Khan v. Dunn-Edwards Corporation

Plaintiffs’ attorneys in California love making claims based on technical violations related to paystubs.  An employee will go see a lawyer complaining about wrongful termination or harassment or discrimination and the lawyer will say, “Let me see your paystub.”  Labor Code Section 226 lists at least 9 items that an employer must include on employees’ paystubs.  Even omitting one item (e.g., pay period dates on a “final” paycheck) can expose employers to extensive liability depending on the nature of the oversight, the number of affected employees, and how often the improper paystubs were issued.  Under the Private Attorneys General Act (“PAGA”) a single employee can bring a lawsuit on behalf of all affected employees, also known as “aggrieved employees,” regardless of whether those employees want to be included, and without having to go through the rigorous requirements of class certification.  [We told you about this in a 2009 California employment law newsletter,]

Up close of wage statementEmployees (or rather, the class action attorneys that bring these cases) do not have to prove that anybody was injured by the omission on the paystub because the code section provides an automatic penalty per paycheck in place of requiring employees to prove actual damages (which are typically non-existent).  Because employers have virtually no defense to these paystub cases, they are generally referred to as “gotcha” claims.

Recently a California Court of Appeal handed PAGA attorneys a “gotcha” of their own.  In Khan v. Dunn-Edwards Corporation, the appellate court upheld summary judgment dismissing Plaintiff Khan’s PAGA claims because he failed to comply with required administrative procedures.  Though Plaintiff’s regular paychecks appeared to be in order, his final paycheck failed to list the start date of the pay period.  On the basis of that single oversight on a single check, Khan and his attorneys filed their lawsuit seeking to recover penalties on behalf of a group of employees who may have received a similar final paycheck.  Khan’s notice and exhaustion letter to California’s Labor and Workforce Development Agency, however, was peppered with references to violations of his rights, and nowhere referenced any other employee other than himself.  The Court was not impressed.  It held that Khan’s use of the word “my” instead of “we,” or any other language indicating that he was seeking to claim penalties on behalf of anyone but himself, constituted a failure to give proper notice to the individuals involved, and a failure to comply with administrative requirements.  Thus, the Court upheld summary judgment in favor of the employer, and dismissed Khan’s PAGA claim.

If you are in the unfortunate position of having to defend yourself (or a client) against a PAGA action, make sure you take a very close look at the employee’s letter to the Labor Workforce and Development Agency to make sure the employee has followed every technical requirement of the law in giving notice to the employer and the Agency.  You might find a technical shortcoming in the letter on which to defend your client.  Or better yet, make sure that your employees’ paystubs contain the required information in advance.