Governor Acts to Limit Litigation, Maintain Fiscal Prudence

 

A California Chamber of Commerce-supported job creator bill that will help limit frivolous, costly litigation against employers was signed by the governor this month. The governor’s continued attention to fiscal prudence led to vetoes of two job creator bills that contained tax credits and a third job creator bill whose purpose the governor said could be achieved by other means less burdensome to the state.

Signed by Gov. Edmund G. Brown Jr. on Oct. 2 was AB 1506 (R. Hernández; D West Covina), which provides employers with a limited opportunity to cure technical violations in an itemized wage statement before being subject to costly and devastating litigation.

The bill received unanimous support in both houses as it moved through the Legislature. By allowing the employer a limited time period to fix technical violations on an itemized wage statement that does not create any injury to an employee before any civil litigation is pursued, AB 1506 will enable an employer to devote its financial resources to expanding its workforce.

AB 1506 contains an urgency clause and thus went into effect immediately upon being signed.

The Labor Code Private Attorneys General Act (PAGA) allows an employee to file a "representative action" against an employer for any violation of the Labor Code and subjects an employer to statutory penalties ranging from $100 per employee per pay period to $200 per employee per pay period, as well as attorney fees.

Labor Code Section 226 sets forth the categories of information that must be included in an itemized wage statement. The section is one area in which employers have seen an increase in frivolous litigation regarding technical violations that do not harm or injure the employee.

AB 1506 will help curb this type of frivolous litigation under PAGA with regard to only two parts of Labor Code Section 226—226(a)(6) and 226(a)(8) by allowing an employer 33 days to cure any alleged technical violation.

If the employer cannot cure the violation, then the employee still would be able to file a civil action and obtain any unpaid wages, penalties and attorney fees. This reform will provide the appropriate balance of allowing an employer to correct unintentional errors without the threat of a multimillion-dollar lawsuit that could put the employer out of business, while still protecting the employee’s ability to obtain accurate information.