If you’re a decision-maker in your organization and exercise that power to withhold wages from an employee, you could find yourself personally liable to that employee if you get it wrong. That means the employee could sue you personally, tapping into your bank account and assets.
This situation could happen, for example, if a business downturn occurs and you recommend that promised bonuses or other wages be withheld until business picks up.
The Pennsylvania Wage Payment and Collection Law (WPCL) makes employers liable for wrongful withholding of wages due and agreed upon. Because the law defines an employer as “any person, firm, partnership, association, corporation ... and agent or officer ... employing any person in this Commonwealth,” employees who take an active role in the decision to withhold wages can be held personally liable for those unpaid wages. If the business fails despite cost-containment efforts, employees may try to collect the money from you.
Recent case: Stephen Hirsch worked for EPL Technologies. When the firm ran into financial trouble, its board decided to temporarily withhold wages. That meant Hirsch didn’t earn about $400,000 that he otherwise would have been paid.
He sued both the company and the CEO personally under the WPCL. The Superior Court held that those who exercise an active role in the decision-making can be liable. Because the CEO actively participated in the pay-reduction plan, he could be personally sued. (Hirsch v. EPL Technologies and Devine, No. 2618-EDA, 2005, Superior Court of Pennsylvania, 2006)
Related note: Other Pennsylvania laws also allow for personal liability for employment decisions. For example, while the federal ADA doesn’t hold individuals liable for disability discrimination, the Pennsylvania Human Relations Act does. In short, it’s more dangerous to be an HR professional in Pennsylvania than in many other states.
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