By Jacob Oslick
In a case of first impression, the trial court in Luzerne County, Pennsylvania found that paying employees through mandatory payroll cards does not comply with a Pennsylvania law, the Wage Payment and Collection Law, which requires “wages” to be paid through either “lawful money of the United States” or a “check.” Siciliano v. Mueller, Case No. 2013-07010 (Pa. Com. Pl., Luzerne Cnty. 2015) (citing 43 P.S. § 260.3). Pennsylvania adopted this statutory language decades ago, principally to bar employers from paying employees in scrip (i.e., worthless Monopoly-style company money). But, if the Court’s ruling stands, Pennsylvania employers may now face liability if they pay their employees through a debit card instead of cash, check, or — upon the employee’s written consent — direct deposit. See 7 P.S. § 6121 (defining “check” to include direct deposit, if an employee requests direct deposit in writing).
Citing Black’s Law Dictionary, the Siciliano Court reasoned that payroll cards are not “lawful money of the United States,” because they are not “bills and coins” that have been approved “in a country for the payment of debts, the purchase of goods, and other exchanges of value.” Nor are they a check, because they are not “an unconditional written order” to “pay certain sum of money on demand.” Rather, the Court opined, payroll debit cards can only be turned into “lawful money” after a visit to the bank or ATM. Thus, the Court determined, the WPCL’s “plain language” compelled finding that payroll cards did not comply with the WPCL’s “lawful money” or “check” requirements. As a result, the Court effectively held that the employer’s practice of paying employees through paycards constituted a per se WPCL violation.
To its credit, the Court recognized that reasonable minds can differ, and certified the case for an immediate appeal to Pennsylvania’s Superior Court (intermediate appellate court). And the Court’s opinion might not hold up on appeal. For instance, despite the WPCL’s literal language, Pennsylvania courts have typically interpreted “wages” broadly, to encompass various forms of compensation — such as stock options and free rent — that are clearly neither “lawful money of the United States” nor “check[s].” See generally Braun v. Wal-Mart Stores, Inc., 24 A.3d 875, 954 (2011) aff’d, 106 A.3d 656 (Pa. 2014); Walker v. Washbasket Wash & Dry, 2001 WL 770804, at *15 (E.D. Pa. 2001). Moreover, the Court’s opinion – if upheld – could have bizarre consequences. It could, for instance, potentially forbid a Pennsylvania employers from offering their workers various non-monetary perks that do not fit within the WPCL’s relatively narrow definition of “fringe benefits and wage supplements.” As an example, using the Siciliano court’s logic, a brewer who gives his employees a free case of beer a week might get slapped with a WPCL suit, on the grounds that beer – though delicious – is sadly not “lawful money of the United States.”
Still, the prospect exists that the Superior Court will affirm the trial court’s ruling. If it does, plaintiffs will likely argue that, because they did not receive “lawful money of the United States,” they received no “wages” at all. Accordingly, plaintiffs will likely contend that their employer owes them full back wages, plus liquidated damages, even though they already received their pay on paycards. The statutory text, and the sheer equities, render such a result unlikely. Indeed, the WPCL expressly permits employers to claim a right of “set-off” that would may eliminate most of the plaintiffs’ claimed damages. And the WPCL, similarly, also permits employers to assert counterclaims. Thus, there is a good chance that the Court will permit the employer to use the original paycard payments to set-off any claimed damages or, alternatively, permit the employer to recover the original paycard payments to prevent unjust enrichment. In either circumstance, Plaintiff’s damages would be minimal (other than, perhaps, statutory attorneys’ fees). That being said, courts do sometimes reach results that seem irrational and unfair. And, in this case, permitting any recovery is likely irrational and unfair, given the nitpicky “gotcha” nature of plaintiff’s claims.
In any event, Pennsylvania employers should consider this decision carefully in deciding whether to revise existing paycard policies.
Jacob Oslick is an Associate in Seyfarth’s New York office. He is an experienced New York and Pennsylvania litigator. He has served as counsel of record in over 60 Pennsylvania matters. If you would like further information on this topic, please contact your Seyfarth attorney or Jacob Oslick at JOslick@seyfarth.com.