Personal Liability under Pennsylvania's Wage Payment Law
Winding down a company during these tough economic times can be quite difficult. A company's decision makers need to be careful to use any available cash for the best interest of the company and its creditors. The Company's board of directors should also give serious consideration to paying employee wages to avoid personal liability.
Under Pennsylvania's Wage Payment and Collection Law, 43 P.S. § 260.1 et seq, (WPCL) a company's "agent or officer" may be personally liable to pay "wages" which is broadly defined to cover everything from bonuses, vacation pay, and severance. The courts construing the WPCL have commented that the Act is designed to give the "agents and officers" incentive to pay wages and benefits while the company still has assets to do so. See, Belcufine v. Aloe, 112 F.3d 633 (3rd Cir. 1997).
A recent case decided in Lehigh County Pennsylvania, Molinaro v. Akrion, Inc. 2010 Pa. D&C., Dec. LEXIS 335 (2010), explored the issue of when a company's principals have exercised enough strategic control to be liable under the WPCL. The distinction can often turn on how active each individual person is in the decision making that lead to a non-payment of wages; and, sometimes whether there was other constraints, such as bankruptcy, that make it essentially impossible for the officer to choose.
In Molinaro the individual defendants asked the Court to rule on several issues on a summary judgment motion. The Court first ruled that the plaintiff employees had voluntarily accepted a salary reduction and, thus it could not be said that the Company's officers made that decision. The Court then declined to hold the officers responsible for severance monies when the Plaintiffs were unable to present evidence of active decision making designed to prevent payment of such wages to the employees. Moreover, the court concluded that it could not be said that there was a decision not to pay wages when the company had no ability to do so. The Defendants had no ability to act strategically when an Article 9 creditor forced a sale of assets. The only claim that survived summary judgment was a dispute over whether the payment of a bonus had a condition that was not met. The parties will be left to argue that at trial.
Because a prevailing employee can recover attorney's fees and a 25% penalty, principals and officers would do well to consider their options before disbursing assets. Individual liability will only attach where there is strategic decision making that affects wages. But where wages are concerned employees are unlikely to go away quietly.