Court Clarifies Pay Stub Requirements -- McKenzie v. FedEx

 The federal district court decision in McKenzie v. FedEx, provided some useful guidance to employers and employees regarding what information must be included in pay statements under Labor Code section 226(a).  For example, in fulfilling the requirement to show "all hours worked," a wage statement doesn't necessarily have to contain a separate line item listing that number.  However, the wage statement must contain sufficient information for an employee to easily add up the total hours from the other lines.  

In McKenzie, the court granted summary judgment to the employee on the ground that FedEx's "idiosyncratic" wage statements were not self-explanatory and therefore failed the test.  

[T]he total regular and overtime hours listed in FedEx's wage statements, when added together, do not sum up to the total hours worked by the employee during the pertinent time period. Without additional information regarding the wage statement, an employee cannot simply “arrive at the sum of hours worked.”  Evidence of this can be seen in the sample wage statement provided by FedEx for McKenzie's pay period ending on March 21, 2009. When the total overtime categories and the regular rate hours listed in that document are added together, the sum of these figures is 58.24, which represents a total of 40 regular hours and 18.24 overtime hours. However, because information provided by FedEx (and not disclosed on the wage statement itself) explains that the overtime hours are always listed twice, the sum of all of the figures on the wage statement during the relevant period is actually 49.12, not 58.24.  Thus, the Morgan rationale, which contemplates that an employee can determine his or her total hours worked by summing up the figures on a wage statement without need to reference any other time records or other documents, does not apply to FedEx's somewhat idiosyncratic wage statement.  Accordingly, the Court finds that FedEx violated Section 226(a)(2) by failing to state the “total hours worked by [an] employee” in its wage statements.

The Court also found that FedEx's wage statements violated Section 226(a)(6) because they listed only the end date and not the start date of the covered pay period, and violated Section 226(a)(9) because they failed to separately list the applicable overtime rate of pay.   The Court further held that these violations would trigger penalties on behalf of all similarly situated employees under the Private Attorney General Act of 2004 ("PAGA"), regardless of whether the employees had suffered any specific injury.

It is surprising how many employers, even large employers like FedEx, will incorrectly assume that the design and content of their pay stubs is a trivial issue.  In reality, the Labor Code recognizes that supplying employees with the information necessary to review their own wages and hours for legal compliance is a crucial part of the overall enforcement scheme. 

As a result, Labor Code Section 226(a) requires the issuance of accurate, itemized wage statements that contain the specific categories of information spelled out in the Labor Code. The good news for employers is that Section 226(a) sets up clear, bright-line requirements which should be easy to follow.  The bad news is that Section 226(e) and PAGA impose penalties for issuing defective statements.  And due to the typically uniform nature of a wage statement program these penalties claims are likely to be assessed on behalf of every employee who ever received a statement.

  

 

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