Code, 2699, subd. Lab. If youve received a PAGA notice, you can count yourself as one of several thousands of California employers who receive one every year. 2012) 2012 WL 2373372 at *17; Schiller v. Davids Bridal, Inc. (E.D. Please log in as a SHRM member before saving bookmarks. Battle over amount in penalties. Was this article useful? While most of what you need can be acquired through formal discovery, an informal exchange is often the most expedient and streamlined method for collecting everything you need to have a meaningful discussion regarding numbers at mediation. PAGA Overview. (Lab. Give yourself enough time to work out an agreement regarding the scope of the exchange and set reasonable production deadlines so that youre not stuck sifting through thousands of pages of time and wage records at the eleventh hour. Legal precedent has established that PAGA provides a "civil penalty." This means that employees can recover both the statutory penalty associated with the Labor Code provision at issue, as well as civil penalties under PAGA, thereby creating a stacking of penalties against the employer. so long as they have suffered at least one alleged Labor Code violation. The number used for the quantifier depends on the overall strength of your case, which is governed by several factors. Are the policies bareboned or do they fail to adequately inform employees of their rights and/or the employers obligations? On top of all that, one employee can sue on the behalf of others. Are employees allowed to leave the premises during meal and rest breaks? The time and wage records are critical to your damages analysis. PAGA penalty for non-compliant wage statements is $100 for each employee per pay period for the initial violation and $200 for each employee per pay period for any subsequent violations. Dont forget to check for second meal periods which must be provided for shifts that are over 10 hours! Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRMs permission. Join/Renew Nowand let SHRM help you work smarter. These penalties are assessed per employee, per pay period, so they can quickly snowball. The district court then ruled against Walmart on the three claims and awarded Magadia and the two remaining classes over $100 million in damages and penalties. The California Supreme Court just made it even more difficult to do business in California. Most defendants will produce these policies without hesitation. Undertaking the cure option is no small feat. You must also give nonexempt employees an opportunity to take a 10-minute . . Specifically, corrected and fully compliant wage statements must be provided to every employee for every pay period going back three years from the date of the PAGA notice (Cal. Thus, the civil penalties recoverable by plaintiffs (25%) and those recoverable by the LWDA (75%) could not be aggregated when calculating CAFA's amount in controversy. In addition, employees are entitled to an unpaid 30-minute meal break once they work five hours. Civil penalties are assessed for violations of the Labor Code; 75% of the penalties go to the State, and 25% are paid to the aggrieved employees. Additional data that will be helpful to your analysis includes: 1) the average hourly rate for non-exempt employees; 2) the average hours worked by non-exempt employees each shift; 3) the total number of shifts greater than five, but less than 10 hours; 4) the total number of shifts greater than 10 hours; and, 5) the percentage of shifts that are eight hours or longer. You have 33 days from the postmark date of the notice to complete the cure. hUN0K$KxH!Z"-Y Llc[>3`3%<3IkS1id|_7*an1MjF/gZ9fZ"BWWtk|se[&ISIi8FV}'lhY_ Euu8]o0hyylpt[oM<15Otg?~}h( by the author. 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. if(currentUrl.indexOf("/about-shrm/pages/shrm-china.aspx") > -1) { How are PAGA penalties calculated? Finally, when negotiating the scope of the pre-mediation exchange, keep in mind that a plaintiffs right to statewide discovery is extremely broad in wage-and-hour class and PAGA actions. 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 . The penalties under PAGA can add up very quickly. If the defense does not provide you with the average hourly rate, you can determine that figure by adding all the hourly rates provided in the sampling and dividing that figure by the total number of employees included. These penalties are assessed on a per-employee basisup to a maximum of $4,000 for each employee who receives inaccurate pay stubs. Please be sure to consult a knowledgeable professional with assistance with your particular legal issue. Many attorneys dont have the resources to conduct an independent analysis of a large production of time and wage records and agreeing to a smaller sample size may be the most practicable approach. Website Copyright 2023 by Neubauer & Associates, Inc.The articles appearing in As such, practitioners should review the applicable wage orders to assess whether additional penalties can be levied against the employer for violations extending beyond those enumerated in Labor Code section 2699.5. In its notice of removal, defendant alleged that the amount in controversy was $6,280,675, which included $2,286,900 in statutory penalties under PAGA. Fifth, paying meal period premiums under Labor Code section 226.7 does not excuse the failure to provide the meal period. It is worth noting that the time period for which penalties can be assessed is limited to one year before the date of filing of the PAGA lawsuit, not the date of the PAGA notice. 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 dealing with a large class size, the best approach is to agree on a statistically significant random sampling of time and wage records. 3. Your call to action is often triggered before you even receive a PAGA notice. Defending against PAGA claims, class action lawsuits, or other legal action, Managing challenging employee situations such as leaves of absence, a remote workforce, or complaints of harassment, Other legal issues related to hiring, compensating, managing, and separating employees. (Lab. California legislation enacted last year found that employers are experiencing a high volume of PAGA claims. Code, 226.3; Raines v. Coastal Pacific Food Distributors, Inc. (2018) 23 Cal.App.5th 667, 680.). The court's decision to reduce the PAGA penalties award was driven by its recognition that the retailer had made a good faith effort to comply with Section 226, that it would be unreasonable to penalize the retailer by awarding maximum PAGA penalties for violations stemming from its practice of awarding bonuses that benefit employees, and . First, review the time records for meal-break violations, i.e., short, late, or missed meal breaks, and compare them with the corresponding wage statements for payment of meal-break premiums. Waiting time penalties: (Total number of employees who were terminated or quit during the three-year period) x (30 x average hourly rate x average number of hours worked per work day). If the defense is being difficult or resistant, remind them that class action and PAGA settlements are subject to court approval and that, without a reasonable exchange, any settlement reached might not withstand judicial scrutiny during the approval process. While reviewing the timesheets, ask yourself if the records evince other unlawful wage-and-hour practices. ), Failure to reimburse business expenses: Total number of employees during the four-year statutory period x average amount each class member spent on necessary business expenditures. at p. Read the first parthere and the second parthere. (2017) 18 Cal.App.5th 705, 724.). $1,750 + $87,500 = $89,250 in Total PAGA Penalties In a straight wage-and-hour class action, the damages period is three years prior to the filing of the lawsuit to the present. If your client presents poorly, is a poor historian, has a significant disciplinary record, or only worked part time or for a short period, modify your quantifier accordingly. (Lab. The penalty period for actions brought under the Private Attorneys General Act of 2004 (PAGA) is one year prior to the date of filing, plus 65 days for the PAGA notice period. You must also file a notice of the cure that includes a description of actions taken with the LWDA ( 2699.3(c)(2)(A)). 50 employees x 26 pay periods = 1,300 violations. Even simple formatting errors can result in penalties, Ahearn noted. (Ibid.) 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. This installment addresses the penalties associated with wage statement violations. As such, you should demand production of all employee handbooks and standalone policies regarding timekeeping, meal and rest breaks, payroll practices, overtime compensation, and expense reimbursements that were in effect at any time during the applicable damages period. 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. They contain evidence of unpaid wages, unpaid premiums, meal and rest break violations, and unlawful timekeeping practices, such as rounding or auto-deductions, among other things. Code, 226.7, subd. PAGA Penalties and Labor Code 226 Claims. The regular rate of pay calculation used to calculate the overtime rate should now be applied to any break premiums. The foundational data needed to evaluate damages or penalties in any class or representative action consists of the class size, workweeks, and pay periods during the applicable damages period. If you identify problems, you should immediately correct any missing or inaccurate information on the wage statements. The good news is that there are several options designed to simplify the calculation process without risking rejection during the court approval process. Lab. For Labor Code provisions that do not specify the penalty amount, PAGA provides default civil penalties at $100 for every employee for every pay period for the first violation, and $200 for each violation thereafter (though case law may provide an argument that PAGA penalties are limited to violations that occur after the PAGA notice). For subsequent, willful, or intentional violations, the new law imposes a penalty of $200 plus 25% of the unlawfully withheld amount. 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. The following formulas can be useful to create high/low scenarios in your damages model for some of the main Labor Code violations. 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. If putative class members have told you that employees were required to be on-call during their rest breaks, uptick the quantifier. Under PAGA, the default civil penalty for an employer's initial violation is one hundred dollars ($100) per employee per pay period, and two hundred dollars ($200) per pay period for any subsequent violations (though PAGA plaintiffs are required to remit 75% of recovered penalties to the Labor and Workforce Development Agency). Code 226(a)(6)); and (2) failure to provide the name and address of the employing legal entity (226(a)(8)). If youve received a PAGA notice, you should immediately correct any missing or inaccurate information on the statements. -1 ) { How are PAGA penalties calculated ) 23 Cal.App.5th 667, 680. ) failure to provide meal. Inaccurate pay stubs 705, 724. ) records are critical to your damages model for of... Quantifier depends on the overall strength of your case, which is governed by several factors of case. Breaks, uptick the quantifier please log in as a SHRM member before bookmarks! 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