Takeaway: An employer did not violate California’s wage statement statute by failing to provide a wage rate or hours worked for a true-up of overtime pay for the preceding month’s work based on the flat rate bonus paid that month. The law requires wage statements to provide hours worked and wage rates for the current pay period only.
?Section 226 of the California Labor Code requires employee wage statements to include all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee.
An employer did not violate Section 226 by failing to state a wage rate or hours worked for a true-up of overtime pay for the preceding month’s work based on the flat rate bonus paid that month, a California appeals court ruled. The law requires wage statements to provide hours worked and wage rates for the current pay period, not rates or hours for prior pay periods, the court said.
The employer is a telecommunications corporation providing voice, video, data, Internet and professional services to businesses, consumers and government agencies. It has branches around the world, including in California. The employee worked for the employer as a premises technician from January 2014 until October 2015. The employee’s duties included installing and repairing the company’s products.
The employee sued the employer for many violations of the California Labor Code, including a claim that the employer failed to furnish accurate and complete wage statements. The trial court dismissed this claim before trial, and the employee appealed.
Proper Construction of Wage Statement Statute
The reviewing court noted that its role on appeal was to determine what the state legislature had intended in passing the wage statement law. A court must determine legislative intent first by looking at the words of the statute, the appellate court said. When a statutory term is not defined, it can be assumed that the legislature was referring to the conventional definition of that term, and a court must give the words in a statute their plain and commonsense meaning.
For regular pay and regular overtime, the wage statements listed the “rate” and “hours” for that pay period, as required by state law. The employer, however, also included a lump sum on certain wage statements titled “OVERTIME TRUE-UP PMT.” For the overtime true-up, the employer left the “rate” and “hour” columns blank. This was the entry that the employee challenged.
The overtime true-up—additional overtime wages owed based on performance bonuses earned in earlier periods—was calculated using a complex formula involving bonus amounts and hours from prior pay periods. Pursuant to the company’s incentive program, each month employees earned points that could be exchanged for merchandise based on the achievement of specified metrics. The employer assigned the points a cash value for tax purposes. It generally listed these monetary amounts on the first wage statement of the month after the employee earned them.
The employer was required by law to include the value of the points, which was a form of bonus, in the regular rate pay for the purposes of calculating the employee’s overtime pay. Because employees earned the bonus over the course of an entire month and the bonus amount was not known until the close of that month, there was no way to determine the overtime owed in relation to that bonus on a pay period by pay period basis. Instead, the employer calculated the additional overtime owed—the overtime true-up—after the close of the month and generally reflected it in the next month’s first wage statement.
The trial court found that the employer’s wage statements complied with statutory requirements, ruling that an employer must identify only the hourly rate in effect during the pay period for which the employee was currently being paid and the corresponding hours worked.
The appeals court noted that the statutory interpretation issue was straightforward: Did the requirement to list on the wage statement “hourly rates in effect during the pay period” and the “corresponding number of hours” worked at such rates encompass a requirement that the employer list the rates and hours from prior pay periods underlying an overtime true-up calculation?
The appeals court agreed with the trial court that the statute contained no such requirement.
Section 226 is explicit that it requires a list of hourly rates during the pay period. The appeals court refused to read into the statute a requirement that an employer include hours and rates from prior pay periods when the legislature omitted such a requirement.
Adding requirements for wage statements was especially unwarranted here, the court said, when payment was not a simple matter of multiplying a pre-determined rate by overtime hours, but an after-the-fact calculation based in significant part on the amount of bonus the employee happened to earn the prior month.
The court affirmed the trial court’s order dismissing the wage statement claim before trial.
Meza v. Pacific Bell Telephone Co., Calif. Ct. App., No. B317119 (June 17, 2022).
Joanne Deschenaux, J.D., is a freelance writer in Annapolis, Md.