As legal challenges to PAGA continue to be a struggle and legislative reforms to PAGA are unlikely, employers should make every effort to minimize the threat of PAGA claims.  A formal policy and informal practice should both be closely monitored.  The proceedings of the PAGA continue to increase due to the potential for favorable fees and fines.  Employers cannot force employees into arbitration or prevent them from suing under the Private Attorneys General Act (PAGA). The most common PAGA claims include:

Regular Rate Calculation Mistakes: The overtime rate for non-exempt employees is not just 1.5 times the hourly rate but must include most forms of compensation.  It is mandatory for employers to include bonuses (and small amounts) in the calculation of the rate for overtime.  Failure to add such compensation can result in a very small amount for overtime purposes, but the penalties on such a mistake can be significant.

Meal and Rest Period Violations: If an employee is not provided a meal break before the end of the fifth hour worked, the employee must be paid an extra hour of their shift.  A paid rest break or unpaid meal period is interrupted during which time an employee would be subject to a penalty.  Employees in the construction and service industries often make such claims.

Working Off the Clock Allegations: The employee must be paid for all the time the employee suffers or is allowed to work. A recent case law in California has eroded the de minimis argument for employers. The minutes before or after an employee can clock in, go to workstations, start computers, put on PPE, etc. can establish a right to unpaid time.

Wage Statement Violations:  The California Labor Code specifies nine items that must be included in a wage statement, which are: (1) gross wages earned, (2) total hours worked by the employee, except as provided in subdivision (j), (3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis, (4) all deductions, provided that all deductions made on written orders of the employee may be aggregated and shown as one item, (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 other than a social security number, (8) the name and address of the legal entity that is the employer and, if the employer is a farm labor contractor, as defined in subdivision (b) of Section 1682, the name and address of the legal entity that secured the services of 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 and, beginning July 1, 2013, if the employer is a temporary services employer as defined in Section 201.3, the rate of pay and the total hours worked for each temporary services assignment  

These requirements, all in all, are quite simple, but common issues can include hourly rates of pay for all forms of compensation, including regular rate calculations, and paid sick leave balances.

As legal challenges to PAGA continue pending, employers in California are advised to take effective measures to prevent and defend potential PAGA claims.  Employers need to review their timekeeping practices, wage statements, rest and meal break policies, and payroll records to ensure they are in compliance with labor laws and regulations.

Please note that the information provided on this website is for general information purposes only and is not to be construed nor relied upon as legal advice nor the formation of an attorney-client relationship. For a free consultation with Attorney Thomas M. Lee, please contact us at 213-251-5533.