In the normal course of managing employees, questions often arise as to how an employee should be paid his or her wages. An especially frequent question is whether an employer can withhold the final wages of a terminated employee when the employee owes property or some other setoff back to the company. This situation in particular, and the payment of employees’ wages in general, are governed by Pennsylvania’s Wage Payment and Collection Law (“WCPL”), which can be found at 43 P.S. § 260.1 et seq..
The WPCL does not create a right to compensation, but rather provides a statutory remedy when an employer breaches its contractual obligation to pay an employee’s earned wages. The contract between employer and employee, whether written or verbal, governs the questions of whether and when specific wages have been earned and are due. The WPCL is a tool for employees to recover wages which are due and unpaid, with mechanisms crafted into the law which encourage the parties to avoid litigation.
As in most statutes, certain terms are defined by the WPCL. For instance, “wages” is defined to include all earnings of an employee, regardless of whether the payment is determined by time, task, piece, commission or other method of calculation. The term “wages” also includes fringe benefits or wage supplements whether payable by the employer from his funds or from amounts withheld from the employee’s pay by the employer. “Fringe benefits or wage supplements” includes all monetary employer payments to provide benefits under any employee benefit plan, as defined in section 3(3) of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq., as well as separation, vacation, holiday, or guaranteed pay; reimbursement for expenses, union dues withheld from the employee’s pay by the employer; and any other amount to be paid pursuant to an agreement to the employee, a third party or fund for the benefit of employees.
Under these definitions, bonuses, accrued vacation time, and stock appreciation rights are “wages” within the meaning of the WPCL. However, unless there is a contractual entitlement to vacation time at the time an employee is discharged, that time may not be considered as recoverable wages. See Harding v. Duquesne Light Co., 882 F.Supp. 422 (W.D.Pa.1995).
It is important under the WPCL that wages and benefits are paid within a short amount of time after they are earned. Wages must be paid on regular paydays designated in advance by the employer, unless there is another agreement between the parties. Overtime wages may be considered as wages earned and payable in the next succeeding pay period. 43 P.S. § 260.3(a). Under the law, it is the duty of every employer to notify his employees at the time of hiring of the time and place of payment, the rate of pay, and the amount of any fringe benefits or wage supplements to be paid to the employee. 43 P.S. § 260.4.
The case of the terminated employee is specifically recognized by the WPCL. Section 260.5 provides that “[w]henever an employer separates an employe from the payroll, or whenever an employe quits or resigns his employment, the wages or compensation earned shall become due and payable not later than the next regular payday of his employer on which such wages would otherwise be due and payable. If requested by the employe, such payment shall be made by certified mail.”
If there is a dispute about wages due after the separation of an employee from his employment, the WPCL provides that the employer must give written notice of the amount of wages which the employer concedes to be due, and must pay that amount without condition. Acceptance by the employee of such payment does not constitute a release of the balance of the employee’s claimed entitlements. 43 P.S. § 260.6.
The Wage Payment and Collection Law is not just a collection of mandates from on high. It contains teeth for the enforcement of its provisions. For instance, an employee or labor organization can bring a claim against the employer under the law, or can refer its claim to the Pennsylvania Secretary of Labor. If the employer fails to pay the claim or explain to the secretary why it has failed to do so within ten days after the employer receives a certified notice from the secretary, the employer will be liable for a penalty of ten percent (10%) of that portion of the claim found to be justly due. A good faith dispute as to the amount of wages due or the good faith assertion of a right of set-off or counter-claim is a satisfactory explanation. 43 P.S. § 260.9a(c). A court can also assess attorneys’ fees against an employer against whom a judgment is taken, even if originally there was a good faith dispute. 43 P.S. § 260.9a(f); Oberneder v. Link Computer Corp., 449 Pa.Super. 528, 674 A.2d 720 (1996), affirmed 548 Pa. 201, 696 A.2d 148. The law also contains a liquidated damages provision. If an employee prevails on his claim at trial, the combination of penalties, liquidated damages, and an award of attorney fees can sometimes double the value of the original claim.
Perhaps most importantly, the officers of a company can be personally liable for payments due under the WPCL, if they are “active decision makers.” This policy gives agents and officers of a corporation incentive to pay wages and benefits in situations where, for instance, a firm is under the threat of bankruptcy and the officers’ primary concern is keeping the company out of bankruptcy as opposed to paying the employees from the available funds. 43 P.S. § 260.2a; see also Belcufine v. Aloe, 112 F.3d 633 (1997). There is also a criminal provision of the law, which provides that any employer who violates any provisions of this act can be found guilty of a summary offense, punishable by a fine of not more than three hundred dollars ($300), or by imprisonment up to 90 days, or by both, for each offense. Nonpayment of wages to each individual employee constitutes a separate offense. Furthermore, if the employer is a corporation, the president, secretary, treasurer, or officer exercising corresponding functions can each be convicted of the offense. 43 P.S. § 260.11a(b) and (c).
It is clear from a review of the Wage Payment and Collection Law that the Pennsylvania Legislature takes an employer’s obligations to its employees very seriously. The next time you have questions about whether an employee should be paid, or if you are an employee who may be owed wages or benefits, be sure to consult with the lawyers at Wolf, Baldwin & Associates, P.C. to make sure you are complying with this important law.
The attorneys of Wolf, Baldwin & Associates, P.C. are available to answer your questions regarding Pennsylvania’s Wage Payment and Collection Law. Our lawyers have litigated these matters on behalf of both employers and employees. Please click here now to contact us.
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