On June 3, 2019, a Northern California Federal District Court Judge ordered Walmart to pay nearly $102 million for various wage and hour violations, primarily based on failure to provide wage statements (i.e., pay stubs) that comply with the requirements of California law.
Background on PAGA
California’s Private Attorneys General Act (PAGA) (Labor Code § 2698, et seq.) allows private individuals to bring a civil action to recover civil penalties, otherwise assessed and collected by the State, on behalf of other current or former “aggrieved” employees for violations of either the California Labor Code or the applicable Industrial Welfare Commission (IWC) wage order. PAGA applies to wage statement violations.
California Labor Code section 226(a) requires employers to issue accurate itemized statements showing (1) gross wages earned, (2) total hours worked by the employee, (3) any applicable piece rates if the employee is paid on a piece-rate basis, (4) all deductions, (5) net wages earned, (6) the inclusive dates of the period for which the employee is paid, (7) the name of the employee and only the last four digits of his or her social security number or an employee identification number, (8) the name and address of the legal entity that is the employer, and (9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee. You can read all of the requirements of Labor Code section 226 at this link.
Class Action for Wage Statement Violations
In this case, the Plaintiff brought claims for statutory and PAGA penalties for Walmart’s inaccurate wage statements. These claims were brought on behalf of a class of thousands of Walmart employees. The statutory penalties for violation of Section 226 start at $50 for an initial violation and increase to $100 for each subsequent violation. These statutory penalties are assessed on a per employee basis with a penalty cap of $4000 for each employee who receives inaccurate pay stubs. However, there is no limit to the total number of employees for which the penalty can be assessed. As such, larger employers could still face hundreds of thousands or even millions of dollars in liability depending on the number of applicable employees. Claims for statutory penalties for wage statement violations are frequently brought as a class action on behalf of all of the affected employees.
Additionally, PAGA establishes a penalty of $250 per employee, per pay period in which a wage statement violation occurred, with no cap on the total PAGA penalties that might accrue. This penalty is in addition to any statutory penalties that may be assessed. In this case, the Judge identified approximately $48 million in statutory penalties, and an additional $54 million in PAGA penalties for which Walmart was liable.
For Walmart, the issue focused on the final paychecks to California employees leaving (voluntarily or involuntarily). Plaintiffs alleged that Walmart failed to include the start and end date of the pay period on the final wage statements, and also failed to accurately show the overtime pay rate on employee wage statements.
- California employers must ensure their wage statements/paystubs fully comply with California law. Remember the penalties for failure to comply with the California wage statement/paystub rules apply even if the employee has been paid all wages owed. The penalties to the employer are severe.