74 Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) Seyfarth Shaw LLP | www.seyfarth.com E. Accrued Vacation Time Need Not Be Recorded California courts have rejected plaintiffs’ attempts to expand the scope of Section 226 to apply to accrued vacation time. In Soto v. Motel 6 Operating, L.P., the Court of Appeal held that employers need not list accrued vacation on wage statements.362 Although under California law, vacation time vests as labor is provided, the court noted that vacation becomes a quantifiable wage only upon termination of the employment relationship. In other words, vacation time does not constitute a wage when it vests; it constitutes a wage only when the employment relationship ends and the employer must calculate the value of any unused vacation time it will pay it to the employee. Thus, Soto held that employers need not list accrued vacation time on each statement. Similarly, in Apodaca v. Costco, the Ninth Circuit held that employers need not list the current hourly rate employees would receive for accrued vacation time on each wage statement.363 In Apodaca, the wage statements recorded accrued vacation time, but not the current hourly rate associated with it. Plaintiff argued that this violated Section 226’s requirement that wage statements list all applicable hourly rates in effect during a pay period. The Ninth Circuit soundly rejected this argument, holding that Section 226 did not require employers to list accrued vacation time in wage statements at all. Thus, Apodaca reasoned, there was no requirement that employers also list the applicable hourly rate.364 F. Wage Statement Penalties The primary remedy for violations of Labor Code section 226(a) is a penalty set forth in Section 226(e). Section 226(e) provides that when an employer “knowingly and intentionally” violates Section 226(a), any employee “suffering injury” may sue and collect actual damages or a penalty of $50 or $100 (for repeat offenders), whichever is greater, up to a maximum of $4,000 per employee.365 Under PAGA, aggrieved employees may attempt to recover the civil penalties set forth in Labor Code section 226.3 of $250 per employee per violation for an initial citation, and $1,000 per employee for each violation in a further citation, but arguably that is only for a failure to provide a wage statement altogether, rather than an inaccurate wage statement.366 362 Soto v. Motel 6 Operating, L.P., 4 Cal. App. 5th 385, 391 (2016). 363 Apodaca v. Costco Wholesale Corp., 675 Fed. App’x 663, 665 (9th Cir. Jan. 10, 2017). 364 Id. 365 Lab. Code § 226(e); as with other Labor Code penalty provisions, the limitations period is one year. 366 Raines v. Coastal Pac. Food Distributors, Inc., 23 Cal. App. 5th 667, 680 (2018). But see Gunther v. Alaska Airlines, Inc., 72 Cal. App. 5th 334, 287 Cal. Rptr. 3d 229, 247 (2021) (“the heightened penalties under section 226.3 apply only where the employer either fails to provide a wage statement or fails to keep required records as required by section 226(a)”); Harvey v. Morgan Stanley Smith Barney LLC, No. 18-CV-02835-WHO, 2020 WL 1031801, at *18 (N.D. Cal. Mar. 3, 2020) (“The heightened penalty under section 226.3 is triggered only where the employer failed to provide any wage statements or to keep records at all, rather than fail to provide a compliant wage statement.”); Finder v. Leprino Foods Co., 2016 WL 3774269, at *5 (E.D. Cal. Jan. 8, 2016) (granting motion to dismiss with prejudice; “While Section 226(a) requires that employers provide an accurate wage statement, Section 226.3 only mandates a penalty for failure to provide any wage deduction statement or failure to keep records.”). Note that there is no cap per individual as to the civil penalties recoverable under Section 226.3.
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