In these perilous economic times, employee layoffs or salary reductions have unfortunately been quite common. As a result, an employer must be aware of its obligations and rights under Pennsylvania’s Wage Payment and Collection Law (WPCL), which governs its responsibility to pay wages to employees. Otherwise, a WPCL violation could subject the employer to liability not just for outstanding wages, but also for attorney’s fees and liquidated damages.
The WPCL mandates that upon the hiring of an employee, an employer is required to inform the employee of his or her rate of pay, the amount of any fringe benefits or wage supplements to be paid to or for the benefit of the employee, and the time and place of payment of wages. Importantly, an employer cannot modify these terms, including the rate of pay, without previously providing notice of the change to the employee.
The WPCL sets time limitations by which an employer is required to pay wages, fringe benefits and wage supplements. If no employment contract governs the time at which wages are to be paid, an employer is required to pay all wages earned in any pay period within 15 days of the end of that pay period or within the standard time lapse customary in the trade. Fringe benefits and wage supplements must be paid within 10 days after they are required to be made to the employee or, when no required time for payment is specified, within 60 days of the date when the employee files a claim for such benefits or supplements. Union dues that are deducted from an employees’ pay must able be paid by the employer within 10 days after the payments are required to be made to the union, trust or fund.
Of particular relevance is that the WPCL broadly defines “wages” as “all earnings of an employe[e], regardless of whether determined on time, task, piece, commission or other method of calculation” and includes fringe benefits or wage supplements “whether payable by the employer from his funds or from amounts withheld” from the employees’ salary. Fringe benefits and wage supplements, in turn, are defined to include “all monetary employer payments to provide benefits under any employe[e] benefit plan” under ERISA, as well as severance, vacation, holiday, or guaranteed pay, reimbursement of expenses, union dues withheld from the employees’ pay by the employer, and any other amount to be paid pursuant to an agreement with the employee, a third party or fund for the benefit of employees.
When an employee is terminated, quits or resigns, the employer must pay any outstanding wages no later than the next regular payday on which such wages would otherwise by due and payable. Frequently, upon an employee’s separation from employment, either voluntarily or involuntarily, a dispute will arise as to how much compensation the employee is still owed. This will typically be the case if the employee’s compensation was at least, in part, commission-based. In the case of such a dispute, the employer must give written notice to the employee or his attorney of the amount of wages which the employer concedes are due the employee and pay that amount without conditions within the time limitations prescribed by the WPCL. An employee’s acceptance of this payment will not constitute a waiver, however, of any additional claims for outstanding wages.
Violation of the WPCL could potentially subject the employer to severe penalties. The Pennsylvania Supreme Court has held that an award of attorneys’ fees to a prevailing employee in action brought under the WPCL is mandatory. Furthermore, an employee will be entitled to liquidated damages in an amount equal to 25 percent of the total amount of wages due if the employer withholds wages without a good faith contest.
Employers must understand and comply with the WPCL. To do otherwise can expose employers to litigation and additional fees and costs that may themselves prove overwhelming, particularly in a precarious economy such as this.
AUTHOR BIO: Natalie Klyashtorny, Esquire concentrates her practice in employment and labor law and commercial and general business litigation, including commercial disparagement, libel and slander, First Amendment and media law. She may be reached at (215) 399-1346 or Natalie.Klyashtorny@nochumson.com.