The California Court of Appeal has held that: (1) the use of payroll service provider generated unique employee file numbers on employee wage statements, in lieu of the employer’s internal employee identification number or last four digits of employee social security numbers, is legally permissible under California law; and (2) employers are not required to state applicable hourly rates for payments of accrued paid time off or vacation on exempt employee wage statements. Blaire v. Dole Food Co., No. B263695, 2017 Wage & Hour Cas.2d (BNA) 46,633 (Cal. Ct. App. Feb. 15, 2017) (unpublished).
Pursuant to California Labor Code section 226(a)(7), employee wage statements must state either “only the last four digits of [the employee’s] social security number or an employee identification number other than a social security number.” In Blaire, the employer utilized a payroll servicing company to issue employee wage statements. The payroll servicing company generated its own unique employee “file” number for payroll purposes, and placed these “file” numbers on employee wage statements, in lieu of the last four digits of employees’ social security numbers or the employer’s internal employee ID numbers.
The court found the unique employee “file” numbers generated and placed on employee wage statements by the payroll servicing company qualified as a unique “employee identification number” required by Labor Code section 226(a)(7). The court held Labor Code section 226 does not require that employers use employer-generated internal employee identification numbers assigned upon hire rather than an “equally unique personal ID number simultaneously created for tax and payroll purposes.” The court explained, “Nothing in section 226, subdivision (a)(7) prohibits an employer’s use of a unique personal ID or file number, so long as the number chosen consistently appears on the employee’s wage statement. The label attached to the number is not material.”
Additionally, the court found that Labor Code section 226(a)(9), which requires employee wages statements state “all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee,” does not apply to payments of accrued paid time off to exempt employees. The court first noted that vacation or paid time off does not constitute “hours worked.” Then it reiterated that Labor Code section 226(a)(2) does not require employers to list the hours worked and the applicable hourly rate for exempt salaried employees. Section 226(a)(2) provides that employers must state employees’ “total hours worked…, except for any employee whose compensation is based on a salary and who is exempt from paying overtime.” The court found that if “the number of hours worked need not be itemized on an exempt employee’s wage statement, there is no ‘applicable hourly rate’ for an employer to furnish.” Accordingly, the court held that employers are not required to provide an hourly rate for payment of paid time off or vacation to salaried exempt employees.
While this decision is favorable to employers, it is another reminder that employers need to ensure that their paystubs comply with all requirements of the Labor Code, as these types of paystub lawsuits appear to be on the rise.