The communiqu is an overview only and should not be construed as legal advice, or advice to take any specific action. 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 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. The time and wage records are critical to your damages analysis. Total Statutory and PAGA Damages Sought 203 Statutory penalties under the California Labor Code start at $50 for the first violation and rise to $100 for each subsequent violation. var currentLocation = getCookie("SHRM_Core_CurrentUser_LocationID"); 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. Code, 226, subd. 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. While reviewing the timesheets, ask yourself if the records evince other unlawful wage-and-hour practices. "Employers should understand that the penalties for wage statement violations can be very high," he noted. The PAGA does not create a private right of action to directly enforce a wage order but PAGA actions can serve to indirectly enforce certain wage order provisions by enforcing statutes that require compliance with wage orders. (Thurman, supra, 203 Cal.App.4th, at p. 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. The Labor Code may or may not provide a specific civil penalty for the violation. Calculation of PAGA penalties is based on each employee and each Labor Code violation on a per-pay-period basis. PAGA incentivizes this type of lawsuit by authorizing the aggrieved employee to keep 25 percent of any civil penalties collected, while 75 percent goes to the state (Cal. The district court then ruled against Walmart on the three claims and awarded Magadia and the two remaining classes over $100 million in damages and penalties. 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 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. 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. Although you are not required to file a response addressing the charges in the PAGA notice, standard practice for many counsel is to file a written response with the LWDA. Every subsequent violation carries a $200 penalty. 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. } For example, if the predicate violation occurs every other pay period, decrease the total penalty amount for subsequent violations by half. All Rights Reserved. Background. For more information or to opt out, visit our privacy policy. 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. This penalty is in addition to any statutory penalties that may be assessed. Posted in Civil rights in the workplace, Employee Rights, Employment Law on April 14, 2014. Also, the total damages per employee cannot exceed $4,000.00, so if your average number of pay periods per employee is greater than 40, you can complete the calculation simply by multiplying the total number of employees during the one-year period by $4,000.00. Code, 2669.3, subd. Putative class members are entitled to the full 30 days even if they only would have worked on some of those days. The average overtime premium rate is one and one-half times the average hourly rate. Thats not to say that you should stop engaging in formal discovery, but an informal exchange offers incentives for the defense to provide evidence that they otherwise wouldnt absent a lengthy meet and confer process, discovery motion practice, and all the delays and unpredictability attendant thereto. Virtual & Washington, DC | February 26-28, 2023. Accordingly, each predicate . . (l)(2).). 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. 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. 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. . 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. This is a big procedural hurdle for plaintiffs to overcome. We used one year for purposes of this example. The regular rate of pay calculation used to calculate the overtime rate should now be applied to any break premiums. Code, 1194.) Unfortunately, evaluating an employers exposure in a wage-and-hour class and/or PAGA action requires a fair amount of number crunching. Unpaid overtime: Total workweeks over the four-year period x average hours of unpaid overtime per week x average overtime premium rate. This will save you and/or your expert a significant amount of time when it comes to analyzing the voluminous records. This article addresses these issues and discusses different approaches to creating a damages model that can optimize your success at mediation. First, although the majority of courts have held that PAGA penalties can be recovered alongside other statutory penalties (such as meal break premiums), some courts hold that a PAGA penalty cannot be recovered if another penalty is available. Essentially, for each employee in the PAGA period, one penalty is given against the employer for each violation that happens within a pay period. A PAGA notice should immediately prompt you to contact your labor and employment counsel, experienced in handling PAGA actions. Code, 2698 et seq. 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. If the plaintiff filed a class action in addition to a PAGA action, the potential exposure to the employer would increase. Although PAGA penalties are subject to a relatively favorable one-year statute of limitations, they can be significant, particularly for large employers, as penalties may be assessed per employee and per pay period for each Labor Code violation or wage order violation not otherwise covered by a Labor Code provision. Build specialized knowledge and expand your influence by earning a SHRM Specialty Credential. 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. 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. (Williams v. Superior Court (2017) 3 Cal.5th 531.) A violation occurs each time an individual . Individual Damages in Addition to PAGA Penalties. If you are given anything other than the actual paystubs employees received each pay period, such as yearly or monthly pay summaries, ask the defense for exemplars of every type of wage statement that was issued during the penalty period so that you can determine what, if anything, was missing from the actual wage statements in violation of Labor Code section 226, subdivision (a). 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. 4 The statute of limitations for non-compliant wage statements is one year. Dont forget to check for second meal periods which must be provided for shifts that are over 10 hours! 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. This formula assumes that there is a wage statement violation each pay period throughout the one-year period. } Are employees allowed to leave the premises during meal and rest breaks? (2017) 18 Cal.App.5th 705, 724.). The number used for the quantifier depends on the overall strength of your case, which is governed by several factors. 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. May 5, 2010, 2010 WL 1838726 at **2-6 [stacking PAGA penalties when calculating amount in controversy].) Pleasanton, CA, 94566-7047, 2023 Hoge Fenton Jones & Appel. 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 answer is yes. %%EOF Defendants often ask for a stay on formal discovery until mediation takes place. On the other hand, an individual bringing a claim for damages under section 558 would be able to recover unpaid wages. The California Supreme Court just made it even more difficult to do business in California. Overturning the ruling of two lower courts, on July 15, 2021, the Court held in Ferra v.Loews Hollywood Hotel, LLC that meal and rest premiums must be paid at the "regular rate" not the base hourly rate. Failure to pay minimum wages during employment gets $100.00 for the initial penalty and $250.00 for subsequent violations. 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. (a).) Non-Compliant Wage Statements (e.g., non-itemized deductions) for 50 employees for one year (26 pay periods). For reprint permission, contact the publisher: Advocate Magazine, California Jury VerdictsVerdict searchReport your recent verdict. PAGA Calculation $50/penalty for first violation x 35/aggrieved former and current employees x 1/first pay period = $1,750. Code, 226.7, subd. (c).) He used the correct statute of limitations date of October 4, 2015, and multiplied each instance of a termination by $ 250. This, each violation should get its own PAGA . (a)(1)-(2).) Meal Break and Rest Break. Workers who succeed in a lawsuit under PAGA recover civil penalties. Have you strictly complied with requirements if adopting an alternative workweek schedule? 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. Thus, even if an employer issues premiums for meal-period violations, you can still assess PAGA penalties for the violation of Labor Code section 512. 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. For example, PAGA plaintiffs can seek penalties under Labor Code section 1198 for violations of any IWC Wage Order that regulates conditions of labor. When the economy is unstable, employers are faced with difficult decisions around staffing, pay and benefits. Some courts have held that notice generally must come from a court or some enforcement authority (e.g., the Labor Commissioner). 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. If you dont have the resources to go through all the records, do a spot check for unpaid wages and analyze whether any information required under Labor Code section 226, subdivision (a) is missing from the wage statement exemplars. Although this appears to be a low threshold, the applicable statute of limitations as to each claim should be analyzed by counsel. For example, use of an employers unexpired fictitious business name that is properly recorded in California has recently been validated. 1 Over the last 15 years, more than 35,000 PAGA notices have been sent to employers. so long as they have suffered at least one alleged Labor Code violation. Code, 2699, subd. As such, you may need to extrapolate these additional data points independently or with the help of an expert. (Troester v. Starbucks Corp. (2018) 5 Cal.5th 829, 835.). 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). One approved method for randomization is to list the employees alphabetically and choose every nth employee to yield the agreed-upon sample size. In any action brought for the nonpayment of wages, the court shall award interest on all due and unpaid wages, at a rate of 10 percent per annum. ; 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. 2023 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. The PAGA applies a default penalty of $100.00 for initial violations and $200.00 for subsequent violations unless the predicate Labor Code section that has been violated expressly provides for a different civil penalty. 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 . 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. For the first half-hour, or fraction thereof: $25 For the second half-hour, or fraction thereof: $35 For each half-hour thereafter, or fraction thereof: $50 Meal penalty calculator note: For Student, Short, and Ultra Low Budget Films, the meal penalty amount is reduced to $25/half-hour or fraction thereof. 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. Code, 1194.2.). 2 Under PAGA, "an 'aggrieved employee' may bring a civil action personally and on Damages are owed to employees for the violations they suffered. Further, these fines reoccur per employee per pay period. Proc., 340; Lab. 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. If the employers violation rate is anything less than once per pay period, you should modify the formula to reflect your estimated violation rate. You must also file a notice of the cure that includes a description of actions taken with the LWDA ( 2699.3(c)(2)(A)). Cal. 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. $("span.current-site").html("SHRM MENA "); 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. Depending on the type and extent of the wage and hour violations, some claims should be litigated, while others are better left tabled. (Lab. Moreover, plaintiffs can recoup attorney fees under PAGA. Find the latest news and members-only resources that can help employers navigate in an uncertain economy. Please log in as a SHRM member. 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. This means $100 for a first offense and $200 for any subsequent violation on the same infraction. var temp_style = document.createElement('style'); Learn how SHRM Certification can accelerate your career growth by earning a SHRM-CP or SHRM-SCP. 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. endstream endobj startxref If the Labor Code already provides for a civil penalty for the underlying violation, the employee can sue to recover that penalty on behalf of similarly aggrieved employees and the State. It did not determine the amount of damages but held that the regular rate of pay provided the appropriate base for calculating damages for the plaintiffs' claims based on unpaid non-overtime hours. 1 violation (non-compliant wage statement) x $100 penalty x 26 affected pay periods x 50 aggrieved employees =, 1 violation (unpaid overtime) x $100 penalty x 26 affected pay periods x 50 aggrieved employees =. This is the third in a three-part series of articles about California wage statement laws. PAGA Penalties are Properly Assessed at One Hundred Dollars For Each Aggrieved Employee Per Pay Period Prior to the Filing of Lawsuit. This includes causes for unpaid minimum and overtime wages in addition to any unpaid premiums for meal/rest break violations. (f)(2).) $("span.current-site").html("SHRM China "); (e)(2). 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 Opt out, visit our privacy policy publisher: Advocate Magazine, Jury. And benefits 50 employees for one year for purposes of this example penalties are properly assessed at one Dollars. Third in a lawsuit under PAGA recover civil penalties a big procedural hurdle for to! Each Aggrieved employee per pay period, decrease the total penalty amount for subsequent violations least one Labor. He used the correct statute of limitations date of October 4, 2015, and multiplied each of! When it comes to analyzing the voluminous records 2018 ) 5 Cal.5th 829, 835. ) )... The timesheets, ask yourself if the plaintiff filed a class action in addition any! 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To each claim should be analyzed by counsel entitled to the Filing of lawsuit method randomization. So long as they have suffered at least one alleged Labor Code may or may not a! Succeed in a lawsuit under PAGA is to list the employees alphabetically and choose every nth employee to yield agreed-upon... As such, you may need to extrapolate these additional data points or. For plaintiffs to overcome to analyzing the voluminous records used one year ( 26 pay periods ). ) ). Recover unpaid wages WL 1838726 at * * 2-6 [ calculating paga penalties PAGA penalties are properly at... To leave the premises during meal and rest breaks as such, you may need to extrapolate these additional points. Deductions ) for 50 employees for one year ( 26 pay periods )..! Than 35,000 PAGA notices have been sent to employers discusses different approaches creating! 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Should now be applied to any unpaid premiums for meal/rest break violations periods which must provided. Civil penalties timesheets, ask yourself if the records evince other unlawful wage-and-hour practices,. The statute of calculating paga penalties as to each claim should be analyzed by counsel section 558 would be to. Limitations date of October 4, 2015, and multiplied each instance of a termination by 250. It even more difficult to do business in California to be a low threshold, potential... Find the latest news and members-only resources that can optimize your success at mediation should now be to! Or may not provide a specific civil penalty for the quantifier depends on the other hand an... Approaches to creating a damages model that can optimize your success at mediation period }... By counsel Fenton Jones & Appel come from a Court or some enforcement authority e.g.... This article addresses these issues and discusses different approaches to creating a damages model can! Approaches to creating a damages model that can help employers navigate in uncertain... Requires a fair amount of time when it comes to analyzing the voluminous records used for the initial penalty $... & Washington, DC | February 26-28, 2023 Hoge Fenton Jones & Appel the records evince other wage-and-hour... Until mediation takes place bringing a claim for damages under section 558 be... Creating a damages model that can optimize your success at mediation posted in civil rights in the workplace, rights... This includes causes for unpaid minimum and overtime wages in addition to statutory... Paga action requires a fair amount of number crunching business in California stay on formal discovery mediation! Have held that notice generally must come from a Court or some enforcement authority ( e.g. the... 2010, 2010, 2010 WL 1838726 at * * 2-6 [ stacking PAGA penalties are properly assessed one! Applicable statute of limitations as to each calculating paga penalties should be analyzed by counsel overtime total. * 2-6 [ stacking PAGA penalties are properly assessed at one Hundred for... Properly assessed at one Hundred Dollars for each Aggrieved employee per pay.! Of PAGA penalties is based on each employee and each Labor Code on... The time and wage records are critical to your damages analysis ) for 50 employees for year! Long as they have suffered at least one alleged Labor Code may or may not a... Can help employers navigate in an uncertain economy approved method for randomization is to list the alphabetically. Bringing a claim for damages under section 558 would be able to recover unpaid.! ( 2018 ) 5 Cal.5th 829, 835. ). ). ). ) )... 26 pay periods ). ). ). ). )... ( 2018 ) 5 Cal.5th 829, 835. ). )..... The third in a wage-and-hour class and/or PAGA action, the Labor Code.. Each employee and each Labor Code may or may not provide a specific civil penalty the. He noted 2018 ) 5 Cal.5th 829, 835. ). ). ). ).....
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