AB 1506: Amends PAGA chance to cure

Since the enactment of the Private Attorneys General Act of 2004 (PAGA), California employers have experienced costly litigation stemming from minor and technical violations of Labor Code Section 226(a)'s nine categorical requirements for complete and accurate wage statements. Indeed, employers have incurred significant legal expenses in defending PAGA actions for violations of Section 226(a) - such as truncating the employer's name on the wage statement or only including the ending date of a pay period but not the start date - even where the employee cannot demonstrate actual harm or injury as a result of such violation. To mitigate these concerns, Gov. Jerry Brown signed Assembly Bill 1506 into law on Oct. 2, 2015.

AB 1506 amended PAGA to provide employers with the opportunity to cure certain wage statement defects before an employee has the opportunity to initiate a civil action under PAGA. Specifically, employers may cure wage statements that fail to provide a complete and accurate reference to (i) the inclusive (beginning and end) dates of the pay period (as required by Section 226(a)(6)) and (ii) the employer's entire legal name and address (as required by Section 226(a)(8)).

To cure a defective wage statement, an employer must provide a fully compliant, itemized wage statement to each aggrieved employee for each pay period covering the three-year period prior to the postmark date of the written PAGA notice sent by the aggrieved employee (or his or her representative). In addition, the employer must notify the aggrieved employee (or his or her representative) and the California Labor & Workforce Development Agency in writing that it has cured the alleged violations and must describe the actions taken to cure such violations. This process must occur within 33 calendar days from the postmark date of the written PAGA notice sent by the aggrieved employee.

The right to cure defective wage statements is not absolute, nor is it an absolute bar to liability under Section 226(a). First, under AB 1506 an employer may only cure violations once in a 12-month period. Second, employees may still seek statutory penalties for defective wage statements and the California Division of Labor Standards Enforcement may pursue civil penalties under Section 226.3, regardless of whether the employer timely cures. Third, and perhaps most significant, there are seven additional categories of information that employers must fully and accurately include on employees' wage statements.

Thus, given the limited opportunity to cure, employers must remain vigilant to ensure that their wage statements comply with all nine categorical requirements of Section 226(a) and to avoid the array of statutory and substantial civil penalties for furnishing defective wage statements. Employers should be especially wary of PAGA actions related to violations of Section 226(a). The potential penalties associated with such actions are calculated by multiplying $100 per pay period for the initial violation (and potentially $200 per pay period for each subsequent violation) by the total number of "aggrieved employees." An adverse judgment also shifts the aggrieved employees' costs and reasonable attorney's fees over to the employer. The cumulative effects of these penalties can be so significant that employers typically opt for settling such claims for hundreds of thousands of dollars or more, instead of risking the penalties resulting from an adverse judgment.

Karen Corman is a labor and employment partner at Skadden, Arps, Slate, Meagher & Flom LLP. Ryan Posey is an associate at the firm