01/15/2018

Essential elements of a wage statement in California


California law contains very specific requirements for the information employers must put on employees’ wage statements and imposes financial penalties on employers who don’t follow those requirements.

Employers must know the legal requirements for wage statements and ensure that wage statements are compliant.

What is a wage statement?

A wage statement is an itemized written statement provided to employees either as a “detachable part of the check, draft or voucher paying the employee’s wages” or a separate writing if the wages are paid by cash or personal check.

For employees who are paid by hard copy checks, the wage statement is usually the “detachable” pay stub attached to the check. For employees paid by direct deposit, the wage statement is usually a copy of the pay stub with a “dummy” check attached instead of the real check.

Labor Code Section 226 contains nine categories of information that must be included in wage statements:

  • Gross wages earned in the pay period.
  • Total hours worked in the pay period. This requirement does not apply to employees who are exempt from the payment of minimum wage and overtime.
  • The number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis.
  • All deductions from the employee’s wages. Deductions made on the employee’s written orders may be aggregated and shown as one item.
  • Net wages earned in the pay period.
  • The inclusive dates of the pay period, meaning the start and end date of the pay period.
  • The employee’s name and only the last four digits of the employee’s Social Security number or employee identification number.
  • The full name and address of the legal entity that is the employer.
  • All applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate.

Temporary services employers must provide employees with wage statements that show the rate of pay and total hours worked for each temporary services assignment.

Paid sick leave requirements

Labor Code Section 246(h) requires that employers notify employees each pay period of the paid sick leave they have available for use. Employers can include the balance on a wage statement or on a separate written document provided to employees when they are paid.

If employers provide paid sick leave through a paid time-off policy, they must provide the PTO balance. Employers who provide unlimited paid sick leave or PTO policies can comply by stating “unlimited.”

Employers in cities with local paid sick leave ordinances should check for any specific record-keeping requirements that would be in addition to California Paid Sick Leave.

Requirements for piece-rate employees

Employers who pay piece-rate employees are required to pay for rest and recovery periods and other nonproductive time at specified minimum hourly rates (Labor Code Section 226.2). For a dental practice, this could include employees who are paid on a “per-patient” basis.

Employers are require to include the following information on their piece-rate employees’ wage statements:

  • Total hours of compensable rest and recovery periods; the rate of compensation for those periods; and the total gross wages.
  • Total hours of compensable nonproductive time; the rate of compensation for that time; and the total gross wages.

Employers are responsible for wage statement accuracy

All of the required information must be contained on the face of the wage statement. A wage statement is not complete if an employee must refer to another document to get the required information.

As a best practice, employers should provide employees a paper pay stub regardless of the means of providing payroll, i.e., direct deposit.

Employers who use a payroll company to prepare wage statements are responsible for providing the payroll company with all information that must be contained in the wage statement. Furthermore, employers should review wage statements for completeness and accuracy and not assume the wage statements are accurate. Accuracy is vital and minor mistakes can be costly, with employers apt to face large fines and penalties, even for minor omissions. California law imposes penalties on employers who do not comply with wage statement requirements:

  • Failure to provide an employee with a wage statement may result in a penalty of $250 per employee for the initial violation and $1,000 per employee for subsequent violations (Labor Code Section 226.3).
  • Providing an employee with an inaccurate wage statement means facing a penalty of up to $4,000 per employee (Labor Code Section 226(e)).

Importantly, Section 226 includes a penalty provision for certain violations of section 226(a). An employer guilty of a knowing and intentional failure to comply with section 226(a) must pay employees who have suffered injury a penalty totaling $50 for an initial offense and $100 for subsequent offenses. Section 226(e) further defines “injury” for purposes of the penalty, along with the term “knowing and intentional failure.” A recent California Court of Appeals decision, Lopez v. Friant & Associates, held that Private Attorneys General Act plaintiffs need not assert injury or employer knowledge to collect penalties for pay stub violations.

Reference the CDA Practice Support resource Records and Documents Retention Guidelines for more information, and find information on paydays, pay periods and final wages from the California Department of Industrial Relations. An FAQ on California Paid Sick Leave is also available.



Related Items

Beginning Jan. 1, 2018, the hourly minimum wage for employers with 25 or fewer employees will increase to $10.50 per hour. For employers with 26 or more employees, the minimum wage will increase to $11 per hour. Employers with exempt employees should evaluate employee salaries, as exempt employees in California generally must earn a minimum monthly salary of no less than two times the state minimum wage for full-time employment.

Gov. Jerry Brown on Oct. 14 signed into law Assembly Bill 1008. This statewide “ban-the-box” law generally bars employers with five or more employees from asking an applicant to disclose conviction information until the employer has made a conditional offer of employment. If an employer later decides to revoke the offer based on an individual's criminal history, the employer must undertake a procedure called the “fair chance” process.

Topics
Top