Safe Harbor Provision of the West Virginia Wage Payment and Collection Act
March 27, 2020
By: Justin M. Harrison, Danielle M. Waltz, and Benjamin J. Wilson
On March 25, 2020, Governor Jim Justice signed into law an amendment to the West Virginia Wage Payment and Collection Act (“WPCA”) that provides a “safe harbor” to employers, allowing them an opportunity to correct underpayment or nonpayment of wages and fringe benefits due to separated employees prior to the start of lengthy - and costly - litigation.
Before the passage of this law, if an employer failed to pay wages and fringe benefits due an employee upon the employee’s separation, the employer became liable for liquidated damages and attorney’s fees. Sound unfair? It often was. See, the employer became liable for liquidated damages - twice the unpaid amount - and attorney’s fees regardless the reason for the underpayment or nonpayment. Payroll error? Liable. Delay in issuing the paycheck? Liable.
These draconian penalties were especially harsh on small businesses, who may not have been as familiar with the requirements of WPCA or who may not have the resources of a larger employer. Those penalties created a lot of leverage for employees and several law firms, resulting in the threat of class action litigation and leaving few options for the business.
The new law erases this unfair outcome by providing employers with a “safe harbor,” the chance to cure the alleged underpayment before liability is imposed upon them for liquidated damages and attorneys’ fees. Specifically, the new law requires former employees to provide a written demand of any alleged underpayment or nonpayment. The employer has seven calendar days from receipt of the written demand to correct the alleged deficiency. If the employer fails to remedy the wage dispute within those seven days, then the employee will be permitted to seek liquidated damages and attorneys’ fees. A similar requirement is also imposed upon individuals pursuing class actions.
Timely payment of wages due is one of the primary purposes of the WPCA. This law encourages that purpose for both employers and employees alike by allowing them to settle wage disputes in a timely fashion before having to get attorneys involved. Employers have the opportunity to avoid liability for potentially minor mistakes and the costs of defending a cause of action, while employees will be able to collect money owed much more quickly than trying to litigate the complaint and avoid the stress that comes with it.
Employers will have to take certain actions in order to take advantage of the safe harbor provisions. First, upon separation from employment or with the issuance of the final paycheck, the employer must notify the employee in writing who the employer’s authorized representative is and where the employee needs to send a written demand by both e-mail and regular mail. Remember, the employee needs to make a written demand before he/she can seek attorney’s fees and liquidated damages in a claim under the WPCA. And a “written demand” means any writing, including e-mail. It is the employer’s responsibility to inform the employee where to send it.
Once the employer has received the written demand, the employer has seven calendar days from receipt of the demand to correct the alleged underpayment or nonpayment. Of course, if the employer believes there is no mistake, it is not obligated to make any payment. But, after the seven days, if the underpayment or nonpayment is not corrected, the employee may seek liquidated damages and attorney’s fees. Of course, nothing in this provision stops an employee from filing an action in the first place, but rather limits what damages the employee can recover if he/she does not follow the requirements of the safe harbor.
Furthermore, in the context of class actions, the same written demand is required from the employee, but the employee must also clearly state that the demand is for all other employees similarly situated in order to pursue liquidated damages. Also of note to employers, in the class-action context, is that if only the underpayment or nonpayment is corrected for the named employee, the class action may still proceed for the other members of the class. Therefore, there is no “picking off” a lead plaintiff as you might occasionally see in collective actions under the FLSA.
The Jackson Kelly Labor and Employment Team is pleased to have participated in the drafting of this legislation in conjunction with the Jackson Kelly Public Policy Team navigating the legislative process. They stand by to answer any questions you might have about this new statute or future legislative needs.