; PAGA),1 which sought civil penalties on behalf of herself and other "aggrieved employees" for Labor Code violations.2 In this appeal, we are 1 Undesignated statutory references are to the Labor Code. The employer has 33 days from the date of the letter to make pay stub corrections. But that would be effective January 2021 in all likelihood, as the current session is over. Under PAGA, the penalty for an initial violation is $100 per pay period, while the penalty for a subsequent penalty doubles to $200 per pay period. Give yourself enough time to work out an agreement regarding the scope of the exchange and set reasonable production deadlines so that youre not stuck sifting through thousands of pages of time and wage records at the eleventh hour. Fortunately, there are several federal cases which hold that PAGA penalties can be stacked. The statute of limitations is based on the date of the violation. This means $100 for a first offense and $200 for any subsequent violation on the same infraction. For example, if an employer didn't provide a worker with a meal break, the employer would have to pay a penalty to the employee for the missed break and would also face a fine for failing to report the meal-break penalty on the pay stub. 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. In its notice of removal, defendant alleged that the amount in controversy was $6,280,675, which included $2,286,900 in statutory penalties under PAGA. This formula assumes that the predicate violation occurs at least once per pay period. PAGA provides for a default penalty of $100 for initial violations and $200 for subsequent violations unless the Labor Code specifically provides for a different penalty. Youve agreed on a mediator and set the date for mediation. When dealing with a large class size, the best approach is to agree on a statistically significant random sampling of time and wage records. (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.]. Read the first parthere and the second parthere. What do the two, other than a shared moniker, have in common? While most of what you need can be acquired through formal discovery, an informal exchange is often the most expedient and streamlined method for collecting everything you need to have a meaningful discussion regarding numbers at mediation. 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. Bucking the trend of unrelentingly bad news for employers in the state, the California Court of Appeal has held that the default (lower) penalties found in the Labor Code Private Attorneys General Act ("PAGA") and not the heightened penalties set forth in Labor Code section 226.3 ("Section 226.3") apply to a run-of-the-mill PAGA claim involving "Employers should understand that the penalties for wage statement violations can be very high," he noted. The most streamlined approach to calculating class-wide damages is to multiply the total number of workweeks during the applicable damages period by a reasonable quantifier. Employers should note that they do have an opportunity to correct PAGA violations and avoid penalties. $("span.current-site").html("SHRM China "); PAGA, California's Private Attorneys General Act of 2004, allows employees to sue their employers on behalf of themselves and other "aggrieved" employees to recover penalties for Labor Code violations. There are 17 such orders that are also known as IWC Orders, or Wage Orders. (Ibid.) In other words, there is a one-year statute of limitations when it comes to PAGA lawsuits. However, Californias Unfair Competition Law (UCL) can be used to extend the class action recovery period to four years for claims seeking restitution, including claims for unpaid wages, unpaid overtime, meal and rest break premiums, and reimbursement of necessary business expenses. Lab. Note that the California Supreme Court recently held that the de minimis defense is not applicable to off-the-clock wage-and-hour claims. If so, you should advocate for a higher quantifier. Code, 2802.). If the plaintiff filed a class action in addition to a PAGA action, the potential exposure to the employer would increase. (a)(1)-(2).) The damages periods used below should be reduced to three years if the lawsuit does not include a cause of action for unlawful business practices in violation of the UCL. The damages period is governed by the statute of limitations for the causes of action alleged in your clients complaint. If the wage statement violations have been cured, the law bars the employee from bringing a civil action pursuant to Section 2699 against you. California Labor Code 203 provides that an employer's willful failure to remit payment entitles the employee to one full day's pay, up to 30 days, from the date the employee was terminated until the employee is paid, or files a lawsuit. Please log in as a SHRM member before saving bookmarks. The act was amended as an attempt to curb frivolous claims, but PAGA claims can still be expensive for employers. Do you maintain or cover the cost of maintaining uniforms? Are employees paid at their regular rate of pay for overtime? Finally, depending on the Labor Code violations alleged and the fact-specific issues in your case, you may want to request additional documents for each employee selected for the sampling, such as documents regarding final payment of wages, business expense reimbursements, meal period waivers, and/or on-duty meal period agreements. California legislation enacted last year found that employers are experiencing a high volume of PAGA claims. & Prof. Code, 17200, et seq. Of course, these decisions were issued before the Ninth Circuit's opinions in Baumann and Yocupicio, which, as we have seen, preclude the aggregation of PAGA penalties for purposes of removal. 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. Yes. violates Wage Orders regulating hours and days of work ($50 for the initial violation and $100 for subsequent violations); fails to pay minimum wages ($100 for the initial violation and $250 for subsequent violations). That could be, for purposes of 203 penalties, the date of your last paycheck, or earlier. The time and wage records are critical to your damages analysis. 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. 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. The astronomical potential penalties attached to PAGA actions also helps fuel these types of representative actions. What Are PAGA Penalties? 4 years x 52 weeks per year x 5 workdays per week = 1,040 days, 1,040 days x 30 minutes of overtime per day = 520 hours of overtime owed per employee, 520 hours of overtime x 50 employees = 26,000 hours of overtime owed. When the economy is unstable, employers are faced with difficult decisions around staffing, pay and benefits. A District Court in California ruled that civil penalties under the California Labor Code Private Attorneys General Act of 2004 ("PAGA") could be aggregated as class claims to meet the amount-in-controversy requirement for CAFA jurisdiction. Remember, 75% of PAGA penalties, which are all up to . If putative class members have told you that employees were required to be on-call during their rest breaks, uptick the quantifier. 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 a pattern and practice is found, penalties between . 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. Website Copyright 2023 by Neubauer & Associates, Inc.The articles appearing in 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. To calculate the penalty take the wage rate and average hours worked per day (max 8 hours) and multiply the hourly wage rate times average hours per day times 30 days. May 5, 2010, 2010 WL 1838726 at **2-6 [stacking PAGA penalties when calculating amount in controversy].) $(document).ready(function () { Please enable scripts and reload this page. Total Statutory and PAGA Damages Sought 203 Further, these fines reoccur per employee per pay period. An employee may seek civil penalties under PAGA on behalf of themselves and other current or former employees so long as they have suffered at least one alleged Labor Code violation. (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. 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. Use an expert or staff member to go through the wage statements to determine if the employees were properly paid for all overtime and double-time. You have successfully saved this page as a bookmark. (Lab. A Congressional committee has approved maximum penalties of $70,000 for serious items and $700,000 for repeated, willful, and failure-to-abate items for violations of Occupational Safety and Health Administration (OSHA) standards. Posted on Aug 23, 2016. In a straight wage-and-hour class action, the damages period is three years prior to the filing of the lawsuit to the present. PAGA penalties can be staggering, since PAGA provides for penalties per employee per pay period in which a violation occurs. PAGA Penalties and Labor Code 226 Claims. The number of these PAGA notices the LWDA received each year has significantly increased, from 4,000 in 2014 to what is expected to exceed over 7,000 filings in 2022. Code, 2699, subd. This is the third in a three-part series of articles about California wage statement laws. One employee can bring a PAGA claim on behalf of other aggrieved employees. If your client presents poorly, is a poor historian, has a significant disciplinary record, or only worked part time or for a short period, modify your quantifier accordingly. The Court's opinion can be found here. Lab. All Rights Reserved. Id.Id. Your session has expired. Seventy-five percent of the penalties that are recovered go to the state, and 25 percent go to employees. No time extensions are available, so if the letter isn't immediately acted upon, the employer will miss the opportunity to significantly reduce potential penalties, he said. (e)(2). (Lab. If you identify problems, you should immediately correct any missing or inaccurate information on the wage statements. San Mateo, CA, 94402-3535, 55 South Market St., Suite 900 The response should be kept brief without going into any details about any expired statute of limitations or how the alleged facts and theories are deficient. Because separate penalties may be assessed for each Labor Code violation in the same pay period for the same underlying violation, the PAGA penalty exposure for the client can grow exponentially. Join/Renew Nowand let SHRM help you work smarter. 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. Speak with your client and/or other putative class members to discover any significant off-the-clock work that was being performed, such as bag checks, preparation of work areas, gathering tools, customer service, clean up, attending training seminars or work meetings, travel time and commuting, or donning and doffing personal protective equipment. Please confirm that you want to proceed with deleting bookmark. } endstream endobj 38 0 obj <> endobj 39 0 obj <>/ProcSet[/PDF/Text/ImageC]/XObject<>>>/Rotate 0/Type/Page>> endobj 40 0 obj <>stream Need help with a specific HR issue like coronavirus or FLSA? For example, if the predicate violation occurs every other pay period, decrease the total penalty amount for subsequent violations by half. }); if($('.container-footer').length > 1){ Cal. Last week the California Court of Appeal, Fourth Appellate District, dropped a bombshell on employers by opining that an employee has standing to pursue PAGA penalties even if she only claims to have suffered a Labor Code violation outside the applicable one-year statute of limitations period.The holding, should it stand, would likely increase the volume of PAGA lawsuits and make them even . 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. The penalties under PAGA can add up very quickly. You have 33 days from the postmark date of the notice to complete the cure. 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. Labor Code section 226 (e) (1) provides that an employee who suffers injury as a result of a knowing and intentional failure to comply with subdivision (a) is liable for up to $4,000 plus costs and reasonable attorney's fees. Uber Technologies, Inc. (N.D. Cal. Section 226.3 provides a penalty of up to " [$250] for an initial citation and [$1,000] for a subsequent citation, for which the employer fails to provide the employee a wage deduction statement or fails to keep the records required in subdivision (a) of Section 226 " (emphasis added). A 30 day penalty is $64 x 30 days = $1,920. Even though an individual cannot seek penalties, the California Labor Commissioner can take action to recover penalties in the amount of $50 for "each employee or person whose rights under this article were violated for each day or portion thereof that the violation occurred" with a cap of $4,000. He can be reached at arhodes@spattorneys.com. Code, 1194.) An experienced PAGA practitioner should be able to chart the best course of action and guide you through the legal terrain. Special considerations regarding PAGA penalties. PAGA Law. ), Failure to reimburse business expenses: Total number of employees during the four-year statutory period x average amount each class member spent on necessary business expenditures. The Labor Code may or may not provide a specific civil penalty for the violation. (d).). 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. Code, 226.7, subd. Every subsequent violation carries a $200 penalty. of PAGA penalties and a trial court's consideration regarding same. Lab. It is worth noting that the time period for which penalties can be assessed is limited to one year before the date of filing of the PAGA lawsuit, not the date of the PAGA notice. An experienced attorney will help you calculate all of the . The following formulas can be useful to create high/low scenarios in your damages model for some of the main Labor Code violations. 3The statute of limitations for PAGA penalties goes back one year from the date of the notice to the LWDA, but PAGA penalties continue to accrue, so they could exceed a one-year period. 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 . On top of all that, one employee can sue on the behalf of others. PAGA penalties are assessed per pay period for each violation of any code section enumerated in Labor Code section 2699.5. . The calculation of Labor Code section 210 penalties is different, however, and amounts to $100 for the initial violation and $200 for each subsequent violation (or any willful or intentional violation) plus25% of the amount unlawfully withheld. The plaintiff brought a wage and hour action alleging various violations of the California Labor . It also remains unsettled as to whether PAGA penalties for multiple violations in a pay period can be added together, also known as stacking. For example, 50 employees who receive non-compliant wage statements (e.g., non-itemized deductions) and were not paid five hours of overtime per pay period (30 minutes of overtime per workday) over the course of a year (26 pay periods) may be able to claim penalties on the basis of potentially two separate violations per pay period: one violation for each non-itemized wage statement and one for unpaid overtime per pay period. 1 Over the last 15 years, more than 35,000 PAGA notices have been sent to employers. A penalty of $100 is imposed for the first violation, per worker for each pay period and $200 per worker for each subsequent violation. so long as they have suffered at least one alleged Labor Code violation. If you take the latter approach, the defense must use a consistent and uniform system that allows you to identify and match the time records for any given employee to the corresponding wage statements for that employee. A PAGA-only action without class action component will often be turned into a hybrid class/PAGA action for settlement purposes. 2010) 2010 WL 2793650 at *6; Smith v. Brinker Intl, Inc. (N.D. Cal. 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. Mr. Rhodes completed his fellowship with the Los Angeles Chapter of the American Board of Trial Advocates, and he graduated magna cum laude from Southwestern Law School. California law Time and wage records typically consist of handwritten or digital timesheets, wage statements, paystubs, and/or pay summaries. 50 employees x 26 pay periods = 1,300 violations. It also held that the subsequent violation rate applied to calculate PAGA penalties for dates after Sept. 26, 2015. Settlement trends in 2018 for combined class and PAGA actions show that the cost of buying peace increases as the case progresses. In this case, the penalty calculation could be: 1 violation (non-compliant wage statement) x $100 penalty x 26 affected pay periods x 50 aggrieved employees = $130,000 1 violation (unpaid overtime) x $100 penalty x 26 affected pay periods x 50 aggrieved employees = $130,000 Total: $130,000 + $130,000 = $260,000 This trend reflects the realities of litigation, in that the parties, after 2.5 years of formal litigation, are likely to have invested significant time and money into the case, and are thereby less willing to compromise their position for settlement. Most defendants will produce these policies without hesitation. Your investigation should include review of the employees social media accounts, as well as a comprehensive search of social media for advertising referencing the employee or your organization. (Troester v. Starbucks Corp. (2018) 5 Cal.5th 829, 835.). Have you strictly complied with requirements if adopting an alternative workweek schedule? This information is readily available for most employers, and the defense should provide the requested data without objection or hesitation in any class or representative action that is headed to mediation. Here's what we know so far about CCPA (CPRA) penalties: From July 1st, 2020, the California Attorney-General can pursue CCPA civil penalties from any person that violates any section of the CCPA (CPRA) The maximum amount is $7,500 per intentional violation or $2,500 per unintentional violation. Any subsequent violation on the same infraction strictly complied with requirements if adopting an alternative workweek?. 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