Philadelphia Employers Beware: The City’s New Draconian Wage Theft Ordinance

July 13, 2016Alerts Labor & Employment Alert

Philadelphia now has a beefed up new ordinance that targets employers who fail to pay wages owed to employees. The law provides a cornucopia of remedies to an aggrieved employee, including:

  • The creation of a wage theft coordinator position in city government. This “judge, jury and executioner” investigates allegations of “wage theft” and has the authority to impose substantial fines; deny, suspend or revoke any license issued or pending by the city for one year; and initiate suit against an employer.
  • Purportedly creates a private right of action enabling employees to file suit against an employer.
  • Mandates new notice and posting requirements.

What Employers Need To Know

Who can bring a claim under the Wage Theft Ordinance?

Employees, labor organizations or “[a] party acting on behalf of an employee to whom any type of wages is payable.” So, virtually everybody.

Who is an employer?

Every person, firm, partnership, association, corporation, receiver, business trust or any person or group employing any employee. So, almost everybody who pays wages. There is joint and several liability and the specter of individual liability even if the employee is employed by a corporation.

What type of claim can be asserted?

A claim for wages but only within the range from $100 to $10,000. No more, no less. The claim also must be for work performed in Philadelphia or where the employment contract underlying the claim was made in Philadelphia. Ripe for mischief because, if the employer is based in Philadelphia, the claim can easily be that the employment contract was “made in Philadelphia.”

What can the city do against an employer?

The wage theft coordinator can order that wages owed be paid and impose substantial penalties. The financial penalties are up to $2,300 per violation – each week in which wages are unpaid is a separate violation. If unpaid, the city can sue to secure a judgment and will publish the identities of employers who have failed to pay and the amount of unpaid wages. The city also can seek imprisonment of the employer.

The city can “pile on” by also denying, suspending or revoking any license or permit issued by the city for one year if the employer violated “or attempted to” violate the Wage Theft Ordinance, the Pennsylvania Wage Payment and Collection Law or the Pennsylvania Minimum Wage Act. So, if the city decides that an employee was not properly paid $101.32, it can theoretically shut down an employer which employs thousands of employees for a year.

How does this impact the issuance of City of Philadelphia licenses and permits related to business enterprises?

Applicants will now be required to certify that the applicant has not been found guilty, liable or responsible in any judicial or administrative proceeding of committing or attempting to commit a violation of the Wage Theft Ordinance, the Pennsylvania Wage Payment and Collection Law or the Pennsylvania Minimum Wage Act within the past three years.

What notice must be provided to employees?

Employers must either post a poster of rights in a conspicuous and accessible place in each establishment where employees are employed or provide individualized notice to each employee. In addition, if “at least 5% of the employer’s workforce” speaks a language other than English as their “first language,” then notice must be provided “in the first language.”

Notice about the ordinance also must be included in the employee handbook if an employer has one.

Willful violation of the posting and notice requirements is subject to a civil fine not to exceed $100 “for each separate offense.”

Can an employer take action against an employee who filed a claim?

Retaliation and discrimination against a complainant are prohibited and can result in additional penalties.

Can an employee sue for unpaid wages?

The law claims to provide a private right of action to seek unpaid wages due, costs, counsel fees and penalties. How the city has the lawful authority to create a private right of action is a mystery. Employees already have the right to sue under the Pennsylvania Wage Payment and Collection Law or the Pennsylvania Minimum Wage Act so why the city thought this element to be necessary also is a mystery.

Will employees be able to use this ordinance to try and hold employers hostage if there is a dispute over wages owed?

The stakes are much higher now, so, yes. No word on how this ordinance will foster business development in the City of Brotherly and Sisterly Love.

What should an employer do now?

Amend employee handbooks to include the required information about the Wage Theft Ordinance and post notice of the ordinance in English or distribute notice to all employees. If 5% or more of the workforce has a first language other than English, provide notice in that language.

Even though parts of the ordinance probably are unconstitutional and other parts violate state law, better to avoid the quagmire of fighting the proverbial City Hall by paying all wages when due.

If you have any questions regarding this alert, please contact Steven K. Ludwig at 215.299.2164 or [email protected] or a member of Fox Rothschild’s Labor and Employment Department.