Pennsylvania Wage Payment and Collection Law Update

In one of the few judicial decisions interpreting the Pennsylvania Wage Payment and Collection Law (“WPCL”), the Pennsylvania Superior Court recently held that an employee’s equity interest in a corporation constituted “wages” for which the employee was required to be compensated upon his resignation. Hartman v. Baker, No. 2230 Pittsburgh 1998, 2000 WL 527891 (Pa. Super. Ct. May 3, 2000). The court also held that, in a case under the WPCL, the employer has the burden of proving by “clear and convincing evidence” that it acted in “good faith” in refusing to make a payment under the WPCL in order to avoid the payment of liquidated damages on claims for unpaid wages.

The plaintiff in Hartman worked for Baker as a cable installer from June 1980 until his resignation in June 1989. During the course of his employment, he and Baker exchanged memoranda that outlined a new compensation structure. The new structure reduced plaintiff’s salary, but provided him with an equity stake in the business. Despite the failure of the parties to sign the agreement, the court found that a binding contract existed because the subsequent actions of the parties indicated acceptance of the terms outlined in the memoranda. When the plaintiff later sought to exercise his equity position as outlined in the memoranda, Baker refused to comply and disputed plaintiff’s right to payment based on the absence of a valid contractual arrangement. Plaintiff sued under the WPCL to recover the amount of the equity payment.

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