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June 2011

Are Your Pay Stubs Going to Make You Pay?

In the recently decided case of McKenzie v. Fed. Express Corp., 2011 U.S. Dist. LEXIS 48707 (C.D. Cal. Apr. 14, 2011), the Federal District Court for the Central District of California issued an opinion adverse to employers across California regarding wage statement violations under California Labor Code ("Labor Code") section 226.  Labor Code § 226 generally requires the following nine enumerated items appear on all wage statements: (1) gross wages, (2) total hours worked, (3) piece-rate units earned if applicable, (4) all deductions from wage, (5) net wages earned, (6) the inclusive dates of the period for which the employee is paid, (7) the name of the employee and the last four digits of their social security number (8) the name and address 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.

The plaintiff in McKenzie worked as a truck driver for defendant FedEx from April 2003 to July of 2009.  Plaintiff brought Labor Code § 226 claims for improper wage statements against FedEx under both the California Private Attorney General Act ("PAGA") in seeking to recover penalties, and as a class action.  PAGA is a statute passed by the California legislature in 2004 which allows a private citizen to file a civil suit against their employer for various violations of the Labor Code.  Penalties under PAGA can range between $50 to $200 per employee, per pay period, and per alleged labor code violation - creating substantial potential exposure for employers. 

The Court in McKenzie held the wage statements deficient as a matter of law for three separate violations of § 226, and also determined that to recover PAGA penalties based on a deficient wage statement, plaintiff did not need to prove an injury, and could move for a summary judgment on behalf of other class members before a class had been certified.  As to the wage statement violations, first, the Court determined that because FedEx listed three separate categories of hours in its wage statements, it failed to provide the total hours that an employee worked during a pay period in violation of § 226(a)(2).  Second, the Court also found that FedEx violated section § 226(a)(6) by failing to include the beginning date for the pay period in its wage statements.  Third, the Court held FedEx's wage statement did not comply with § 226(a)(9)'s requirement that all applicable hourly rates in effect during the pay period, with corresponding hours worked at that rate, appear on the wage statement. 

The McKenzie opinion is an extremely negative development for employers, and exposes the unwary employer to significant monetary exposure.  Employers are urged to contact legal counsel to review their wage statements to ensure complete compliance with Labor Code § 226's strict requirements.  As McKenzie demonstrates, even minor and seemingly innocuous violations can lead to enforceable legal claims. 


Employment Law

Mark A. Saxon

Employment Law