As it does with almost every other aspect of employment law, California has unique requirements for payroll recordkeeping. Unlike the Fair Labor Standards Act and the requirements in almost all other states, California’s provision for the imposition of civil penalties can dwarf any statutory damages that might result from violations of the state’s recordkeeping requirements.
These actions can be brought both by the state labor commissioner and by private parties acting as private attorneys general on the behalf of the state. Recent decisions of state and federal courts regarding the application of these civil penalty statutes to all sections of the Industrial Welfare Commission wage orders have further encouraged the plaintiffs’ bar to actively seek out and file class and representative actions for what can only be described as simple, non-injurious “hyper-technical” recordkeeping violations.
Applicable penalties can be as much as $100 per employee per pay period for the total number of workers employed for up to one year prior to the filing of any civil action.
It is, therefore, possible that an employer with only 200 weekly paid California employees could be presented with a representative action brought by a single “aggrieved” employee, for civil penalties of more than $1 million for not maintaining payroll records containing all required information during the prior year.
What is required by California law?
The California Labor Code and the Industrial Welfare Commission wage orders each have their own mandatory payroll recordkeeping requirements. Together they require that all employers maintain the following information:
- The name, home address, occupation and social security number of every employee and the birth date of all employed minors under 18 years of age
- All deductions made from wage payments
- Time records showing when all non-exempt employees begin and end each work period, all meal periods (except meal periods during which the operations cease), split shift intervals and total daily hours worked
- Total wages paid to each employee each payroll period, including the value of board, lodging or other compensation actually furnished to the employee
- Total hours worked in the payroll period by non-exempt employees and the applicable rates of pay
- All piece-rates and the applicable number of piece-rate units paid for at each rate
- An explanation of any applicable incentive plan formulas
All of the above required records must be kept at a central location in California or at the plants or establishments at which the employees are employed in the state. All individually-related records also must be made available to each employee for inspection upon reasonable request.
For how long must records be maintained?
While there are various specific retention times contained in the Labor Code and Wage Orders, all payroll records should be maintained for at least four years in California.
This is because the California courts have found lawsuits seeking back pay are subject to the unfair competition provisions of the California Business and Professions Code, which has a four-year statute of limitations.
What steps should employers take?
- Audit payroll procedures regularly to make certain all required information is collected and maintained in a manner that allows it to be easily selected and put into a printed or electronic output format that meets the production requirements for inspection by both enforcement agencies and individual employees upon proper demand.
- Ensure that copies of all required information are maintained in at least one location in California in either printed form or on a dedicated server.
- Maintain all required information for at least four years.