Labor Code 226(a) Paystub Requirement Clarified as to Vacations

In a rare employer-friendly ruling, the Fourth District of the Court of Appeal clarified that Labor Code Sec. 226(a) does not require employers to include the monetary value of accrued paid vacation time in employee wage statements unless and until a payment is due at the termination of the employment relationship.  Soto had sued Motel 6 alleging that it violated the pay stub requirement of section 226(a) by failing to provide its California nonexempt employees with wage statements setting forth “all vacation and PTO (paid time off) wages accrued during the applicable pay period.”  In other words, the pay stubs did not state the cash value of the accrued vacation and PTO.

In affirming the trial court’s grant of demurrer, the Court of Appeal held that “Because the amount of unused vacation and an employee’s final rate may change, an employee’s accrued vacation balance depends on the particular circumstances at the employment termination date.”  Moreover, “Because unused vacation pay is not owed to an employee and is not paid to the employee until the termination of the relationship, and the monetary value of the unused vacation pay cannot be determined until the termination date, the requirement that an employer identify earned ‘wages’ logically does not extend to accrued vacation benefits.”  Thus, Motel 6 was not required to itemize the value of vacation/PTO on each pay stub.

Soto v. Motel 6 Operating, L.P., 2016 S.O.S. 5209 (Cal. Ct. App. 4th Dist. Oct. 20, 2016),