Poll in-house counsel about the things that keep them up at night. The contents of a wage statement (commonly known as a “pay stub”) would be way down that list. After all, the federal Fair Labor Standards Act (FLSA) and Florida state law do not require any specific information on employee pay stubs. Logic suggests that sleepless nights would be better spent cleaning out that e-mail Inbox.
I strongly advocate otherwise because a pay stub can lead to wage “theft”/wage and hour litigation, or stop it in its tracks.
Florida has no law regulating pay stubs. However, every pay stub tells a story. Was the employee paid hourly, a salary, by commission or piece rate? Was vacation time paid? Was the employee sick? How many hours did the employee work each week? These are just a few questions a paycheck may answer or obscure.
For example, if an employee is classified as exempt and receives a salary, it is best that his or her pay stub make no reference to hours worked (let alone 40 hours!). Why? Because exempt employees are not paid on an hourly basis. Labels are also important. A pay stub with a line item labeled “gratuities” is vague. Is a “gratuity” a tip or a service charge? Who knows?! As such, it is prudent to use proper labeling. The distinction between a tip and a service charge is important, because each has deeper implications pertaining to its proper tax treatment. A true service charge cannot be counted as a tip to justify the taking of a tip credit against the employee’s minimum wage. The distribution of a service charge can also lead to a higher overtime rate of pay or permit an employee to be classified as “exempt” if he or she meets all of the requirements of Section 7(i).
Even in a jurisdiction like Florida, pay stubs still call for a certain degree of scrutiny. It becomes more difficult to defend a wage and hour claim when the contents of the pay stub are inconsistent with the employee’s classification, and manner in which he or she was actually paid. Whether an organization runs payroll internally or through an outside vendor, payroll software is generally customizable to properly reflect actual payroll practices.
Many Florida businesses also have operations in other states. It is not uncommon for a central payroll department to run payroll for all of its business operations, using the same format for all states in which it does business. Employers take heed! Be sure to check the laws of every state in which you have operations, to ensure your pay stubs are legally compliant in every state. Among those states with the most stringent pay stub requirements are . . . you guessed it, New York and California.
Here is a taste for New York employers:
In New York, an employer is required to provide its employees a statement (pay stub) with every payment of wages, listing the following:
- dates of work covered;
- name, address and telephone number of the employer;
- name of the employee;
- rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission, or other basis;
- gross wages;
- allowances, if any, claimed as part of the minimum wage (such as for tips, meals or lodging); and
- net wages.
In addition, for non-exempt employees, the pay stub must include:
- the regular rate or rates of pay;
- the overtime rate or rates of pay;
- the number of regular hours worked; and
- the number of overtime hours worked.
For all employees paid a piece rate, the statement must include the applicable piece rate or rates of pay, and the number of pieces completed at each piece rate. New York law also imposes additional requirements for certain industries or groups of employees, such as railroad corporations.
Upon the request of an employee, a New York employer is required to provide an explanation in writing of how the employee’s wages were calculated. Furthermore, New York employers must maintain payroll records for six (6) years.
California has a similar set of requirements for pay stubs, and also adds:
- the address of the employee; and
- only the last four digits of the employee’s social security number, or an employee identification number that is not his or her social security number.
The California statute specifies that the name and address of the listed employer must be that of the legal entity that is the employer. California law has additional requirements for farm labor contractors, and temporary services employers. The foregoing information must be provided to employees at least semi-monthly, or with every payment of wages.
A copy of each pay stub must be kept on file by the employer for at least three (3) years, either at the place of employment, or at a central location within the State of California. For these purposes, it is sufficient to retain duplicates of the pay stubs, or a computer-generated record that accurately shows all of the required information.
There are often statutory penalties associated with an employer’s failure to provide legally compliant pay stubs, which vary from state to state.
Even employers in states with no legal guidelines on pay stubs would be well served to consider including the types of information required in New York and/or California, to aid in the defense of garden variety wage and hour lawsuits. Be sure to consult local counsel regarding the compliance requirements in your state, as well as applicable record retention periods and penalties for violations.