In these perilous economic times, employee layoffs and salary reductions are becoming more and more commonplace.  Pennsylvania’s Wage Payment and Collection Law (WPCL) sets forth an employer’s responsibility to pay wages to its employees.  Familiarity with the terms of the WPCL is thus critical for both an employee and employer as its violation could subject the employer to liability not just for outstanding wages but also for attorney fees and liquidated damages. 

The WPCL requires that, upon the hiring of an employee, an employer is required to inform its employee of his 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 rate of pay, without first providing notice of such a modification of terms to the employee. 

The WPCL sets time limitations by which an employer is obligated to pay wages, fringe benefits and wage supplements.  If no employment contract governs the time at which wages are to be paid, an employer must 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 employee’s pay must also 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 employee’s salary.  Fringe benefits and wage supplements, in turn, 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 employee’s 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 be due and payable. Frequently, upon an employee’s separation from employment, either voluntarily or involuntary, 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, however, will not constitute a waiver of any additional claims for outstanding wages.

Violation of the WPCL could potentially subject the employer to severe penalties.  The Supreme Court of Pennsylvania has held that an award of attorney 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% of the total amount of wages due if the employer withholds wages without a good faith contest.   

For all of these reasons, an employer should be mindful of the requirements of the WPCL during employee separation.