The act was amended as an attempt to curb frivolous claims, but PAGA claims can still be expensive for employers. 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 ($200) for each subsequent violation per aggrieved employee, per pay period. These penalties are assessed per employee, per pay period, so they can quickly snowball. (The terms injury and knowing and intentional failure are further defined in section 226 (e) (2)). hUN0K$KxH!Z"-Y Llc[>3`3%<3IkS1id|_7*an1MjF/gZ9fZ"BWWtk|se[&ISIi8FV}'lhY_ Euu8]o0hyylpt[oM<15Otg?~}h( Lab. 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. (Lab. For cases that require deeper investigation, consider producing your client for deposition and/or taking the deposition of the defendants person(s) most knowledgeable regarding its wage-and-hour policies, practices, and procedures. The class damages for unpaid overtime would be 26,000 x $37.50 = $975,000. 2021 Hoge Fenton, Silicon Valley 408-947-2435 | Download v-card, Silicon Valley 408-947-2434 | Download v-card, 411 Borel Avenue, Suite 310 Keep up with the latest news and events from Hoge Fenton, https://esd.dof.ca.gov/Documents/bcp/1920/FY1920_ORG7350_BCP3230.pdf, https://www.populardemocracy.org/sites/default/files/sPAGA%20Report_WEB.pdf, https://advocacy.calchamber.com/policy/issues/private-attorneys-general-act/. Brinker Int'l, Inc. (N.D. Cal. 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. The amount in controversy was often easy to establish, as PAGA penalties mount rapidly: $100 per employee per pay period, even if one counts only the 25% of the penalties that go to the employees (75% go to the State of California). Some courts have held that notice generally must come from a court or some enforcement authority (e.g., the Labor Commissioner). Are the policies bareboned or do they fail to adequately inform employees of their rights and/or the employers obligations? Please be sure to consult a knowledgeable professional with assistance with your particular legal issue. 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. For example, an employee who went on disability leave more than a year before the date of the PAGA lawsuit would not have worked within the past year that would serve as the basis for any meal and rest violations. Lab. Cal. Employers should also be aware that in addition to PAGA penalties (which the plaintiff is ostensibly asserting on behalf of the State), plaintiffs may seek individual damages to compensate for any unpaid monies owed to the employee. (Home Depot U.S.A., Inc. v. Superior Court (2010) 191 Cal.App.4th 210, 223-24.) 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. to calculate the hour of premium pay owed when employers fail to provide a compliant meal or rest period. Seventy-five percent of the penalties that are recovered go to the state, and 25 percent go to employees. It also held that the subsequent violation rate applied to calculate PAGA penalties for dates after Sept. 26, 2015. Another wrinkle in the law is that penalties are assessed per paycheck, Sarchet explained. Unfortunately, evaluating an employers exposure in a wage-and-hour class and/or PAGA action requires a fair amount of number crunching. 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 . 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 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). (Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1800; Lab. 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. 43.) var temp_style = document.createElement('style'); (Ibid.) While reviewing the timesheets, ask yourself if the records evince other unlawful wage-and-hour practices. Copyright 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. Many California wage and hour class actions and Private Attorneys General Act (PAGA) collective actions include allegations that employers failed to properly pay bonuses and . 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. . Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organizations culture, industry, and practices. One employee can bring a PAGA claim on behalf of other aggrieved employees. Lab. SHRM Online that even hypertechnical violations may be costly for employers. All Rights Reserved. Although this appears to be a low threshold, the applicable statute of limitations as to each claim should be analyzed by counsel. California attorneys told Are there any facially unlawful policies? 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. 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. (Lab. This article addresses these issues and discusses different approaches to creating a damages model that can optimize your success at mediation. } If the answers to these questions are yes, or the general quality of the employee handbook is poor, you should give your per-workweek quantifier a boost. 05.19.2021 | Employment Law. Total Statutory and PAGA Damages Sought 203 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. PAGA Calculation $50/penalty for first violation x 35/aggrieved former and current employees x 1/first pay period = $1,750. 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. Increase or decrease your quantifier accordingly based on the theories of liability you can substantiate through the pay records. 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. (c).) 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. 1 Over the last 15 years, more than 35,000 PAGA notices have been sent to employers. Lab. 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 wage orders can be found online at the Department of Industrial Relations public website. Please confirm that you want to proceed with deleting bookmark. Finally, the Industrial Welfare Commission, known as the IWC, is a commission made up of five members appointed by the Governor with the consent of the Senate, that is responsible for setting the wages, hours of work, and working conditions of California employees. (www.dir.ca.gov). In a straight wage-and-hour class action, the damages period is three years prior to the filing of the lawsuit to the present. 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 simpler terms, PAGA confers a private right of action to individuals to prosecute Labor Code violations. 37 0 obj <> endobj Under AB 673, these penalties are . Note that the amount is doubled because employees are entitled to liquidated damages in the amount of the total unpaid minimum wages. 1132.) When dealing with a large class size, the best approach is to agree on a statistically significant random sampling of time and wage records. This includes causes for unpaid minimum and overtime wages in addition to any unpaid premiums for meal/rest break violations. The communiqu is an overview only and should not be construed as legal advice, or advice to take any specific action. Further, these fines reoccur per employee per pay period. This formula assumes that there is a wage statement violation each pay period throughout the one-year period. The penalties under California law can add up quickly. 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. Additionally, PAGA establishes a penalty of $250 per employee, per pay period in which a wage statement violation occurred, with no cap on the total PAGA penalties that might accrue. 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. Thus, two late payments of wages totaling $2,000 will result in a penalty of $800 ($100 for the first violation plus $200 for the subsequent violation + $500 [$2,000 x .25]). 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. PAGA Overview. (d).). PAGA penalties on that claim based on violations incurred by other Walmart employees. The formula used to calculate PAGA penalties is therefore the same regardless of the predicate violation: (Initial violation penalty x total number of employees in the one-year period) + (subsequent violation penalty x [total number of pay periods in the one-year period total number of employees in the one-year period]). The second part of PAGA imposes a monetary penalty for every violation an employer commits, including violations committed against other employees. 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. For example, in a PAGA action for unpaid wages under Labor Code section 558, an aggrieved employee is able to recover civil penalties, but not able to recover unpaid wages. Dont forget to check for second meal periods which must be provided for shifts that are over 10 hours! 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. Employers in the state must pay workers at least twice per month, though some pay workers every week. . The first installment reviewedcommon pay stub errorsthat employers make. Statutory penalties under the California Labor Code start at $50 for the first violation and rise to $100 for each subsequent violation. Calculating PAGA Penalties; PAGA penalties are evaluated per pay period for every violation of any code section listed in Labor Code section 2699.5. Virtual & Washington, DC | February 26-28, 2023. Requires that the plaintiff suffered a typical and common violation similar to the other members. Even then, the Legislature could pass a law clarifying the calculation of the meal / rest period penalty. Code, 512, subd. Note that the California Supreme Court recently held that the de minimis defense is not applicable to off-the-clock wage-and-hour claims. 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. (e)(2). Code 2699 (f) (2). Indeed, it makes most sense for employers to obtain the broadest release possible, since the PAGA claims will be based on wage and hour violations that trigger class damages separate from PAGA penalties. Because PAGA actions are generally a product of a copious amount of information that has been amassed by the employees counsel prior to providing the PAGA notice, you should also use counterinvestigative strategies, such as encouraging employees to report any outside contact inquiring about working conditions, or wage and hour matters. The following formulas can be useful to create high/low scenarios in your damages model for some of the main Labor Code violations. "Employers should understand that the penalties for wage statement violations can be very high," he noted. 45 0 obj <>/Filter/FlateDecode/ID[]/Index[37 14]/Info 36 0 R/Length 60/Prev 133243/Root 38 0 R/Size 51/Type/XRef/W[1 2 1]>>stream This penalty is in addition to any statutory penalties that may be assessed. If a pattern and practice is found, penalties between . (Lab. How are PAGA penalties calculated? Meal and rest period premiums: Total workweeks over the four-year period x average hourly rate x average number of meal/rest break violations per workweek. Learn how SHRM Certification can accelerate your career growth by earning a SHRM-CP or SHRM-SCP. Legal precedent has established that PAGA provides a "civil penalty." This means that employees can recover both the statutory penalty associated with the Labor Code provision at issue, as well as civil penalties under PAGA, thereby creating a stacking of penalties against the employer. Several bills to further reform PAGA are currently making their way through the state legislature, Sarchet noted. Non-Compliant Wage Statements (e.g., non-itemized deductions) for 50 employees for one year (26 pay periods). If a PAGA plaintiff employee is successful, 75% of any penalty recovered is paid to the Labor and Workforce Development Agency (LWDA), with the remainder going to the PAGA plaintiff employee or distributed among the aggrieved employees. else if(currentUrl.indexOf("/about-shrm/pages/shrm-mena.aspx") > -1) { There are 17 such orders that are also known as IWC Orders, or Wage Orders. (Ibid.) 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 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. Civil penalties are assessed for violations of the Labor Code; 75% of the penalties go to the State, and 25% are paid to the aggrieved employees. 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. May 5, 2010, 2010 WL 1838726 at **2-6 [stacking PAGA penalties when calculating amount in controversy].) He can be reached at arhodes@spattorneys.com. This is a big procedural hurdle for plaintiffs to overcome. 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. Undertaking the cure option is no small feat. 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. Id.Id. The answer is yes. You have successfully saved this page as a bookmark. Where such requisite information is missing from the wage statements, you should strongly consider undertaking the cure option, as there are few viable defenses to such violations. And, the penalties for misclassifying workers as independent contractors instead of employees can be severe. (Lab. A PAGA-only action without class action component will often be turned into a hybrid class/PAGA action for settlement purposes. Therefore, until an employer has such notice, in our example, each pay period with a non-compliant wage statement would be an initial violation. What constitutes sufficient notice triggering the heightened penalties is not clearly defined. } (Belaire-West Landscape, Inc. v. Superior Court (2007) 149 Cal.App.4th 554.). California's Private Attorney General Act of 2004-or PAGA-gives private citizens the ability to pursue penalties against employers for violations of the California Labor Code.In cases in which plaintiffs successfully bring PAGA claims, 75% of these penalties go . Amount is doubled because employees are entitled to liquidated damages in the law is that are! Calculating amount in controversy ]. ) confirm that you want to proceed with deleting.... Paga notices have been sent to employers for one year ( 26 pay periods ) currently making way. Addition to any unpaid premiums for meal/rest break violations on behalf of other aggrieved.! 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