June 18, 2019

Double-Check Your Pay Stub Format (or Pay Up!) in California

Pile of hundred dollar bills with a judge's gavel

You may recall us harping on how important it is to take responsibility for your own wage and hour compliance as an employer. The data included on employee pay stubs is one area where you need to be hyper-vigilant that you’re meeting what’s required by law, especially if you run a business in California.

California requires a TON of details to be systematically included on employee pay stubs every pay period, but many employers don’t pay attention to that, simply trusting their payroll company to get everything right. Unfortunately, you bear ultimate responsibility for any errors. So, while using a payroll company can be convenient, you can’t just trust that they know what’s required by California employment law—you need to know it, too.

 

So What Are California’s Pay Stub Requirements?

First, CA employees must receive a written, itemized wage statement—casually referred to as a pay stub—every pay period. Each pay stub you issue must include a laundry list of specific details outlined by the California Labor Code. We recommend you check your pay stub format immediately and make sure every one of these items is included:

  • Correct dates of the pay period
  • Legal name and address of the employer
  • Employee’s name and either their employee number or the last 4 digits (only) of their SSN
  • Employee’s total hours worked, for nonexempt employees
  • All pay rates in effect, and how many hours at each rate
  • Piece-rate units and rate, if paid on a piece-rate basis
  • Employee’s gross wages
  • Any and all deductions made from pay
  • Employee’s net wages
  • Employee’s up-to-date balance of paid sick leave

Some other states also have pay stub requirements (itemizing sick leave availability is picking up traction as other states pass sick leave laws). But, as usual, California’s are the most demanding!

You can’t simply assume your payroll company knows about California’s regulations and is following them correctly—it’s your responsibility. The same goes for your office manager or anyone else you might be trusting to process payroll.

Want to know where your business stands on HR compliance? Click to schedule a free consultation.

What Kind of Fines Are We Talking About?

OK, so there are plenty of items your pay stubs should include, but these are pretty simple details, after all. The fines surely wouldn’t be much for missing one tiny piece of data…right?

As usual, that’s not the way things work in California. Penalties are steep and common. Complaints and class action lawsuits prompted by missing or inaccurate pay stub information are often brought against employers by employees and plaintiff’s attorneys, even when the error was unintentional and so small that no real harm was done. The right of California employees to receive complete, accurate pay stub data is well-publicized—in fact, during the writing of this article, a simple Google search to confirm a detail of the California Labor Code offered up free attorney consultations to employees receiving faulty or no pay stubs as the featured result.

So what magnitude of fines are we talking about if you are found to have made an error? For a “knowing and intentional failure” (for example, if an error was known but thought to be harmless), fines start small: actual damages, or, if greater, $50 for the initial pay period and $100 per violation thereafter. That may not sound terrible until you realize that it’s per employee, per pay period, because every faulty pay stub you issue counts as a violation. Since pay periods last no more than a week or two, fines stack up quick, and fines are not capped until you’ve reached $4000 per employee, not counting attorney fees and other costs.

Given that pay stubs by their very nature are replicated across your entire workforce, a minor issue replicated for every employee on every bimonthly pay stub for a year could easily cost you $35,000 or more with fees, even if you only have 15 employees. If you have 20+ employees, weekly pay stubs, multiple issues, or the error continued longer, you could be looking at $50,000…or far more.

 

If You Find an Error, Fix it Now

If you do find an issue or omission on your pay stubs, you’ll want to immediately work with your payroll provider to correct it so it’s no longer replicated. If you have HR questions surrounding what to do next, reach out to an HR expert.

Unfortunately, employment laws are made by legislators who may have never run a business themselves—so lawmakers often don’t know how inconvenient their requirements are in a real-world context. Presumably many legislators are unaware, for instance, that payroll companies frequently charge employers per line for info printed on pay stubs. Many employers or well-meaning managers find themselves making errors because they tried to trim costs by omitting lines of data—but that’s a decision that may well come back to haunt you.

As is usually the case with employment laws, abiding by pay stub requirements is far, far cheaper than paying the fines for noncompliance. The good news is that we’re not suggesting you abandon having your payroll processed externally—payroll can still be a simple and effective thing to outsource if you keep an eye on it.

Plus, some payroll companies are aware of the stricter requirements California employers face, and will work with you to be positive that you meet them. Our own payroll partner, PayDay, makes a special point of being more accountable to these requirements and won’t charge employers per line for items that must be included on pay stubs.

 

Keep a Close Watch on Payroll

Knowing your payroll company will work with you to minimize costs while also including all information required by California law is essential. Ensuring compliance is your responsibility—but remember, the great thing about payroll is that, once you have your format right, it can easily be replicated for subsequent pay stubs and pay periods.

So, now that you know the rules and consequences, would you bet on the accuracy of every detail in your employee pay stubs? Because as a California employer, you are betting money on this each and every time you run your payroll.

 

  

Friendly Disclaimer: This information is general in nature and is not intended to provide legal advice or replace individual guidance about a specific issue with an attorney or HR expert. The information on this page is general human resources guidance that is believed to be current as of the date of publication. Note that CEDR is not a law firm, and as the law is always changing, you should consult with a qualified attorney or HR expert who is familiar with all of the facts of your situation before making a decision about any human resources or employment law matter.

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Please note: CEDR Solutions specializes in providing expert HR support to owners and operators of independently owned medical and dental practices.