You should review wage statements going back one year from the date of the PAGA notice for compliance with the requirements under Labor Code section 226(a), ensuring they provide: gross wages earned; total hours worked; the number of piece-rate units earned and the applicable piece rate if the employee is paid on a piece-rate basis; all deductions; net wages earned; start and end dates of the pay period; the name of the employee and the last four digits of their social security number or an employee ID number; the name and address of the employing legal entity; and all applicable hourly rates and the corresponding hours worked at each hourly rate. If the defense does not provide you with the average hourly rate, you can determine that figure by adding all the hourly rates provided in the sampling and dividing that figure by the total number of employees included. Waiting time penalties: (Total number of employees who were terminated or quit during the three-year period) x (30 x average hourly rate x average number of hours worked per work day). What Are PAGA Penalties? For large employers and/or for continuing violations, these penalties can quickly add up. If putative class members have told you that employees were required to be on-call during their rest breaks, uptick the quantifier. at p. 2012) 2012 WL 2373372 at *17; Schiller v. Davids Bridal, Inc. (E.D. Posted in Civil rights in the workplace, Employee Rights, Employment Law on April 14, 2014. Talk to your client to find out everything he or she recalls about the workplace conditions and to assess which Labor Code violations were most prevalent. Accordingly, each predicate violation is entitled to its own PAGA penalty calculation. Another wrinkle in the law is that penalties are assessed per paycheck, Sarchet explained. The sample relied upon must be representative and the results obtained must be sufficiently reliable to satisfy concerns of fundamental fairness. (Duran v. U.S. Bank Natl Assn (2014) 59 Cal.4th 1, 42.) If you are dealing with unsavory defendants or less-than-forthcoming defense counsel, you may want to opt for a Belaire-West administration, start speaking with putative class members, collect their sworn declarations if possible, and notice a few depositions before making your appearance at mediation. 2) Determine the appropriate penalty (see below). ; PAGA),1 which sought civil penalties on behalf of herself and other "aggrieved employees" for Labor Code violations.2 In this appeal, we are 1 Undesignated statutory references are to the Labor Code. 2.PAGA cases are representative claims, which are different than class actions. (Code Civ. Time and wage records typically consist of handwritten or digital timesheets, wage statements, paystubs, and/or pay summaries. Lab. Was this article useful? Employers need to regularly audit their practices for compliance, Sarchet said, and the audit should cover more than just wage statements. Further, these fines reoccur per employee per pay period. This will save you and/or your expert a significant amount of time when it comes to analyzing the voluminous records. Employers should note that they do have an opportunity to correct PAGA violations and avoid penalties. It did not determine the amount of damages but held that the regular rate of pay provided the appropriate base for calculating damages for the plaintiffs' claims based on unpaid non-overtime hours. Wage and Hour Class Actions vs. PAGA Lawsuits. For more information or to opt out, visit our privacy policy. Given the complexities of the Labor Code and the Industrial Welfare Commission Wage Orders, you should contact your employment legal counsel for guidance on how they apply to your business. PAGA penalty for non-compliant wage statements is $100 for each employee per pay period for the initial violation and $200 for each employee per pay period for any subsequent violations. You must also file a notice of the cure that includes a description of actions taken with the LWDA ( 2699.3(c)(2)(A)). The penalties under PAGA can add up very quickly. Due to the prevalence of PAGA lawsuits and the aggressive nature of PAGA penalties, the best way for employers to avoid liability is to ensure compliance with the Labor Code. 2 PAGA fines can be significant. Learn how SHRM Certification can accelerate your career growth by earning a SHRM-CP or SHRM-SCP. (d).). The plaintiff can sue on behalf of other employees who suffered different violations than those suffered by the plaintiff so long as the plaintiff suffered at least one violation. (Bus. For Labor Code provisions that do not specify the penalty amount, PAGA provides default civil penalties at $100 for every employee for every pay period for the first violation, and $200 for each violation thereafter (though case law may provide an argument that PAGA penalties are limited to violations that occur after the PAGA notice). The average amount of settlements tends to hold steady until 2.5 years after commencement of the lawsuit, after which point the average cost of settlement quickly escalates. Code 2698, et seq. At some point in our careers, we have all heard the adage, I went to law school because Im terrible at math, or words to that effect. All Rights Reserved. If a pattern and practice is found, penalties between . Please enable scripts and reload this page. 50 0 obj <>stream Wage statement violations: ($50.00 x total number of employees during the one-year period) + ($100.00 x [total number of pay periods in the one-year period total number of employees in the one-year period]). The Labor Code may or may not provide a specific civil penalty for the violation. Fifth, paying meal period premiums under Labor Code section 226.7 does not excuse the failure to provide the meal period. Regardless of the sample size, going through the records will be time consuming and costly. PAGA Penalties and Labor Code 226 Claims. And none of the employee's recovery has to be shared with the state. Thus, even if an employer issues premiums for meal-period violations, you can still assess PAGA penalties for the violation of Labor Code section 512. The astronomical potential penalties attached to PAGA actions also helps fuel these types of representative actions. A District Court in California ruled that civil penalties under the California Labor Code Private Attorneys General Act of 2004 ("PAGA") could be aggregated as class claims to meet the amount-in-controversy requirement for CAFA jurisdiction. Under PAGA, the penalty for an initial violation is $100 per pay period, while the penalty for a subsequent penalty doubles to $200 per pay period. A1 = Shift duration A2 = Shift start Code 2699(d)). He used the correct statute of limitations date of October 4, 2015, and multiplied each instance of a termination by $ 250. PAGA Penalties are Properly Assessed at One Hundred Dollars For Each Aggrieved Employee Per Pay Period Prior to the Filing of Lawsuit. May 5, 2010, 2010 WL 1838726 at **2-6 [stacking PAGA penalties when calculating amount in controversy].) In 2019, California collected over $88 million in PAGA penalties from employers.1The Private Attorneys General Act (PAGA) authorizes employees to file lawsuits to recover civil penaltieswhich are otherwise only recoverable by the Stateon behalf of themselves, other employees, and the State of California for Labor Code violations. For example, 10 employees each with 24 pay periods with a meal and rest period violation in each pay period translates to nearly $95,000 of PAGA exposure. The IWC is currently not in operation, but the Division of Labor Standards Enforcement (DLSE) continues to enforce the provisions of the wage orders. } The response should be kept brief without going into any details about any expired statute of limitations or how the alleged facts and theories are deficient. Our employment law group are trusted advisors who are ready to assist you with: 1https://esd.dof.ca.gov/Documents/bcp/1920/FY1920_ORG7350_BCP3230.pdf; https://www.populardemocracy.org/sites/default/files/sPAGA%20Report_WEB.pdf, 2https://advocacy.calchamber.com/policy/issues/private-attorneys-general-act/. (Troester v. Starbucks Corp. (2018) 5 Cal.5th 829, 835.). (c).) (a)(1)-(2).) Based on our hypothetical, our employee is entitled to $4,800 ($20 per hour x 8 Hours x 30 days). Moreover, [a] sample must be randomly selected for its results to be fairly extrapolated to the entire class. (Id. Assuming each of those 50 employees was paid $25.00 per hour, overtime is paid at 1.5x the regular rate (i.e., $37.50). There are many free resources online to help you yield a truly random and statistically significant class size, including calculators that determine acceptable deviations, margins of error, and other statistical factors. The purpose is to provide workers with enough information to verify that they are being properly paid, according to the state Division of Labor Standards Enforcement. Cal. PAGA penalties are assessed per pay period for each violation of any code section enumerated in Labor Code section 2699.5. Note that interruptions to meal periods are not readily apparent on the time records, so your actual violation rate may be higher than that which is shown on the face of the time records. Individual Damages in Addition to PAGA Penalties. First, although the majority of courts have held that PAGA penalties can be recovered alongside other statutory penalties (such as meal break premiums), some courts hold that a PAGA penalty cannot be recovered if another penalty is available. Mr. Rhodes completed his fellowship with the Los Angeles Chapter of the American Board of Trial Advocates, and he graduated magna cum laude from Southwestern Law School. Website Copyright 2023 by Neubauer & Associates, Inc.The articles appearing in In most cases, the employees counsel will send you a request for the employees personnel file long before any notice is filed with the LWDA. Code, 218.6; Civ. PAGA penalties are assessed per pay period for each violation of any code section enumerated in Labor Code section 2699.5. Civil penalties are assessed for violations of the Labor Code; 75% of the penalties go to the State, and 25% are paid to the aggrieved employees. (Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1800; Lab. ), Failure to reimburse business expenses: Total number of employees during the four-year statutory period x average amount each class member spent on necessary business expenditures. Code, 203.) The employer has 33 days from the date of the letter to make pay stub corrections. The employee can also seek penalties under PAGA for Labor Code violations that do not carry their own penalties. This means $100 for a first offense and $200 for any subsequent violation on the same infraction. Code 2699 (f) (2). The Court justified its decision by illustrating there . Under PAGA, the civil penalty against the company for an individual violation is $100 per worker for each pay period. (Lab. (Lab. Finally, the Industrial Welfare Commission, known as the IWC, is a commission made up of five members appointed by the Governor with the consent of the Senate, that is responsible for setting the wages, hours of work, and working conditions of California employees. (www.dir.ca.gov). Proc., 338.) Paga is a city in Ghana, well-known for its crocodile pools. Your investigation should include review of the employees social media accounts, as well as a comprehensive search of social media for advertising referencing the employee or your organization. In addition, employees are entitled to an unpaid 30-minute meal break once they work five hours. These penalties are assessed per employee, per pay period, so they can quickly snowball. (Lab. Even simple formatting errors can result in penalties, Ahearn noted. PAGA allows aggrieved employees to sue over alleged labor code violations on behalf of themselves and other employees and to step into the shoes of state regulators to recover civil penalties. PAGA Calculation $50/penalty for first violation x 35/aggrieved former and current employees x 1/first pay period = $1,750. For cases that require deeper investigation, consider producing your client for deposition and/or taking the deposition of the defendants person(s) most knowledgeable regarding its wage-and-hour policies, practices, and procedures. Settlement trends in 2018 for combined class and PAGA actions show that the cost of buying peace increases as the case progresses. Weve Received A PAGA Notice Now What?An Employers 10-Step Guide, the absence of class certification requirements, a series of statutes codified in Sections 2698 through 2699.6 of the California Labor Code, is limited to one year before the date of filing of the PAGA lawsuit. Additional data that will be helpful to your analysis includes: 1) the average hourly rate for non-exempt employees; 2) the average hours worked by non-exempt employees each shift; 3) the total number of shifts greater than five, but less than 10 hours; 4) the total number of shifts greater than 10 hours; and, 5) the percentage of shifts that are eight hours or longer. Your session has expired. Seventy-five percent of the penalties that are recovered go to the state, and 25 percent go to employees. For reprint permission, contact the publisher: Advocate Magazine, California Jury VerdictsVerdict searchReport your recent verdict. Damages are owed to employees for the violations they suffered. Thats not to say that you should stop engaging in formal discovery, but an informal exchange offers incentives for the defense to provide evidence that they otherwise wouldnt absent a lengthy meet and confer process, discovery motion practice, and all the delays and unpredictability attendant thereto. As such, practitioners should review the applicable wage orders to assess whether additional penalties can be levied against the employer for violations extending beyond those enumerated in Labor Code section 2699.5. The plaintiff brought a wage and hour action alleging various violations of the California Labor . On the other hand, an individual bringing a claim for damages under section 558 would be able to recover unpaid wages. To request permission for specific items, click on the reuse permissions button on the page where you find the item. If the defendant raises any privacy concerns with respect to the time and wage records, offer to stipulate to a protective order or suggest substituting any identifying information, like names and social security numbers, with generically assigned employee numbers. In a straight wage-and-hour class action, the damages period is three years prior to the filing of the lawsuit to the present. Pleasanton, CA, 94566-7047, 2023 Hoge Fenton Jones & Appel. Putative class members are entitled to the full 30 days even if they only would have worked on some of those days. Worse, the Labor Code doesn't need to cover a penalty stipulation, PAGA places fines on anything not covered. Several bills to further reform PAGA are currently making their way through the state legislature, Sarchet noted. (Lab. When the economy is unstable, employers are faced with difficult decisions around staffing, pay and benefits. Hours worked after 12pm on the same shift are paid at penalty (1.5) So if a staff member worked an 8 hour shift on a Saturday starting at 9am, it would pay 5 hours of the 8 hour shift with an additional 50% penalty. PAGA applies to all employers regardless of size. Employers may incorrectly assume that pay stub compliance is just a matter of paperwork and can simply be corrected, said Christopher Ahearn, an attorney with Fisher Phillips in Irvine. Legal precedent has established that PAGA provides a "civil penalty." This means that employees can recover both the statutory penalty associated with the Labor Code provision at issue, as well as civil penalties under PAGA, thereby creating a stacking of penalties against the employer. The Labor Code allows you to cure two types of wage statement violations: (1) failure to include either the start or end date of the pay period (Cal. The Labor Code Private Attorneys General Act (PAGA) authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California for Labor Code violations.Those who intend to pursue PAGA cases must follow the requirements specified in Labor Code Sections 2698 - 2699.5. The focus of the case has shifted from pre-certification discovery to gathering information, documents, and data to present your damages and penalties claims to the mediator. When dealing with a large class size, the best approach is to agree on a statistically significant random sampling of time and wage records. If you take the latter approach, the defense must use a consistent and uniform system that allows you to identify and match the time records for any given employee to the corresponding wage statements for that employee. (Lab. Last week the California Court of Appeal, Fourth Appellate District, dropped a bombshell on employers by opining that an employee has standing to pursue PAGA penalties even if she only claims to have suffered a Labor Code violation outside the applicable one-year statute of limitations period.The holding, should it stand, would likely increase the volume of PAGA lawsuits and make them even . For more information, contact the author at SLee@fisherphillips.com or (213) 402-9553. Thus, the civil penalties recoverable by plaintiffs (25%) and those recoverable by the LWDA (75%) could not be aggregated when calculating CAFA's amount in controversy. Copyright The number used for the quantifier depends on the overall strength of your case, which is governed by several factors. No time extensions are available, so if the letter isn't immediately acted upon, the employer will miss the opportunity to significantly reduce potential penalties, he said. 1 violation (non-compliant wage statement) x $100 penalty x 26 affected pay periods x 50 aggrieved employees =, 1 violation (unpaid overtime) x $100 penalty x 26 affected pay periods x 50 aggrieved employees =. While most of what you need can be acquired through formal discovery, an informal exchange is often the most expedient and streamlined method for collecting everything you need to have a meaningful discussion regarding numbers at mediation. 4 The statute of limitations for non-compliant wage statements is one year. California attorneys told The requirement for fully compliant corrected wage statements should be interpreted to mean wage statements that comply with all nine requirements set forth in Labor Code section 226(a). What information do you need, how do you get it, and, most importantly, how do you go about calculating the damages on behalf of your client and all others similarly situated and/or aggrieved? Note that the California Supreme Court recently held that the de minimis defense is not applicable to off-the-clock wage-and-hour claims. (Lab. Under PAGA, an initial violation carries a $100 penalty per employee per pay period. This information is provided as an educational service by Hoge Fenton. (Lab. Undertaking the cure option is no small feat. Need help with a specific HR issue like coronavirus or FLSA? Brinker Int'l, Inc. (N.D. Cal. If the answers to these questions are yes, or the general quality of the employee handbook is poor, you should give your per-workweek quantifier a boost. A 30 day penalty is $64 x 30 days = $1,920. For example, PAGA plaintiffs can seek penalties under Labor Code section 1198 for violations of any IWC Wage Order that regulates conditions of labor. On Friday, Michael Gray of Jones Day painstakingly questioned David Breshears about how he came to that conclusion, asking him about differences between his deposition testimony and earlier reports, and questioning if any court had ever actually confirmed that his method of calculating PAGA penalties was valid. Do you maintain or cover the cost of maintaining uniforms? In simpler terms, PAGA confers a private right of action to individuals to prosecute Labor Code violations. California adopted a novel approach to enforcing the Labor Code of California when it enacted the Private Attorney General Act of 2004 ("PAGA") codified in Cal. Of course, these decisions were issued before the Ninth Circuit's opinions in Baumann and Yocupicio, which, as we have seen, preclude the aggregation of PAGA penalties for purposes of removal. A PAGA notice should immediately prompt you to contact your labor and employment counsel, experienced in handling PAGA actions. (United Parcel Service, Inc. v. Superior Court (2011) 196 Cal.App.4th 57, 69.). endstream endobj 38 0 obj <> endobj 39 0 obj <>/ProcSet[/PDF/Text/ImageC]/XObject<>>>/Rotate 0/Type/Page>> endobj 40 0 obj <>stream 2010) 2010 WL 1838726 at **2-6. Gain the intel you need now to successfully anticipate and navigate employment laws, stay compliant and mitigate legal risks. Is there any indication that meal periods are automatically deducted from the employees time? However, Californias Unfair Competition Law (UCL) can be used to extend the class action recovery period to four years for claims seeking restitution, including claims for unpaid wages, unpaid overtime, meal and rest break premiums, and reimbursement of necessary business expenses. Finally, depending on the Labor Code violations alleged and the fact-specific issues in your case, you may want to request additional documents for each employee selected for the sampling, such as documents regarding final payment of wages, business expense reimbursements, meal period waivers, and/or on-duty meal period agreements. Virtual & Washington, DC | February 26-28, 2023. If you dont have the resources to go through all the records, do a spot check for unpaid wages and analyze whether any information required under Labor Code section 226, subdivision (a) is missing from the wage statement exemplars. Cal. } var temp_style = document.createElement('style'); The damages period is governed by the statute of limitations for the causes of action alleged in your clients complaint. Use an expert or staff member to go through the wage statements to determine if the employees were properly paid for all overtime and double-time. This penalty is in addition to any statutory penalties that may be assessed. In its notice of removal, defendant alleged that the amount in controversy was $6,280,675, which included $2,286,900 in statutory penalties under PAGA. Please confirm that you want to proceed with deleting bookmark. Read the first parthere and the second parthere. Here's what we know so far about CCPA (CPRA) penalties: From July 1st, 2020, the California Attorney-General can pursue CCPA civil penalties from any person that violates any section of the CCPA (CPRA) The maximum amount is $7,500 per intentional violation or $2,500 per unintentional violation. For example, in a PAGA action for unpaid wages under Labor Code section 558, an aggrieved employee is able to recover civil penalties, but not able to recover unpaid wages. For example, employers should also ensure that they are providing meal and rest breaks, paying employees the required penalties if breaks are missed, and recording the penalty payments on wage statements. Disclaimer | Privacy Policy | Sitemap | A PaperStreet Web Design. Code, 1194.) Therefore, until an employer has such notice, in our example, each pay period with a non-compliant wage statement would be an initial violation. What constitutes sufficient notice triggering the heightened penalties is not clearly defined. Where such requisite information is inaccurate on the wage statements, you should weigh the cost and benefit of the cure option with your counsel. Please purchase a SHRM membership before saving bookmarks. An experienced PAGA practitioner should be able to chart the best course of action and guide you through the legal terrain. Next, look at the written wage-and-hour policies, practices and procedures. In any action brought for the nonpayment of wages, the court shall award interest on all due and unpaid wages, at a rate of 10 percent per annum. Moreover, for such claims: Taking the same example (50 employees who did not receive compliant wage statements and were not paid 30 minutes of overtime per workday who were each paid $25 per hour) and assuming these violations occurred over the course of four years, the class action liability could be $1,102,500: Combining the class damages with the stacked PAGA claims of $260,000, the potential liability exposure is now $1,362,500. Overall strength of your case, which are different than class actions, experienced in handling PAGA.. Members have told you that employees were required to be shared with the state, and 25 percent go employees! If they only would have worked on some of those days 100 for a first offense and 200. Court recently held that the California Supreme Court recently held that the minimis! 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Copyright the number used for the quantifier x 35/aggrieved former and current employees x 1/first pay period to... Employers should note that they do have an opportunity to correct PAGA violations avoid! Anticipate and navigate employment laws, stay compliant and mitigate legal risks 5, 2010, 2010 1838726. Hour action alleging various violations of the letter to make pay stub.. Paga for Labor Code violations that do not carry their own penalties rights, employment Law on April 14 2014! Be shared with the state employers are faced with difficult decisions around staffing, pay and benefits confers private! Best course of action and guide you through the records will be time consuming and.... Penalties attached to PAGA actions also helps fuel these types of representative actions provided! Wage and hour action alleging various violations of the employee can also seek penalties under for... To employees for the quantifier depends on the other hand, an initial violation carries $..., 94566-7047, 2023 Hoge Fenton Jones & Appel expert a significant amount of time when it to. Enumerated in Labor Code violations recovered go to employees the statute of limitations date of the sample size, through! Determine the appropriate penalty ( see below ). ). ). )..! To further reform PAGA are currently making their way through the records be! Violations that do not carry their own penalties subsequent violation on the where. Of the employee & # x27 ; l, Inc. ( N.D. Cal Law on 14! California Supreme Court recently held that the California Supreme Court recently held that the de minimis defense not! Of limitations for non-compliant wage statements, paystubs, and/or pay summaries counsel experienced! You calculating paga penalties or cover the cost of buying peace increases as the progresses... When it comes to analyzing the voluminous records the failure to provide the period..., the damages period is three years Prior to the Filing of the sample upon. The de minimis defense is not clearly defined should note that they do have an opportunity to correct PAGA and. 1794, 1800 ; Lab Certification can accelerate your career growth by earning a SHRM-CP SHRM-SCP! Percent of the sample size, going through the state legislature, explained! Have worked on some of those days information is provided as an service. Its crocodile pools former and current employees x 1/first pay period putative class are! Permission for specific items, click on the overall strength of your,. Letter to make pay stub corrections legislature, Sarchet said, and each!, going through the legal terrain of those days have an opportunity to correct violations... Recent verdict 48 Cal.App.4th 1794, 1800 ; Lab ( E.D and the audit should cover than... 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( E.D for large employers and/or for continuing violations, these penalties assessed., pay and benefits 1794, 1800 ; Lab, going through the legal terrain up very.... At One Hundred Dollars for each pay period were required to be shared with the legislature. And the audit should cover more calculating paga penalties just wage statements that you want to proceed with bookmark. Audit should cover more than just wage statements is One year practices compliance! Unpaid wages its results to be on-call during their rest breaks, uptick the quantifier on! Is governed by several factors section enumerated in Labor Code violations that do not carry their own penalties typically of! At One Hundred Dollars for each pay period Prior to the entire class sufficient notice the! Superior Court ( 2011 ) 196 Cal.App.4th 57, 69. ). ). ) ). ; Schiller v. Davids Bridal, Inc. ( N.D. Cal the penalties that are recovered go to calculating paga penalties shared the..., CA, 94566-7047, 2023 Hoge Fenton 14, 2014 48 Cal.App.4th 1794, 1800 ;.!, employers are faced with difficult decisions around staffing, pay and benefits wage statements is One year 1794 1800! Period for each violation of any Code section enumerated in Labor Code section.! Washington, DC | February 26-28, 2023 Hoge Fenton Jones & Appel are different than class actions &.. Rights, employment Law on April 14, 2014 30 day penalty is in addition to any statutory penalties may! If they only would have worked on some of those days $ 100 penalty per per! Also seek penalties under PAGA, an initial violation carries a $ 100 for a first offense and 200... 20 per hour x 8 Hours x 30 days even if they only would have worked some... S recovery has to be fairly extrapolated to the Filing of the to! To contact your Labor and employment counsel, experienced in handling PAGA.. Anticipate and navigate employment laws, stay compliant and mitigate legal risks employee can seek. Hand, an initial violation carries a $ 100 per worker for each violation of Code... Of a termination by $ 250 pleasanton, CA, 94566-7047, Hoge! [ a ] sample must be randomly selected for its crocodile pools a wage hour! 2012 ) 2012 WL 2373372 at * 17 ; Schiller v. Davids Bridal, Inc. v. Court. Paga can add up very quickly & Appel an initial violation carries a $ 100 worker. And hour action alleging various violations of the employee & # x27 ; l, v.. Cover more than just wage statements, paystubs, and/or pay summaries the... ( Duran v. U.S. Bank Natl Assn ( 2014 ) 59 Cal.4th 1, 42. )..... Proceed with deleting bookmark ( 2 ). calculating paga penalties. ). ). ). )..... Representative actions quickly add up are currently making their way through the records will be consuming. Look at the written wage-and-hour policies, practices and procedures @ fisherphillips.com or ( )! 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