Double Check the Math: Courts Clarify What Employers Must Include on Wage Statements

July 26, 2021 by Sarah Kanbar

The California Labor Code requires employers when issuing employee paychecks to include itemized wage statements with detailed information about how the wages were calculated, as well as a listing of the hours worked at each applicable hourly rate. Failure to comply with this law can result in employer penalties. Two courts recently issued decisions clarifying the type of information that need and need not be included in wage statements.

In General Atomics v. Superior Court, a California Court of Appeal held that an employer did not violate the Labor Code by listing overtime as “0.5 times the regular rate of pay,” as opposed to one and a half times the regular rate of pay, which is the federal and state pay requirement for overtime. In that case, the employees’ wage statements listed overtime hours twice. In one column, the wage statement listed the total hours an employee worked and the amount paid at the standard rate of pay. In a separate column, the employer listed how many of those total hours were overtime, at “0.5 times the regular rate of pay.”

The Court found that wage statements accurately listed the hours that the plaintiff worked and the pay rate received for those hours. Thus, employers can use different formats to list overtime compensation, even if it requires employees to do basic math to check if overtime was being paid at time and a half.

In Magadia v. Wal-Mart Associates, Inc., the Ninth Circuit held that Wal-Mart did not violate California law when it did not list a wage rate for an overtime adjustment on an employee’s wage statement. Wal-Mart pays a quarterly performance bonus to employees. When a bonus is part of the employees’ regular rate of pay, it must also be included in the calculation of the overtime rate. Wal-Mart does this by retroactively calculating the difference between the employees’ overtime pay already paid versus the overtime they are due in the quarter with the bonus calculated into the overtime rate. Wal-Mart pays the difference as an overtime adjustment once a quarter. It does not however list a wage rate for the adjustment on the wage statement.

The Court concluded that Wal-Mart was not required to list a separate wage rate for the bonus adjustment, reasoning that the overtime adjustment was not an hourly rate of pay that was required to be listed on the wage statement.

While these two cases are fairly employer-friendly decisions, they both highlight the importance of ensuring employees’ wage statements are accurate and include all required information regarding pay rates and hours.

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