California Appellate Court Confirms that Labor Code section 226 Requires Single Comprehensive Wage Statements to Employees
We try to report on common labor and employment law pitfalls for employers to avoid. Wage statements can be one of these traps for the unwary. The dual issues of a single wage statement and an employer’s good faith in producing the wage statement recently came up in an appeal to California’s 6th Appellate District in the case of Estevan Palomino v. Northrop Gruman Systems Corporation. The appeals panel clearly answered the first question (so employers please heed this information!), and remanded the second issue back to the trial court to resolve.
Issue 1: Singular itemized wage statements. California Labor Code section 226(a) provides that an employer shall furnish “an accurate itemized statement in writing.” It states more fully: “[a]n employer, semimonthly or at the time of each payment of wages, shall furnish to their employee, either as a detachable part of the check, draft, or voucher paying the employee’s wages, or separately if wages are paid by personal check or cash, an accurate itemized statement in writing showing” nine enumerated categories of information. Other portions of the statute use similar singular language. For instance, subdivision (e)(2) provides that an employee is deemed to suffer injury if the employee cannot promptly determine certain specified information from “the wage statement.” Northrop Grumman had argued that there was no requirement in section 226 for wage statements to be a single document. The trial court found and the appellate court upheld the fact that, indeed, section 226, subdivision (a), requires a wage statement to be a single comprehensive statement.
The appellate court concluded that Northrop Grumman’s multiple wage statements did not comply with section 226’s requirement for a single comprehensive statement. Northrop’s nationwide statement was automatically issued to all employees electronically via a link on Northrop Grumman’s employee self-service web portal entitled “paycheck inquiry,” while the California supplement was issued electronically via a separate link entitled “supplemental paycheck inquiry.” Yet the two statements did not include page numbers “that might show collation.” In addition, while employees could elect to receive an identical paper copy of the nationwide statement, they could not do the same with the California supplement, which they would have to access and print separately from the web portal. By issuing multiple wage statements in that manner, Northrop Grumman violated section 226. The court cautioned however that it did not hold that any particular form of wage statement or statements necessarily satisfies the “single comprehensive statement” requirement of section 226. Nor did it construe the statute, or California Supreme Court authority, as articulating the parameters of what constitutes a “single comprehensive statement” in every circumstance. The court held only that the multiple wage statements here failed to comply with section 226.
Employers, let this be a cautionary tale when issuing wage statements to your workers.
Issue 2: Good Faith. The appellate panel then turned to Northrop Grumman’s argument that even if it did fail to comply with section 226(a), its failure was not “knowing and intentional,” so Palomino did not suffer injury within the meaning of section 226(e)(1). Northrop Grumman contended that its good faith belief that it was not violating section 226 precluded a finding of a knowing and intentional violation. Subdivision (e)(1) specifically provides: “An employee suffering injury as a result of a knowing and intentional failure by an employer to comply with subdivision (a) is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not to exceed an aggregate penalty of four thousand dollars ($4,000), and is entitled to an award of costs and reasonable attorney’s fees.”
The trial court rejected Northrop Grumman’s argument and held that “good faith” does not negate the “knowing and intentional” element of section 226(e)(1). The appellate panel reversed and remanded on this point in light of a new case that had simultaneously been decided in the 2nd District Court of Appeal, Naranjo v. Spectrum Security Services, Inc. The Naranjo court held that “an employer’s objectively reasonable, good faith belief that it has provided employees with adequate wage statements precludes an award of penalties under section 226, subdivision (e)(1). An employer that believes reasonably and in good faith, albeit mistakenly, that it has complied with wage statement requirements does not fail to comply with those requirements knowingly and intentionally.” The Palomino appellate court concluded that because the trial court’s conclusion was contrary to the holding in Naranjo, that its ruling was in error and must be reversed. The court remanded the issue back to the trial court to determine whether Northrop Grumman had acted in good faith.
If you have questions about wage statement compliance, call Rosasco Law Group for a thorough evaluation of your wage statements and any other wage and hour practices before you end up in the hot seat.
