Pennsylvania Employers: how are you paying employees?

The Pennsylvania Wage Payment and Collection Act requires employers to pay employees in “lawful money of the United States” or by “check.” [“Check” is defined to include direct deposit to an employee’s bank account where the employee has consented in writing to being paid by direct deposit.] Many employers have begun to pay their employee by using Payroll Cards, which have been gaining favor in recent years. “Payroll Cards” are similar to a bank debit or credit cards, in that at each pay date the employer electronically uploads to each employee’s card the appropriate wage. To get cash, the employee must use the card at the bank that issues the Payroll Card or another bank (or ATM) that accepts it. The Payroll Card also can be used to make purchases, much like a credit or debit card, at any location where such cards are accepted.

Typically, Payroll Cards are issued by major banks or credit card companies such as VISA and MasterCard, so it is not difficult to convert the card into cash or use them to make purchases. However, it is possible such cards can reduce actual wages if used at an ATM that charges a fee.

In Siciliano v. Mueller, a trial level court held that the payment of wages via Payroll Cards does not satisfy this statutory obligation, rejecting the employer’s argument that because the funds loaded onto the card could be readily converted to cash, the cards were the equivalent of money. The court’s reasoning is that the statutory language, “lawful money of the United States,” has a more specific meaning than “money.” (Bear in mind the statute was originally enacted to prevent employers from paying employees in scrip, which also might meet the more generally definition of “money.”)

To its credit, the court recognized that this is a case of first impression in Pennsylvania; that there is legislation pending that would permit the use of Payroll Cards under certain conditions, and that the state Department of Labor is authorized under the Wage Act to promulgate regulations that might permit the use of Payroll Cards. The court certified the case for immediate appeal to the Superior Court.

Pennsylvania employers using Payroll Cards face considerable liability under the Act. To the extent employees convert the cards to cash, it is not likely that they could make the argument that they are entitled to those wages again. However, liquidated damages, which the Act provides for and for attorney’s fees could be substantial in the case of an employer with a large workforce. Accordingly, Pennsylvania employers using Payroll Cards might wish to suspend doing so until there is a final appellate ruling, regulations or new statute authorizing their use.

For questions, comments or additional information, please contact Robert Small, Partner in our Employment Practice Group, at or via phone at 215.495.6541.