On May 6, 2024, the California Supreme Court, in Naranjo v. Spectrum Security Services Inc. clarified that an employer is not liable for statutory penalties for inaccurate wage statements when it had a good faith and reasonable belief that the issued statements were accurate. The court’s holding offers employers a mechanism to avoid penalties reserved for a “knowing and intentional” failure to report accurate wage statements in California wage and hour class actions.

What Are Employers’ Duties? Cal. Labor Code Section 226 requires employers to issue earnings statements to employees that include, among other items, the legal name of the employer, the pay period, gross and net wages earned, all applicable hourly rates, and the corresponding number of hours (full list here). Employees (most often on a class basis) can seek hefty statutory penalties if an employer “knowingly and intentionally” failed to issue accurately recorded pay statements.