Hiring and firing employees requires consideration of multiple legal issues. When an employee is hired or separates from employment, one statute both the employee and employer must consider is the Pennsylvania Wage Payment and Collection Law (“WPCL”) 43 P.S. §260.1 et seq.  The WPCL is a state law that acts as a vehicle to recover unpaid wages and also provides for damages in the event an employer withholds compensation from an employee.   The protections of the WPCL apply to all employees based in Pennsylvania.

Under the WPCL, the employer has a duty to notify its employees at the time of hiring of the time and place, as well as the rate of payment of wages, fringe benefits and wage supplements. Every employer is required to pay all wages due to an employee on regularly scheduled paydays. Regular paydays must be designated by the employer in advance and cannot be altered without adequate notice.

Salary payments are considered wages for purposes of the WPCL. Other compensation that the employer has promised through an employment agreement also is considered “wages” under the law. More specifically, earned commissions and earned bonus payments, accrued but unused PTO, health benefits, and other fringe benefits promised within an employment agreement are considered wages. This would include malpractice insurance premiums, including tail coverage, assuming the agreement calls for it. Employers are not required to pay out unused vacation time, however, if the employer has clearly communicated a use it or lose it policy.

The WPCL provides employees with a process to recover wages which they have earned, but have not been paid. If an employer fails to pay wages and if an employee institutes a lawsuit in order to obtain the payments that are undisputedly due and owing, a successful employee will be entitled to the full amount due, plus an additional 25% in liquidated damages (when wages remain unpaid for more than 30 days past the regular payday) as well as attorney’s fees. The award of attorney fees to a successful employee is mandatory. Employers, on the other hand, who successfully defend against a WPCL claim are not entitled to recover its attorney’s fees.

Under the WPCL, the term “employer” includes “every person, firm, partnership, association, corporation, receiver or other officer of a court of this Commonwealth and any agent or officer of the above-mentioned classes employing any person in this Commonwealth.” The inclusion of “agent or officer” within the definition means that the decision-maker within the company who made the determination not to pay wages due may be held personally liable. There is a three year statute of limitations meaning any action must be brought within three years of the non-payment.

Upon separation of employment, wages earned prior to separation become due and payable on the next regular payday on which such wages would otherwise be due and payable. Severance payments agreed upon within a separation agreement also are considered wages under the statute.

This article is meant to educate the reader on the general parameters of the Wage Payment and Collection Law and is not intended to act as legal advice. Lamb McErlane PC can assist you in understanding how this law may apply to your specific circumstances and encourage you to seek legal advice on this topic.

Mary-Ellen is a partner and co-chair of Lamb McErlane’s Employment Law Department and a member of the litigation department. She concentrates her practice in employment law and commercial litigation. mallen@lambmcerlane.com.  610-701-4420.