. They contain evidence of unpaid wages, unpaid premiums, meal and rest break violations, and unlawful timekeeping practices, such as rounding or auto-deductions, among other things. 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). Code, 218.6; Civ. 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 . You must also file a notice of the cure that includes a description of actions taken with the LWDA ( 2699.3(c)(2)(A)). 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. 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. 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. 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. Code, 226.7, subd. If the plaintiff filed a class action in addition to a PAGA action, the potential exposure to the employer would increase. Moreover, plaintiffs can recoup attorney fees under PAGA. 4 The statute of limitations for non-compliant wage statements is one year. 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. You have 33 days from the postmark date of the notice to complete the cure. 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). (Troester v. Starbucks Corp. (2018) 5 Cal.5th 829, 835.). One employee can bring a class action on behalf of other employees. The Labor Code may or may not provide a specific civil penalty for the violation. (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.]. & Prof. Code, 17200, et seq. Settlement trends in 2018 for combined class and PAGA actions show that the cost of buying peace increases as the case progresses. 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. The California Supreme Court just made it even more difficult to do business in California. Several bills to further reform PAGA are currently making their way through the state legislature, Sarchet noted. Remember that regardless of what the defendant agrees to give you informally, the defense will continue to maintain and exploit its unilateral and complete access to employees, witnesses and relevant records. 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. The steadily increasing number can be explained by three characteristics unique to PAGA actions: the absence of class certification requirements, that they are not arbitrable, and cannot be waived. (l)(2).). Members may download one copy of our sample forms and templates for your personal use within your organization. Code 2699(f)). Fifth, paying meal period premiums under Labor Code section 226.7 does not excuse the failure to provide the meal period. Although this appears to be a low threshold, the applicable statute of limitations as to each claim should be analyzed by counsel. ; Pineda v. Bank of America (2010) 50 Cal.4th 1389, 1401.) If the defendant raises any privacy concerns with respect to the time and wage records, offer to stipulate to a protective order or suggest substituting any identifying information, like names and social security numbers, with generically assigned employee numbers. 1) Determine the number of Labor Code violations within the statutory period. 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. All Rights Reserved. Posted on Aug 23, 2016. The astronomical potential penalties attached to PAGA actions also helps fuel these types of representative actions. 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. On July 15, 2021, in Ferra v.Loews Hollywood Hotel, LLC, the Supreme Court of California set forth a new rule requiring that premiums for meal, rest, and recovery break violations be paid at the regular rate of pay. 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). The exposure will be doubled for an employer who pays its employees on a weekly basis. This article addresses these issues and discusses different approaches to creating a damages model that can optimize your success at mediation. In this case, the penalty calculation could be: As evidenced by this example, PAGA penalties can quickly accumulate. 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. Further, these fines reoccur per employee per pay period. If you do agree to a stay discovery at the defendants request, inform the mediator so that gaps in the record are weighed in your favor. An experienced attorney will help you calculate all of the . Do you maintain or cover the cost of maintaining uniforms? The average amount of settlements tends to hold steady until 2.5 years after commencement of the lawsuit, after which point the average cost of settlement quickly escalates. The wage orders can be found online at the Department of Industrial Relations public website. "Those numbers add up really fast," Ahearn said. Defendants often ask for a stay on formal discovery until mediation takes place. 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. The time and wage records are critical to your damages analysis. 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. 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. 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. Please log in as a SHRM member before saving bookmarks. Cal. The penalties under PAGA can add up very quickly. Code, 2699, subd. The requirement for fully compliant corrected wage statements should be interpreted to mean wage statements that comply with all nine requirements set forth in Labor Code section 226(a). The second installment explored therules for electronic pay stubs. 2023 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. to calculate the hour of premium pay owed when employers fail to provide a compliant meal or rest period. This installment addresses the penalties associated with wage statement violations. 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. 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. 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. Under PAGA, the civil penalty against the company for an individual violation is $100 per worker for each pay period. Code, 512, subd. 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. If putative class members have told you that employees were required to be on-call during their rest breaks, uptick the quantifier. 2.PAGA cases are representative claims, which are different than class actions. (Lab. Join/Renew Nowand let SHRM help you work smarter. What Is a PAGA Settlement? 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. Do you automatically deduct time for a meal period? (The terms injury and knowing and intentional failure are further defined in section 226 (e) (2)). PAGA penalties are assessed per pay period for each violation of any code section enumerated in Labor Code section 2699.5. 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. You have successfully saved this page as a bookmark. And none of the employee's recovery has to be shared with the state. var currentUrl = window.location.href.toLowerCase(); Mr. Rhodes has successfully represented thousands of employees individually and on a class-wide basis in actions arising out of the FEHA and Labor Code. 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. } 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. 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. Yes. Increase or decrease your quantifier accordingly based on the theories of liability you can substantiate through the pay records. Battle over amount in penalties. 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. 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. Next, look at the written wage-and-hour policies, practices and procedures. The waiting time penalty is an amount equal to the employee's daily rate of pay for each day the wages remain unpaid, up to a maximum of thirty (30) calendar days. Additional factors in assessing the quantifier include the likelihood of success on class certification and the outcome of any depositions taken prior to mediation. Employers need to regularly audit their practices for compliance, Sarchet said, and the audit should cover more than just wage statements. Code, 558, subds. 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