California Labor Code § 1174 – Preserving Payroll Records

Labor Code § 1174 requires California employers to preserve and keep all employee payroll records for at least three years and to keep a record of the names and addresses of all current employees. Employers also must allow the Division of Labor Standards Enforcement free access and inspection of these records.

The full text of the statute reads as follows:

1174. Every person employing labor in this state shall:

(a) Furnish to the commission, at its request, reports or information that the commission requires to carry out this chapter. The reports and information shall be verified if required by the commission or any member thereof.

(b) Allow any member of the commission or the employees of the Division of Labor Standards Enforcement free access to the place of business or employment of the person to secure any information or make any investigation that they are authorized by this chapter to ascertain or make. The commission may inspect or make excerpts, relating to the employment of employees, from the books, reports, contracts, payrolls, documents, or papers of the person.

(c) Keep a record showing the names and addresses of all employees employed and the ages of all minors.

(d) Keep, at a central location in the state or at the plants or establishments at which employees are employed, payroll records showing the hours worked daily by and the wages paid to, and the number of piece-rate units earned by and any applicable piece rate paid to, employees employed at the respective plants or establishments. These records shall be kept in accordance with rules established for this purpose by the commission, but in any case shall be kept on file for not less than three years. An employer shall not prohibit an employee from maintaining a personal record of hours worked, or, if paid on a piece-rate basis, piece-rate units earned.

Legal Analysis

California Labor Code 1174 mandates that employers do the following five things:

1. Maintain a record of every employee name and address;
2. Maintain a record of the age of every employee under age 18;
3. Save payroll records for at least three years;
4. Keep payroll records at a central location or at the location where employees work; and
5. Permit the Division of Labor Standards Enforcement (DLSE) to access these records at no cost.¹

The purpose of Labor Code 1174 is to preserve important evidence should a wage and hour dispute occur. For example, these records could help show whether:

• Employees were improperly misclassified as independent contractors;
• Employees were paid less than their regular rate of pay or overtime (OT) rates; and/or
• Employees were not provided meal and rest breaks.

And if employers fail to preserve these records or to make them available, they face civil penalties and lawsuits. (Note that employees must exhaust all administrative remedies prior to suing the employer for failure to keep records.²)

Only employers can be held liable for a Labor Code 1174 violation. Therefore, the employer’s officers, managers, or directors cannot be sued for failing to keep or allow access to records.³

---

Legal References