In Lidia Soto v. Motel 6 Operating, L.P., (Superior Court No. 37-2015-00017074-CI-OE-CTL), published October 20, 2016, the Court of Appeal for the Fourth Appellate District unanimously rejected an employee’s argument that her employer was required to include the monetary amount of accrued vacation pay on its employees’ wage statement pursuant to California Labor Code section 226(a). In its ruling, the Soto Court held that accrued paid vacation does not become a “wage,” which must be identified on an employee’s wage statement until the employee quits or is terminated. Under the Court’s holding, until a vacation benefit is required to be paid, it does not need to be included on the employee’s wage statement. Accordingly, the Court dismissed Ms. Soto’s individual claim, and her representative claim pursuant to California’s Private Attorneys General Act of 2004 (“PAGA”).
In Soto, plaintiff Linda Soto worked for Motel 6 from June 2012 to January 2015. In May 2016, Soto filed an action in her individual capacity and on behalf of all aggrieved workers under PAGA. Soto alleged Motel 6 violated California Labor Code section 226(a) by failing to provide its California nonexempt employees with wage statements settling forth “all vacation and PTO (paid time off) wages accrued during the applicable pay period.” Ms. Soto sought statutory penalties and attorney’s fees. Penalties under Section 226(a) are capped at $4,000. However, the attorney’s fees that can be awarded are unlimited and are based on a reasonableness standard.
Soto claimed that Section 226(a), which requires an employer to provide “accurate itemized statement of wages to their employees” required Motel 6 to list on her paystub the monetary value of her accrued vacation. Motel 6 demurred to Soto’s Complaint arguing that the value of vacation balances was not one of the necessary disclosures required by Labor Code section 226(a). The trial court agreed with Motel 6 and dismissed Ms. Soto’s Complaint.
The Court of Appeal affirmed the dismissal of Plaintiff’s Complaint. The Court held that pursuant to Section 226(a), a wage statement must include nine separate items:
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- The name and address of the employer;
- Name of the employee;
- Last 4 digits of the employee’s social security number (or employee ID number assigned to the employee by the employer);
- The pay period;
- Total hours worked;
- Hourly wage;
- Gross wages earned;
- Net wages earned; and
- All deductions.
Soto argued that even though “net amount of earned vacation pay” was not one of the items expressly required by Section 226(a), the amount should have been included because the courts have held that “vacation pay” are wages. Therefore, per Soto, the dollar amount of her vacation pay should have been included in the “gross wages earned” and “net wages earned” statutory categories. The Court of Appeal disagreed. The Court held that the purpose of Section 226(a) is to ensure “that employees are adequately informed of compensation received and are not shortchanged by their employers.” Accordingly, because the statute omitted “a particular category from a more generalized list, a court can reasonably infer a specific legislative intent not to include that category within the statute’s mandate.” Pursuant to Section 226(a) an employer is only required to identify items that are part of the employee’s current monetary compensation. Since vacation benefits are not paid out until an employee’s termination, the employee does not have a current entitlement to the money and no need exists to state the amount on a wage statement.
The Soto decision is an important validation by the courts that employers can comply with Section 226(a) and similar statutes by following the “letter of the law” or in this case, the applicable statute. By including all nine required elements on its pay stubs, Motel 6 was able to avoid not only statutory penalties, but attorney’s fees and costs. Employers should review their generic pay stubs to make sure they comply with the requirements of Section 226(a) and include all nine required elements – and nothing more, and nothing less.
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