Businesses in California don’t have keep a running tally of paid time off or vacation hours accrued on worker paychecks or wage statements, according to a new state appeals court ruling.
In Soto v. Motel 6 Operating, L.P., plaintiff alleged employer violated California Labor Code section 226, subdivision (a), by not including the monetary amount of vacation pay/ PTO on employees’ wage statements. A three-judge panel for California’s Fourth Appellate District disagreed, affirming the lower court’s ruling in favor of the company after it was sued by a former worker in 2015.
Plaintiff worked for the hotel chain for almost three years, from 2012 to 2015. A few months after she left the company, she brought a representative Private Attorney General Act of 2004 (PAGA) action for a violation of the aforementioned statute. The law says, in part, that every employer shall on a semimonthly basis at the time of payment of wages give each employee an accurate, itemized statement that shows in writing:
- Gross wages earned;
- Total hours worked (except those based on salary who are exempt from overtime);
- Number of piece-rate units earned;
- All deductions;
- Net wages earned;
- Inclusive dates of the period for which employee is paid;
- The name of employee and last four digits of his/her social security number with wage statements that set forth “all vacation and PTO wages accrued during the applicable pay period.”
Our Orange County employment lawyers understand it was that very last part on which this litigation was filed.
The company, however, argued the statute doesn’t require employers to itemize the monetary value of vacation balances before the employer-employee relationship is over. The company relied on not just the language of the statute and related statutes, but also on federal and state case law precedent.
Plaintiff countered the plain language of the statute does require an itemization of “wages” earned and that numerous state cases in California have held that a “wage” includes vacation pay. She argued that requiring companies to report vacation wages is supported by public policy that favors timely pay for work completed.
The trial court sided with the company, finding the statute doesn’t require companies to include the value of vacation or PTO in wage statements.
In its review, the Fourth Appellate District panel noted that a federal district court five years ago rejected an argument identical to the one plaintiff makes here. The court ruled that neither the statutory language nor its purpose supports this premise.
The court reasoned that vacation pay is not a form of accrued wages, but rather a form of deferred wages for services rendered, similar to a retirement benefit. That is, an employee must be paid a pro rata share of his or her unused vacation time at the end of his or her employment, but it’s not something workers are receiving each pay period.
Employee argued that this conclusion serves to keep employees in the dark about whether their PTO and vacation time is accurately credited. While it’s true the law was passed to make sure paid wages are documented so workers are informed and not shortchanged, there is nothing in the statute that indicates the purpose is to disclose all elements of the employer/ employee relationship.
Contact the employment attorneys at Nassiri Law Group, practicing in Orange County, Riverside and Los Angeles. Call 949.375.4734.
Soto v. Motel 6 Operating, L.P., Oct. 20, 2016, California Court of Appeal, Fourth Appellate District, Division One
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