Paycheck Stub Review2019-04-11T13:42:06-07:00

Paycheck Stub Review

Nine Pieces of Information Your California Pay Stubs Must Have
Pay stubs (also called “wage statements”) are a common target of wage and hour lawsuits. If they are deficient, the proof is directly on the face of the documents. Plaintiffs suing in a class or representative action could subject your company to steep penalties.

Nine Pieces of Information Your California Pay Stubs Must Have

Pay stubs (also called “wage statements”) are a common target of wage and hour lawsuits. If they are deficient, the proof is directly on the face of the documents. Plaintiffs suing in a class or representative action could subject your company to steep penalties.

Our employment law experts can review your company’s pay stubs and make sure they comply with the California Labor Code.  Under Section 226.2, nine items must be on every pay stub:

1. Gross Wages Earned During the Pay Period

This is a basic item, but you cannot leave it out.  Employee pay stubs must list total gross wages earned during each pay period. It does not matter if the employee could calculate the gross wages from the rest of the information provided on the pay stub. There must be a separate line item titled “Gross Wages” with the correct amount.  

2. Total Hours Worked During the Pay Period

Your company must also be sure to list the total hours worked on employees’ pay stubs. Even if your pay stubs break down the number of regular and overtime hours worked (see # 9 below),  they still must include a line item for the total hours worked during the pay period.

3. Number of Piece-Rate Units Earned and Piece-Rates, If Any

If your business pays a piece rate to any employees, you must include on the wage statement the piece rate units earned, and the piece rates, for each pay period.  Examples of piece rate work include: furniture assemblers paid for each piece of furniture built, pet groomers paid by the number of animals served, and auto mechanics paid by the number of cars repaired.

Paycheck stub review

We can also help you determine if you are paying the correct amount of wages to your piece-rate employees. Piece rate pay is governed by California Labor Code section 226.2. Under this law, you may pay employees by the “piece.”  And if you pay a different rate for a different type of piece, the pay stub must list the rate for each piece and the number of units earned for each.

So, an auto shop that pays mechanics $150 per brake job and $50 per oil change would need to list those rates on the pay stub along with how many brake jobs and how many oil changes the employee performed during that pay period.

In addition, you must still keep track of the total hours your employees work, because:

  • You must pay at least minimum wage for all the time your employees spend not working at a piece rate.  So, for example, if you employ a mechanic who has no cars to work on for two hours, you must still pay him at least minimum wage for those two hours.
  • Your employees must still be paid overtime if they work enough hours to be entitled to overtime. (In most industries, overtime is due after 8 hours of work in a day or 40 hours a week.)
  • Piece-rate workers are entitled to paid 10-minute rest periods, just like hourly-paid employees. You are required to pay the greater of either: (1) minimum wage, or (2) an average hourly rate calculated based on total piece-rate compensation for the week divided by hours worked.

Although this may seem complex, we can assist you to make sure you are paying your piece-rate workers correctly, and listing their pay correctly on their pay stubs.

4. All Deductions from Wages

Any money your company deducts from your employees’ Gross Wages must be listed on their wage statements.  This includes deductions for taxes, health care and life insurance benefits, 401Ks, and anything else.

Labor Code section 224 and the industry Wage Orders limit the kinds of deductions your company may take from your employees. Usually the employee must consent to the deduction in writing. In addition, you may not deduct the cost of uniforms, or other business expenses from your employee’s pay. So, for example, if you run a restaurant, and your employee breaks a dish, you may not deduct the cost of the dish from his or her wages.  Likewise, a cashier whose till is short may not be charged for the difference.

We can advise you regarding proper and improper deductions if you have any questions.

5. Net Wages Earned During the Pay Period

After listing Gross Wages and deductions, you must then list Net Wages as a separate line item on employee pay stubs.

6. Inclusive Dates of the Pay Period (Start and End Dates)

Wage statements must include the “inclusive” pay period dates. This means that the pay period start date and end date must be listed – not just the date the check was issued.

7. Employee’s Name and Last Four of SSN, or EID

Each wage statement must list the employee’s name, but may not list the whole Social Security number. Listing all 9 digits of employees’ SSNs can expose them to identity theft and other personal security breaches.  Instead, use a unique employee ID for each employee or – if this is not possible – make sure only the last 4 digits of the SSN are on the employee’s pay stub.

8. Full Name and Address of Legal Entity of Employer

This is a very important requirement that many employers get wrong. Each wage statement must contain the full legal name and a physical address of the employer.  So, if the registered name of your corporation is different from the name on the sign of your storefront, the registered legal name is the one that you must include on the wage statement.  Also, a P.O. Box is insufficient. You must list the physical address of your company’s principal place of business. Failure to do this can lead to significant penalties.

9. All Applicable Hourly Rates During the Pay Period and Amounts Paid at Each Hourly Rate

The final requirement leaves the most room for error as miscalculations can invite lawsuits. Each applicable hourly rate – and each piece rate – has to be listed separately.  The regular hourly rate, any overtime rate, double time rate, or holiday pay rate must be separately listed, next to the number of hours each employee worked at that rate. In addition, if you paid any bonuses during a given pay period, any overtime or premiums paid during the same pay period must be calculated somewhat differently.  The “regular rate” of pay for overtime in that pay period is 1.5 x the hourly rate plus a percentage of the bonus pay.

California’s wage statement requirements are extensive.  However, our experienced employment attorneys can review your company’s statements and advise you on any changes needed to comply with the laws.

Regardless of whether you are just starting a brand new company, run a ‘mom & pop’ business, or you already have a large established corporate enterprise with hundreds of locations across California, we are able to grow with you and meet your legal needs.

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