Use of Unregistered Acronym on Paychecks Violates Labor Code Section 226

The California Legislature has enacted strict requirements regulating the content that appears on employee wage statements. Labor Code section 226 sets forth the requirements in an extensive list, such as the requirements that the wage statement show gross wages earned, total hours worked, all applicable deductions, the name and address of the legal entity that is the employer, and more. Failure to include these requirements often forms the basis for some of the most common wage and hour claims, and can prove to be a minefield of potential violations for any unfamiliar employer.

One requirement is that the wage statement display the name and address of the legal entity that is the employer and was the subject of a recent appeal in California’s Third Appellate District, Noori v. Countrywide Payroll & HR Solutions, Inc. (Cal. Ct. App., Dec. 26, 2019, No. C084800) 2019 WL 7183403. In Noori, the plaintiff, Mohammed Noori (“Noori”) sued his former employer, Countrywide Payroll & HR Solutions, Inc. (“Countrywide”) for violating Labor Code section 226 by (1) providing wage statements bearing the acronym “CSSG” rather than the name of the legal entity and (2) for failing to maintain copies of the accurate itemized wage statements.

Countrywide demurred to Noori’s complaint, arguing in part that its use of the acronym “CSSG” on its wage statements was proper and in compliance with Labor Code section 226, because “CSSG” was a legal fictitious business name held by Countrywide. The trial court sided with Countrywide and sustained the demurrer. Noori thereafter appealed the ruling, arguing that there was no authority that an acronym for an out-of-state fictitious business name complies with the requirements established in Labor Code section 226(a)(8).

The court of appeal settled the issue in favor of Noori. The court noted the importance of the requirement established by Labor Code section 226, but pointed out that the name of the employer stated on the wage statement does not need to be the company’s complete name. (Noori v. Countrywide Payroll & HR Solutions, Inc., supra, at *4; See Elliot v. Spherion Pacific work, LLC (C.D. Cal. 2008) 572 F.Supp.2d 1169, 1180.) Indeed, employers can even use minor truncations of names and fictitious business names. (Id.; See also Elliot v. Spherion Pacific work, LLC, supra, at 1179; Savea v. YRC Inc. (2019) 34 Cal.App.5th 173, 180.) The line is drawn, however, where the truncations and alterations of the employer’s name create the possibility for confusion. As an example, the court of appeal pointed to the employer in Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949, which used only the word “SUMMIT” on “driver trip summaries” instead of its full name, “Summit Logistics, Inc.”

According to the court of appeal, the problem for Countrywide in Noori was its use of an out-of-state fictitious business name that was far removed from its actual business name. “CSSG” was not a registered, fictitious business name in California, nor was it a minor truncation or alternation of the full name, Countrywide Payroll & HR Solutions, Inc. Instead, “CSSG” corresponded with “Countrywide Staffing Solutions Group,” which did not necessarily have any meaning to all Countrywide employees. The court of appeal further rejected Countrywide’s argument that it complied with section 226 because the paycheck, a detachable part of the wage statement, included the full fictitious name of “Countrywide Staffing Solutions group.” The paycheck, the court ruled, was simply not a part of the wage statement, which did not in and of itself contain all information required by Labor Code section 226.

Accordingly, the court of appeal determined that Countrywide employees could not easily determine the employer’s name from wage statements alone, as required by Labor Code section 226, and reversed the trial court’s order sustaining the demurrer. Noori is an example of the specificity demanded by Labor Code section 226, and should be a warning to employers of the costly error of such minor name changes on wage statements. A few simple adjustments can sometimes prove to be the difference between compliance and costly litigation.

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January 7, 2020