​​​​​​​​​All paychecks must be payable in cash, on demand and without discount at some established place of business in the state, the name and address of which must appear on the paycheck. At the time the paycheck is issued and for at least 30 days after, sufficient funds or credit in the payroll account must exist for the paycheck’s payment.1

​Read ​about a recent court case.

Paying any wage with a check backed by insufficient funds is unlawful. The dishonored check constitutes evidence that you violated the law.2 Payment by means of an insufficient check can subject an employer to waiting time penalties.3 However, the Legislature did not intend absolute criminal liability for all cases of issuing paychecks with insufficient funds. In cases where insufficiency results from unforeseen or unpreventable circumstances, violation of the statute becomes excusable.4 For more information on penalties for insufficient funds for payroll, see “Insufficient Paycheck Funds” in Wage and Hour Enforcement and Penalties.

The law does not prohibit you from using an electronic transfer system, such as direct deposit, to transfer wages to a bank, savings and loan or credit union pursuant to an employee’s voluntary choice and authorization. You cannot force employees to use a direct deposit system.5

Public employers, including California and all local governments, do not fall under provisions that establish time and form of payment.6

Payroll With Pay Cards or Debit Cards

Employers have long used prepaid debit cards to issue payroll. Employees without bank accounts will find the debit cards a secure, convenient and inexpensive means of accessing payroll without opening a bank account or paying hefty check-cashing fees. For employers with international employees or vendors, the prepaid debit card can be a faster and less expensive alternative to traditional funds exchange options and can simplify the transfer of regular global payments. Finally, in some instances, you may even find prepaid debit cards a cheaper, simpler and more secure alternative to direct deposit.

Two DLSE opinion letters state that the use of payroll debit cards and money network checks does not violate the Labor Code so long as all of the following conditions are met:

  • The receipt of payment in this manner is voluntary.
  • Employees have other payroll payment options.
  • There is no fee to use this form of payment at least once per pay period at a banking institution in California.
  • The employee has immediate access to the funds.
  • The employee has specifically authorized the form of payment.

Consult with legal counsel before implementing a payroll program using pay or debit cards.7

Itemized Wage Statement

California law contains very specific requirements for the information employers must put on employees’ wage statements, also known as a paystub, and imposes financial penalties on employers who don’t follow those requirements.

At the time wages are paid, you must provide each employee an accurate, itemized written wage statement.

What is a wage statement? Labor Code Section 226 describes a wage statement as an itemized written statement provided to employees either as a “detachable part of the check, draft or voucher paying the employee’s wages” or a separate writing if the wages are paid by personal check or cash.

Wage statements must contain all the required information on their face. A wage statement is not complete if an employee must refer to another document to get the required information.

  • If you use a payroll company to prepare wage statements, you are responsible for providing your payroll company with all the information that must be contained in the wage statement.

Review wage statements for completeness and accuracy; do not assume the wage statements are accurate.

There are nine categories of information that must be included in wage statements. Additionally, there are paid sick leave requirements that must be included and requirements if you pay employees by piece-rate. The following information must be included:

  • Gross wages earned in the pay period
  • Total hours worked in the pay period (This requirement does not apply to exempt employees)
  • All deductions, including taxes, disability insurance and health and welfare payments
    • Deductions made on the employee’s written orders can be aggregated and shown as one item
  • Net wages earned in the pay period
  • The pay period’s inclusive dates (meaning the start and end of the pay period)
  • Name of the employee and last four digits of his/her Social Security number (SSN)
    • All employers can print no more than the last four digits of an employee’s Social Security number on check stubs or similar documents. They can substitute some other identifying number.
  • The full name and address of employer or legal entity that is the employer (if the employer is a farm labor contractor, the wage statement must include the name and address of the legal entity that secured the services of the employer).
  • All applicable hourly rates in effect during the pay period and the corresponding number of hours the employee worked at each hourly rate
  • The number of piece rate units earned and any applicable piece rate, if the employee is paid on a piece rate basis8
    • For more information on piece rate requirements for the itemized wage statement see ”Requirements for Piece Rates Workers” on this page
  • Temporary service employers must also include the rate of pay and the total hours worked for each temporary services assignment. Licensed security services companies are specifically excluded from this law.
  • In a recent case, an employee argued that the employer’s name and address must exactly match the information registered with the Secretary of State, but the appellate court disagreed, holding that the use of the employer’s fictitious name on the wage statements was sufficient.9 While the company was registered as “YRC Inc.,” its fictitious business name “YRC Freight” was on its wage statements.

The court noted that section 226 does not require the use of a “registered” name and that use of a fictitious business name does not create a separate legal entity. Since YRC Inc. and YRC Freight are the same legal business entity, there was no violation of section 226.

  • Though fictitious business names have been proven legally acceptable, employers should ensure that the company’s legal name appears on wage statements in order to minimize the risk of violating section 226.

As described below, additional information must also be provided on the wage statement relating to mandatory paid sick leave. Moreover, if you employ certain types of workers you will also be required to provide additional information on the wage statement.

Employees who are exempt from the payment of minimum wage and overtime under the Labor Code or the Wage Orders are not required to have their hours tracked and logged on an itemized wage statement.10

  • For a visual sample of what to include in wage statements, visit our SmartStub tool.

Wage Statement Requirements for Paid Sick Leave

California’s mandatory paid sick leave law requires employers to provide employees with a written notice that sets forth the amount of paid sick leave available for use, or paid time off leave an employer provides in lieu of sick leave. Employers can provide the information on either:11

  • The employee’s itemized wage statement;
  • A separate writing provided on the designated pay date with the employee’s payment of wages.

Employers with unlimited paid sick leave or paid time off policies can meet the payday notice requirement by indicating “unlimited” on either the itemized wage statement or the separate notice. With this type of policy, employees are not given a set number of days off but, instead, there is basically an honor system where employees can take time off whenever, and as often as, they like.

For more information see Paid Sick Leave.

Wage Statement Requirements for Piece Rate Workers

Existing law requires that the itemized wage statement given to piece rate workers must include the number of piece rate units earned and any applicable piece rate.12

Wage statements given to piece rate employees must also contain the following specific information for each payroll period:13

  • The total hours of compensable rest and recovery periods, the rate of compensation for those periods and the gross wages paid for those periods; and
  • The total hours of nonproductive time, the rate of compensation for nonproductive time and the gross wages paid for such time.
    • You are not required to put this information on the pay stub if you pay for nonproductive time by paying a base hourly rate of at least the minimum wage for all hours worked, in addition to the piece rate. For more information, see “Compensation for Nonproductive Time” on this page.

Wage Statements and Accrued Vacation or Paid Time Off

A California court of appeal ruled that employers do not have to include the monetary value of accrued paid vacation time on the itemized wage statement unless and until the accrued vacation is paid out when the employment relationship ends.

An employee sued Motel 6 under the Private Attorneys General Act, alleging that the motel failed to include the monetary value of accrued paid vacation time or paid time off (PTO) on pay stubs. Motel 6 sought to have the case dismissed before trial, arguing that the Labor Code doesn’t require an employer to itemize the monetary value of vacation balances.14

The employee argued that the pay stubs should have included vacation because vacation/PTO is considered a “wage” under California law, and employers must itemize “wages earned” on the pay stub (Lab. Code sec. 226(a)(1),(5)).

The court dismissed the employee's case and rejected the argument that vacation falls within the definition of “gross wages earned” and “net wages earned” which must be listed on the pay stub.

Under California law, vacation time is a form of “deferred wages” that is not payable until employment ends. Although the employee has vested rights to paid vacation during the time of his/her employment, the employee is not entitled to receive the monetary value of these wages until employment ends.15

In addition, the employer cannot ascertain the value of vacation time until separation. This is because “an employee is entitled to obtain the value of unused paid vacation at his or her ‘final rate.’”

Finally, the court noted that Labor Code section 226 is “highly detailed” and lists nine separate categories of information that must appear on the pay stub. Accrued paid vacation is not identified anywhere in this detailed list.

Accordingly, the court ruled that paid vacation time does not need to be included on the wage statement until employment ends.

  • When an employee separates from employment, make sure that the final pay stub includes any vacation or PTO that is paid out to the employee.​​​

​One cautionary note: This case did not address the requirement to report paid sick leave on the pay stub.

  • If you provide mandatory paid sick leave through your PTO policy, you will need to provide the PTO balance on your pay stub.

Wage Statement Requirements for Farm Labor Contractors

On the itemized payroll statement furnished to employees, employers that are farm labor contractors must disclose the name and address of all legal entities (for example, other growers or other farm labor contractors) that secured the employer’s services.16

Farm labor contractors have other legal requirements relating to notice of wages. For example, farm labor contractors must have available for inspection by employees or growers a written statement in English and Spanish showing the rate of compensation he/she receives from the grower and the rate he/she is paying to employees for services rendered to, for, or under the control of the grower.17

The statement has to be provided to a current or former employee or grower within 21 calendar days or the farm labor contractor can be subject to a $750 fine recoverable by the employee or grower.18

For more information on special rules relating to farm labor contractors visit the Department of Industrial Relations dedicated web page.

In addition, farm labor contractors, agricultural employers and agricultural associations that employ migrant or seasonal agricultural employees must include the employer’s identification number assigned by the IRS.19

Recordkeeping Requirements

A copy of the itemized wage statement and the record of deductions must be kept for at least three years at the place of employment or at a central location within the State of California. You must make these records available for employee’s inspection upon reasonable request. You must allow the employee to inspect and/or copy them.20 For more information, see Access to Payroll File.

The copy an employer must maintain can be a duplicate of the itemized statement given to the employee or a computer generated record accurately showing all information required in the itemized statement.

Penalty for Failure to Comply​

A wage statement (also known as a paystub) is more than a piece of paper. It can be the source of enforcement citations or lawsuits. If employees believe their wage statements are not accurate, they can sue you — and the number of these lawsuits has increased dramatically in recent years. In particular, employees can file class-action and representative-action lawsuits under California’s Private Attorneys General Act (PAGA) for wage statement violations.

The potential liability in these types of lawsuits can be staggering. If a wage statement violation is common to all the members of a class or representative action, the total penalties can number in the hundreds of thousands — or even millions — of dollars.

The two types of penalties for wage statement violations are:

  • Labor Code section 226.3, which imposes civil penalties on employers of $250 per employee per violation for the first violation and $1,000 per employee for each subsequent violation. If you make a clerical error or inadvertent mistake on the first violation, the Labor Commissioner has discretionary power not to penalize you.
  • Labor Code section 226(e), which allows an employee who is injured by an employer’s knowing and intentional failure to provide an itemized wage statement to recover the greater of all of the employee’s actual damages, or $50 for the initial violation and $100 for each subsequent violation, not to exceed an aggregate penalty of $4,000.

Labor Code section 226​(e) allows an employee "suffering injury" by an employer’s "knowing and intentional failure" to provide the itemized wage statement information to recover all actual damages or up to $50 for the initial pay period in which a violation occurs and $100 per employee for each violation in a subsequent pay period, up to a total of $4,000, plus costs and reasonable attorneys’ fees.

An employee "suffers an injury" with regard to employer-provided wage statements under the following two circumstances:21

  • When the employer fails to provide a wage statement at all to the employee.
  • When the employer (1) fails to provide accurate and complete information on the wage statement; and (2) the employee cannot “promptly and easily determine” the following information from the wage statement alone:
    • ​The amount of the gross wages or net wages paid to the employee during the pay period or any of the other information required to be provided on the itemized wage statement.
    • Which deductions the employer made from gross wages to determine the net wages paid to the employee during the pay period.
    • The name and address of the employer and, if the employer is a farm labor contractor, the name and address of the legal entity that secured the services of the employer during the pay period.
    • The name of the employee and only the last four digits of the employee’s Social Security number or an employee identification number.

“Promptly and easily determine” means a reasonable person would be able to readily ascertain the information without reference to other documents or information.

A “knowing and intentional failure” does not include an isolated and unintentional payroll error due to a clerical or inadvertent mistake. In determining whether an employer complied, a factfinder may consider whether the employer, prior to an alleged violation, has adopted and is in compliance with a set of policies, procedures, and practices that fully comply with this section.

  • A recent case held that an employer can be liable under PAGA even if the employer did not knowingly or intentionally violate the wage statement statute, and the employee was not harmed in the violation.22 The employee can bring a PAGA claim under Labor Code 226.3,​ which allo​ws for civil penalties that can be recovered by the Labor Commissioner. There is no knowing and intentional requirement to impose these civil penalties.​​

Wage and Employment Notice

Nonexempt employees must also receive specific wage and employment information at the time of hire. For specific information, see “Providing Wage Information Upon Hire” in ​New Employee Orientation.

  • You are generally required to notify employees, in writing, of any changes to wage information required by the notice within seven calendar days after the time a change was made. An exception exists if all of the changes are reflected in a timely itemized wage statement that meets all of the legal requirements or are reflected in another legally required writing within seven days of the changes.

The Labor Commissioner published a revised wage notice that contains information regarding paid sick leave. For more information see Paid Sick Leave.

Execution of Release on Account of Wages Due

You cannot ask or require an employee to forego wages due or “execute a release” of wages due. The phrase “execute a release” includes requiring an employee, as a condition of being paid, to sign a false statement of the hours he/she worked during a pay period. Employers who violate this law are guilty of a misdemeanor.22

1.Lab. Code sec. 212

2.Lab. Code sec. 212

3.Lab. Code sec. 203.1

4.People v. Hampton, 2236 Cal. App. 2d 795 (1965)

5.Lab. Code sec. 213

6.Lab. Code sec. 220

7.DLSE Opinion Letters 2008.07.07 and 2008.07.07.2

8.Lab. Code sec. 226

9.Savea v. YRC Inc., 34 Cal.App.5th 173 (2019)

10.Lab. Code sec. 226(j)

11.Lab. Code sec. 246 (h)

12.Lab. Code sec. 226

13.Lab. Code sec. 226.2

14.Soto v. Motel 6 Operating, L.P., 4 Cal.App.5th 385 (2016)

15.Suastez v. Plastic Dress-Up Co., 31 Cal.3d 774 (1982)

16.Lab. Code sec. 226

17.Lab. Code sec. 1695(a)(5)

18.Lab. Code sec. 1695(a)(5)

19.29 CFR sec. 500.80(d), Migrant and Seasonal Worker Protection Act

20.Lab. Code sec. 226

21.Lab. Code sec. 226(e)

22.Lopez v. Friant & Associates, LLC, 15 Cal.App.5th 773 (2017)

23.Lab. Code sec. 206.5​​