certain Labor Code violations relating to overtime and hours and days of work, equal to $50 to $100 dollars for each underpaid employee for each pay period for which the employee was underpaid, in addition to "an amount sufficient to recover underpaid PAGA allows aggrieved employees to sue over alleged labor code violations on behalf of themselves and other employees and to step into the shoes of state regulators to recover civil penalties. Was this article useful? Based on the total penalties divided by the total number of aggrieved employees, the plaintiff argued that no one employee's penalties exceeded the $75,000 jurisdictional minimum as each employee would be entitled to only approximately $11,000 in penalties. These penalties are assessed per employee, per pay period, so they can quickly snowball. "Employers should understand that the penalties for wage statement violations can be very high," he noted. $("span.current-site").html("SHRM MENA "); 1132.) Lab. (Troester v. Starbucks Corp. (2018) 5 Cal.5th 829, 835.). 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. Where such requisite information is inaccurate on the wage statements, you should weigh the cost and benefit of the cure option with your counsel. 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. You must also give nonexempt employees an opportunity to take a 10-minute . The Labor Code Private Attorneys General Act (PAGA) 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.Those who intend to pursue PAGA cases must follow the requirements specified in Labor Code Sections 2698 - 2699.5. In other words, for each employee in the PAGA period, one penalty is assessed against the employer for each predicate violation that occurs within a pay period. Posted in Civil rights in the workplace, Employee Rights, Employment Law on April 14, 2014. If you agree to a smaller sampling of records, you might consider stipulating that neither side will challenge the representative nature of the sample size used at mediation. Depending on the type and extent of the wage and hour violations, some claims should be litigated, while others are better left tabled. 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]). In addition to the difference between their base and regular rate of pay, these employees can bring claims for wage statement violations, unpaid wages, PAGA penalties and (for former employees) waiting time penalties. 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. If putative class members have told you that employees were required to be on-call during their rest breaks, uptick the quantifier. (d).). (a)(1)-(2).) 1 Over the last 15 years, more than 35,000 PAGA notices have been sent to employers. Meal Break and Rest Break. Proc., 340; Lab. California adopted a novel approach to enforcing the Labor Code of California when it enacted the Private Attorney General Act of 2004 ("PAGA") codified in Cal. 50 0 obj <>stream The wage orders can be found online at the Department of Industrial Relations public website. If you receive correspondence from a court or other enforcement authority indicating potential Labor Code violations, please consult with legal counsel to discuss its implications and next steps. This installment addresses the penalties associated with wage statement violations. There are only approximately 25 decisions, since PAGA's inception, where a court has analyzed PAGA penalties and given guidance . Your call to action is often triggered before you even receive a PAGA notice. He can be reached at arhodes@spattorneys.com. Settlement trends in 2018 for combined class and PAGA actions show that the cost of buying peace increases as the case progresses. 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. 2021 Hoge Fenton, Silicon Valley 408-947-2435 | Download v-card, Silicon Valley 408-947-2434 | Download v-card, 411 Borel Avenue, Suite 310 The first installment reviewedcommon pay stub errorsthat employers make. A violation occurs each time an individual . The act was amended as an attempt to curb frivolous claims, but PAGA claims can still be expensive for employers. This is in contrast to penalties under the Private Attorneys General Act. Accordingly, each predicate violation is entitled to its own PAGA penalty calculation. (Lab. 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. 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. For example, use of an employers unexpired fictitious business name that is properly recorded in California has recently been validated. In 2019, California collected over $88 million in PAGA penalties from employers.1The Private Attorneys General Act (PAGA) authorizes employees to file lawsuits to recover civil penaltieswhich are otherwise only recoverable by the Stateon behalf of themselves, other employees, and the State of California for Labor Code violations. Cal. Even simple formatting errors can result in penalties, Ahearn noted. 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