Paga is a city in Ghana, well-known for its crocodile pools.  PAGA, California’s Private Attorneys General Act of 2004, allows employees to sue their employers on behalf of themselves and other “aggrieved” employees to recover penalties for Labor Code violations.  What do the two, other than a shared moniker, have in common?  Run afoul of either and you’re bound to get bit.

Imagine a company that unknowingly pays its employees bi-weekly and 10 days after the close of a pay period.  Strictly speaking, that practice would be is a violation of Labor Code section 204, which requires payment within seven days after a pay period ended.  The hyper-technical violation is fixed promptly once the company learns of it.  No employees complain; no employees were financially harmed in any way; and nothing suggests the company profited from the mistake. 

No harm, no foul, right?  Wrong.  The company is potentially on the hook for millions of dollars in PAGA penalties. 

Employees’ attorneys try to conflate the penalties to extract the maximum amount of penalties from the seemingly innocuous mistake described above.  The way they do it is by misreading the statutory language of Labor Code section 210, which prescribes the penalties for a violation of section 204.  The law allows for $100 for each failure to pay each employee for “any initial violation” and $200 for each failure to pay each employee, plus 25% of the amount wrongfully withheld, for “each subsequent violation.”  Lab. Code § 210(a)(1)&(2).  

One of the primary reasons for this situation is an unfortunately superficial 2008 decision that said an initial violation is incurred for each pay period within the one-year statute of limitations up until the time actual notice of the violation was given to the employer.  Buoyed by this decision, employees’ attorneys have pushed for aggregation of multiple “initial violations” dating back to the start of the statute of limitations.  This math results in millions of dollars in theoretical penalties in connection with the relatively harmless scenario described above.

The good news: there are strong arguments that the statutory language allows for just a single initial violation.

Nothing in Labor Code section 210 says that an initial violation arises from each pay period.  This omission is significant, particularly in light of other statutory language.The California Legislature is careful to specify when an initial violation is to be paid for “each pay period” (see Labor Code sections 752, 558, 1197, and 2699), so the intentional omission of this language from Labor Code section 210 is proof that the Legislature did not intend for this law to be applied that way.

Also, Section 210 imposes a penalty for violations of eight specific sections of the Labor Code, including section 204.  That means there can be eight separate Labor Code violations to trigger Section 210 penalties.  That is eight ways to have an initial violation, one for each enumerated code provision.  The statute does not allow for aggregate penalties for the same violation.  Instead, it allows eight ways to fail, and a penalty for “each failure.”  This analysis is missing from the 2008 decision and is a critical shortcoming of the opinion. 

There are also specific terminology differences between the initial violation statute and the subsequent violation statute that compel the conclusion that there is only a single initial violation, resulting in a single payment of $100 to each aggrieved employee.  In the former, the term “any initial violation” is used, indicating a single event.  By comparison, repeated violations are contemplated for “each subsequent violation.”  If the Legislature wanted to aggregate multiple initial violations, then it would have said so, using “each” as it did for subsequent violations.

Workplace Solutions: Don’t be alarmed by an employee’s attempt to stack penalties for multiple “initial violations” under Labor Code section 210.  There are strong arguments that the statutory language allows for only one, single initial violation.