Kelly A. Knight is an attorney and mediator based in Los Angeles, CAlifornia. He handles matters throughout California.

Raines v. Coastal Pacific Food Distributors, Inc.: PAGA enforcement of wage-statement violations does not require proof of actual injury

In Raines v. Coastal Pacific Food Distributors, Inc., 23 Cal. App. 5th 667 (Cal. Ct. App. 3d Dist. May 22, 2018) (slip opinion; Google Scholar), the California Court of Appeal held that plaintiffs acting as private attorneys general in PAGA-enforcement actions do not need to show actual injury to secure penalties for violations of Labor Code section 226, California's wage-statement statute.

For those that don't know, Labor Code section 226(a) requires that employers issue wage statements to its employees that show a whole host of information:

An employer, semimonthly or at the time of each payment of wages, shall furnish to his or her employee, either as a detachable part of the check, draft, or voucher paying the employee’s wages, or separately if wages are paid by personal check or cash, an accurate itemized statement in writing showing (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. The deductions made from payment of wages shall be recorded in ink or other indelible form, properly dated, showing the month, day, and year, and a copy of the statement and the record of the deductions shall be kept on file by the employer for at least three years at the place of employment or at a central location within the State of California. For purposes of this subdivision, “copy” includes a duplicate of the itemized statement provided to an employee or a computer-generated record that accurately shows all of the information required by this subdivision.

Labor Code § 226(a).

Labor Code section 226(e) allows an employee "suffering injury as a result  of a knowing and intentional failure by an employer to comply with subdivision (a)" to recover actual or statutory damages. 

The parties in Raines stipulated that the wage statements issued by the employer did not include the overtime hourly rate of pay, but did include both the number of overtime hours worked and the total overtime pay, and that there were 16,252 violations for failure to furnish accurate wage statements. Slip op. at 3-4.

The employer argued that there was no actual injury because the overtime hourly rate was readily ascertainable, so there was no actual injury. Id. at 4. The trial court agreed (id. at 5) and granted summary judgment, but the appellate court reversed the grant of summary judgment on the plaintiff's PAGA-enforcement claim.

Civil penalties for violations of Labor Code section 226(a), recoverable under the Labor Code Private Attorneys General Act of 2004 ("PAGA"), are provided for under a separate section, Labor Code section 226.3, which provides: 

Any employer who violates subdivision (a) of Section 226 shall be subject to a civil penalty in the amount of two hundred fifty dollars ($250) per employee per violation in an initial citation and one thousand dollars ($1,000) per employee for each violation in a subsequent citation, for which the employer fails to provide the employee a wage deduction statement or fails to keep the records required in subdivision (a) of Section 226.

Labor Code § 226.3; slip op. at 6.

The Raines court held that section 226.3 provides the civil penalties for all violations of section 226 (notwithstanding several federal district courts that ruled that section 226.3 only applies where the employer fails to issue any wage statement at all). See slip op. at 7-8. The Raines court reasoned that the mere provision of a "grossly inadequate wage statement" (in violation of section 226(a)) could not result in an employer being relieved of civil penalties, "[o]therwise the purpose of the statute would be thwarted." See id. at 8.

But remember that the plaintiff was seeking penalties not under section 226.3, but under section 226(e), which provides that “[a]n employee suffering injury as a result of a knowing
and intentional failure by an employer to comply with subdivision (a)” may recover the
greater of actual damages or statutory penalties, and “[a]n employee is deemed to suffer
injury” if the employer fails to provide accurate and complete information of the hourly
rate and “the employee cannot promptly and easily determine [the applicable hourly rate] from the wage statement alone.” See id. at 9; Labor Code § 226(e)(2)(B).

Under section 226(e), a plaintiff is injured if the accuracy of the information required under section 226(a) cannot be ascertained from the face of the wage statement alone. Id. at 9. If additional information is needed beyond what is shown on the wage statement, actual injury is shown. Id. But where simple math allows correction of the deficiency, there is no actual injury. Id. at 10, citing Price v. Starbucks Corp., 192 Cal. App. 4th 1136, 1143 (2011).

Applying these principles, the appellate court held that there was no actual injury to the plaintiff because the plaintiff could have done the math and figured out the actual hourly overtime rate, and therefore the trial court's grant of summary judgment was proper on the plaintiff's individual claim. See id. at 10.

But a different result applied to the plaintiff's PAGA claim. Why? Section 226 itself only provides for a statutory penalty recoverable by a plaintiff and does not provide for a civil penalty recoverable by the state (which then allows a plaintiff, acting as a private attorney general under PAGA, to go after the civil penalty). But "PAGA is concerned with collecting civil penalties for the violation of section 226(a), not the damages or statutory penalties provided for in section 226(e)." Id. at 14. And PAGA's default penalty provision (which allows for collection of those civil penalties and applies wherever a statute does not include a civil-penalty provision) does not contain any requirement that a private attorney general must show actual injury. Id. at 14; see also id. at 11-18 (analyzing and discussing multiple federal district court opinions).

Further, "no [individual, actual] injury" is not the same thing as "no violation" of the Labor Code. Id. at 15. Damages under section 226(e) are intended to compensate an individual for harm, and thus there must be injury. Id. at 16. But civil penalties are intended to punish the wrongdoer and to deter future misconduct. Id. Therefore, "[a]n act may be wrongful and subject to civil penalties even if it does not result in injury." Id.

So there you have it. When it comes to civil penalties for wage-statement violations, there is no requirement that a PAGA plaintiff, acting as a private attorney general, show actual injury in order to maintain a PAGA enforcement action for violations of section 226(a).

If this seems unfair, the Raines court noted that a failure to show actual injury simply does not defeat a PAGA enforcement action premised on enforcing section section 226, but that doesn't mean imposition of full penalties---"a trial court has discretion in awarding civil penalties and may reduce the award for technical violations that cause no injury." Id. at 16. The Raines court quoted the language of section 2699(e)(2), providing that in PAGA actions "a court may award a lesser amount than the maximum civil penalty amount specified . . . based on the facts and circumstances of the particular case, to do otherwise would result in an award that is unjust, arbitrary and oppressive, or confiscatory.” Id. And the Raines court noted that trial courts are "directed to consider whether the violation was inadvertent in assessing penalties." See id., citing Labor Code § 2699(e)(1) and Heritage Residential Care, Inc. v. Div. of Lab. Standards Enforcement, 192 Cal. App. 4th 75, 82 (2011).

This result is not a surprise given that the purpose of the PAGA is to allow private attorneys general to take action to force employers to comply with the Labor Code. On the other hand, trial courts have discretion to reduce penalties for mere technical violations, violations that result in no injury, etc. This discretion to award a lower penalty amount is supposed to strike a balance between what is seen by many as a heavy handed PAGA statute, with violations leading to potential maximum penalties that are astronomical, and the actual situation on the ground. What does this mean, practically? It comes down to your judge...

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