California Labor Laws: Paystub Requirements and Mistakes to Avoid
California employers know the importance of promptly and accurately paying employees for all hours worked. But, did you know that failure to include certain information on your employee’s pay stubs may lead to expensive class-action lawsuits?
While payroll laws vary by state, there are specific requirements for what employer paystubs must include. Here’s an overview of dos and don’ts to ensure your business is compliant.
California Paystub Requirements
Under California law, there are 10 specific items that must be included on your employees’ wage-earning statements, so your business can remain compliant and avoid any penalties.
California Labor Code Section 226(a) outlines nine specific items that must be included on a pay statement:
- Gross wages earned;
- The total hours worked by the employee (unless the employee is a salaried employee and is exempt from overtime or the employee is exempt from the payment of minimum wage and overtime under specific laws);
- The number of piece-rate units earned, if applicable;
- All deductions made from wages;
- Net wages earned;
- The pay period beginning and end dates;
- The employee’s name and only the last four digits of his or her Social Security number (or an employee identification number other than a Social Security number);
- The name and address of the legal entity that is the employer; and
- All applicable hourly rates in effect during the pay period and the corresponding number of hours the employee worked at each hourly rate
If you neglect to list the total hours worked for a pay period or leave off the dates of the pay period, you could be in hot water. Other common mistakes include not having the employer’s complete legal name listed or failing to include the employer’s address on the paystub. Overtime compensation, commission, and bonuses must also be listed in a transparent manner.
The Healthy Workplace Healthy Family Act entitles any California employee, that has worked at least 30 days within a year, to accrue one hour of paid sick leave for every 30 hours worked. Both part-time and full-time employees are entitled to paid sick leave. However, employers may limit accrual of paid sick leave to 24 hours or 3 days each year. Employers must show on a pay stub—or a document issued the same day as a paycheck—how many days of sick leave an employee has available.
Federal vs California Payroll Laws
The Fair Labor Standards Act (FLSA) does not require an employer to provide employees with pay stubs, however it does require that employers keep accurate records of hours worked and wages paid to employees. Rules vary by state in terms of how much access employees have to their pay information.
Certain “No Requirement” states do not require employers to provide a statement that details an employee’s pay information. Some states deem access permissible, while others require a physical paystub.
California is one of the strictest states when it comes to payroll laws. Under California law, pay statements must be issued in writing and deductions made from wages must be recorded “in ink or other indelible form.”
As more businesses began going paperless and employees opted to receive their pay by direct deposit, employers weren’t clear on whether electronic pay stubs complied with the Labor Code. As a result, the California Department of Industrial Relations Division of Labor Standards Enforcement (DLSE) issued an opinion letter in 2006 about the circumstances under which paperless statements would be compliant with state law.
The DLSE stated employees must be able to easily, and confidentially, access electronic statements and convert them into hard copies at no expense to employees. The DLSE wrote that the employer’s practices described in the letter were compliant because:
- Employees could elect to receive paper wage statements at any time.
- The wage statements contained all the information required under Labor Code Section 226(a) and were available on a secure website no later than the payday.
- Access to the website was controlled by unique employee identification numbers and confidential personal identification numbers.
- Employees could access their records at work using company computers or their own personal computers.
- Employees could print free copies of their electronic wage statements at work on printers that were close to their computers.
Employers should maintain wage statements electronically for at least 3 years and must make them available to active employees during that time. Former employees are entitled to free paper copies upon request.
California is one of the most protective states when it comes to employee rights, including the right to be paid on time. Per Labor Code Section 207, an employer must establish a regular payday and is required to clearly and visibly post a notice that shows the day, time and location of payment.
Wages earned between the 1st and 15th days, inclusive, of any calendar month must be paid no later than the 26th day of the month during which the labor was performed, and wages earned between the 16th and last day of the month must be paid by the 10th day of the following month.
Consequences of Non-Compliance
The consequences of non-compliance vary by state. As an example, California state law requires employers to provide payroll records within 21 calendar days if an employee requests them. If you can’t or don’t provide the records, the employee is entitled to a $750 penalty paid by the employer, as well as a claim for injunctive relief and attorneys’ fees. California Labor Code Section 226 outlines this and more.
Providing employees with pay stubs is a local requirement in most states. Consequences for non-compliance varies, but it’s best to avoid a Department of Labor (DOL) audit. In the event that an employer isn’t required to provide employees with pay stubs, should an employee request access, it’s good practice to allow them to review their records.
Employers shouldn’t assume that their wage statements are compliant with California law, even if they use a third-party payroll provider. Most third-party providers will follow Federal laws when it comes to paystub requirements, unless you specifically request otherwise. Compliance is ultimately the employer’s responsibility. It’s critical for employers to be proactive when they work with vendors to make sure the format and content of their statements satisfy state law. Consult one of our employment law attorneys to make sure your payroll practices are compliant.