Complying with California law on wage statements can be tricky for employers. Pursuant to Labor Code Section 226(a)(8), wage statements must identify the employer's legal name. An employer can comply with this requirement by listing either the legal entity name or a registered fictitious business name (dba) on the wage statement. Failing to do so can expose employers to extensive liability on a class-wide basis through a class action or Private Attorney General Act (PAGA) representative action, thereby leading to potential statutory damages, attorneys' fees, and injunctive relief. And because a violation can easily be determined from an employee's wage statement, employers will struggle to avoid liability once a violation is found.
The Case Law
For years, there has been much litigation regarding whether an employer may use a fictitious business name as the employer name on wage statements. In April 2019, the California Court of Appeal issued a decision in Savea v. YRC, Inc. (2019) 34 Cal.App.5th 173, holding that the use of a registered fictitious name in a wage statement did not create a wage statement violation.
Additionally, in December 2019, the Court of Appeal issued another decision in Noori v. Countrywide Payroll & HR Solutions, Inc. (2019) 43 Cal.App.5th 957, holding that an employer violated Labor Code Section 226 by providing wage statements bearing the acronym "CSSG," which stood for "Countrywide Staffing Solutions Group." This name served as Countrywide's fictitious business name, but was not listed with the California Secretary of State.
The court determined that while minor truncations of an employer's name or the use of fictitious business names were permissible, severe truncations or alterations that could potentially cause confusion to employees violated the statute. The court also held that it was not sufficient that the employer's legal name or a registered fictitious business name appeared on the checks physically attached to the wage statements. The employer's legal name or a registered fictitious business name must also be on the wage statements. For a more detailed discussion of the Noori case, see our legal alert from February 2020.
Takeaway
Based on this case law, the best practice for employers is to
use either the legal entity name or a registered fictitious
business name. Any employer that currently uses an acronym or an
unregistered fictitious business name should promptly take steps to
bring itself into compliance with Labor Code Section 226(a)(8). By
doing so, employers can reduce their liability in PAGA
representative actions, which have a one-year statute of
limitations, as well as in class actions, which may have a statute
of limitations of up to four years. Even if an employer were to be
sued and was deemed to have violated Labor Code Section 226, courts
would consider how promptly it rectified the error in awarding
statutory penalties under PAGA.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
