More and more employers are moving to electronic on-boarding to minimize the expenses and reliability issues in relying on paper.  Employers are also moving toward issuing wage statements electronically to employees.  Unfortunately, there is very little regulatory guidance as to the requirements that employers must meet when issuing electronic wage statements.  Indeed, the Labor Code section that pertains to the information required to be placed on wage statements, Labor Code section 226, is completely silent in regards to whether employer can issue the statements electronically and only sets out that employers must provide employees a wage statement as “a detachable part of the check, draft, or voucher paying the employee’s wages.” I’ve written previously about what information is required to be listed on the pay stub.  This Friday’s Five includes five requirements, plus a “bonus” sixth requirement (I knew keeping these articles limited to five items in California would be a continual battle).

California’s Division of Labor Standards Enforcement (DLSE) has issued an opinion letter on the issue to provide some guidance (but employer must understand that the DLSE’s opinion is not binding legal authority, so caution must be used when relying on the DLSE’s opinion letters).

In the opinion letter authorizing electronic distribution of wage statements, the DLSE provides:

The Division in recent years has sought to harmonize the “detachable part of the check” provision and the “accurate itemized statement in writing” provision of Labor Code section 226(a) by allowing for electronic wage statements so long as each employee retains the right to elect to receive a written paper stub or record and that those who are provided with electronic wage statements retain the ability to easily access the information and convert the electronic statements into hard copies at no expense to the employee.

The DLSE approved electronic wage statements as long as the employer incorporated the following features:

  1. An employee may elect to receive paper wage statements at any time;
  2. The wage statements will contain all information required under Labor Code section 226(a) and will be available on a secure website no later than pay day;
  3. Access to the website will be controlled by unique employee identification numbers and confidential personal identification numbers (PINs). The website will be protected by a firewall and is expected to be  available at all times with the exception of downtime caused by system errors or maintenance requirements;
  4. Employees will be able to access their records through their own personal computers or by company provided computers. Computer terminals will be available to all employees for accessing these records at work.
  5. Employees will be able to print copies of their electronic wage statements at work on printers that are in close proximity to the computer or computer terminal. There will be no charge to the employee for accessing their records or printing them out. Employees may also access their records over the internet and save it electronically and/or print it on their own printer.
  6. Wage statements will be maintained electronically for at least three years and will continue to be available to active employees for that entire time. Former employees will be provided paper copies at no charge upon request.

As for the sixth point above, employers need to understand that the statute of limitations for many wage and hour class actions in California can extend back to four years under Business and Professions Code section 17200, and therefore should consider keeping wage statements and other documentation required to defend against claims going back the previous four years.

Also, employers should note that California passed a law in October 2015 providing employers to cure certain wage statement violations and minimize penalties if they take certain steps to fix the problem and inform the impacted employees within a very short period of time.