Wage Statements and PAGA: Penalties under Labor Code 226.3

California Labor Code section 226(a) requires that employers provide accurate, itemized wage statements to employees.  Those statements must include nine categories of information.  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.  (The terms injury and knowing and intentional failure are further defined in section 226(e)(2)).

Litigants have grappled for years over the question of whether the injury and knowing/intentional failure requirements of section 226(e) apply to a plaintiff who sues under the Private Attorneys General Act (“PAGA”) seeking civil penalties for a violation of section 226(a).  Those civil penalties are described in section 226.3 as follows:

Any employer who violates subdivision (a) of Section 226 shall be subject to a civil penalty in the amount of two hundred fifty dollars ($250) per employee per violation in an initial citation and one thousand dollars ($1,000) per employee for each violation in 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. The civil penalties provided for in this section are in addition to any other penalty provided by law. In enforcing this section, the Labor Commissioner shall take into consideration whether the violation was inadvertent, and in his or her discretion, may decide not to penalize an employer for a first violation when that violation was due to a clerical error or inadvertent mistake.

Notably, section 226.3 does not require either injury or a knowing and intentional failure to comply.  For this reason, in Lopez v. Friant (September 26, 2017) Case No. A148849, the First District Court of Appeal held that plaintiffs are not required to show injury or a knowing and intentional violation in order to prevail on a PAGA claim under section 226.3.

The court based its holding on the following analysis:  First, the plain language of section 226(e) indicates that it provides for statutory penalties.  However, PAGA is limited to the recovery of civil penalties.  Section 226.3, which sets forth the civil penalties available for a violation of section 226(a), does not not require either injury or a knowing and intentional failure to comply.  Therefore, the requirements of section 226(e) do not apply to a claim for civil penalties under section 226.3.

The court’s holding in Lopez is consistent with the holdings of a number of federal district court cases.  Let us hope it puts the issue to bed.

If you have questions about your wage statements, feel free to contact Hunter Pyle Law for a free and confidential initial intake.  We can be reached at (510) 444-4400 or at inquire@hunterpylelaw.com.