Assembly Bill 1506 grants relief to employers from frivolous actions under PAGA by allowing employers to cure certain alleged wage statement defects before an employee may recover PAGA penalties.
After receiving unanimous bipartisan support in the California State Legislature, Governor Jerry Brown signed Assembly Bill 1506 (AB 1506) into law on October 2. The new law contains an urgency provision and is therefore effective immediately. AB 1506 moves certain wage statement defects into the category of Labor Code violations that employers can cure before employees may file a civil action under the Private Attorneys General Act of 2004 (PAGA), Labor Code Section 2699, et seq.
The legislature originally enacted PAGA to permit employees to file civil actions against an employer to recover civil penalties that the Labor and Workforce Development Agency (LWDA) would otherwise pursue for Labor Code violations. PAGA requires employees to first provide written notice to the LWDA and their employer detailing the alleged Labor Code violations before the employee can pursue civil penalties. If the LWDA does not inform the employee within 33 days that it intends to investigate the alleged violations, then the employee may file a lawsuit to recover penalties on behalf of all aggrieved employees.
For certain Labor Code violations, PAGA gives employers a right to cure the violation between the time that an employee provides notice to the LWDA and before he or she files a civil action. In enacting AB 1506, the California legislature took steps to address employer concerns of frivolous and costly litigation that arose from hyper-technical violations of the Labor Code. Specifically, the law removes two sections of Section 226 from the list of “serious” Labor Code violations enumerated in Section 2699.5. As a result, employers can cure defects on a wage statement concerning “the inclusive dates of the period for which the employee is paid” or “the name and address of the legal entity that is the employer” (Labor Code Sections 226(a)(6) and (8)) within 33 days from the postmarked date of an employee’s notice to the LWDA of such violations.
After receiving a notice letter to the LWDA alleging issues with the applicable information on wage statements, employers must act quickly if they wish to exercise their right to cure within the required 33-day period. To “cure” these defects, an employer must show that it has provided fully compliant, itemized wage statements to each aggrieved employee for the three-year period prior to the date of the LWDA notice. In other words, the employer must reissue corrected wage statements to employees for each pay period for the previous three years.
After providing the “cured” wage statements to employees, the employer must then give written notice by certified mail to the LWDA and the employee pursuing a PAGA action within the same 33-day period. The notice must contain a description of the employer’s actions to cure the alleged defects.
If the employee disputes that the employer cured the alleged violation, the employee may appeal to the LWDA. The LWDA would then have 17 days to review the employer’s attempt to cure the violation. At that time, the LWDA may give the employer three additional days to effectuate its right to cure. If the LWDA determines that the alleged violation was not cured, or if the LWDA does not respond at all, the employee may proceed with filing a civil action under PAGA.
Employers may not exercise this right to cure more than once in a 12-month period for the same alleged violation or violations contained in the notice. This limitation applies regardless of the location of the complaining employee’s worksite.
AB 1506 has the potential to relieve employers from burdensome and potentially costly PAGA actions for civil penalties due to alleged violations of Labor Code Sections 226(a)(6) and (8), as long as they act quickly.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
John S. Battenfeld
Barbara J. Miller