SILFEE v. AUTOMATIC DATA PROCESSING, INC.
Filing
58
MEMORANDUM (Order to follow as separate docket entry) re 40 MOTION to Compel ARBITRATION AND STAY LITIGATION OF ERG STAFFING SERVICE, LLP filed by ERG Staffing Service, LLP, 38 MOTION to Dismiss PLAINTIFF'S AMENDED CLASS AC TION COMPLAINT filed by Automatic Data Processing, Inc., 42 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM filed by ERG Staffing Service, LLP, 36 MOTION to Compel INDIVIDUAL ARBITRATION AND STAY PROCEEDINGS filed by Automatic Data Processing, Inc. Signed by Honorable A. Richard Caputo on 9/15/16. (jam)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
JOSHUA SILFEE, individually and on
behalf of all others similarly situated,
Plaintiff,
CIVIL ACTION NO. 3:15-CV-00023
(JUDGE CAPUTO)
v.
AUTOMATED DATA PROCESSING,
INC., and ERG STAFFING SERVICE,
LLP,
Defendants.
MEMORANDUM
Presently before me are four motions: Defendant Automated Data Processing, Inc.’s
(“ADP”) Motion to Compel Arbitration and Stay Litigation (Doc. 36) and Motion to Dismiss
for Failure to State a Claim (Doc. 38), as well as Defendant ERG Staffing Services, LLP’s
(“ERG”) Motion to Compel Arbitration and Stay Litigation (Doc. 40) and Motion to Dismiss
for Failure to State a Claim (Doc. 42). After careful consideration, I will deny Defendants'
motions to compel arbitration, deny ERG’s motion to dismiss, and grant ADP’s motion to
dismiss.
I. Background
Plaintiff Joshua Silfee (“Silfee”) wishes to represent a class of every employee of
every employer in Pennsylvania that used a payroll debit card system administered by
Defendant ADP. (Am. Compl., ¶ 22). According to Silfee, ADP charged fees on those
paycards, which were issued to him as payment of his wages, in violation of Pennsylvania’s
Wage Payment and Collection Law (WPCL). Specifically, Silfee contends that ADP’s
paycard system imposed enrollment, maintenance, ATM, balance inquiry, purchase and
account closure fees. (Id. ¶ 13). Such fees are alleged to be in violation of the WPCL
because Pennsylvania allows only for “deductions provided by the law, or as authorized by
regulation of the Department of Labor and Industry.” 43 P.S. § 260.3.
Defendant ADP is “a provider of business processing and cloud-based solutions,
including payroll, talent management,
human resource management,
benefits
administration, and time and attendance, to employers and automotive dealerships around
the world.” (Id. at ¶ 4.) As part of its payroll products and services offered to clients, ADP
provides employers the option of paying their employees through a paycard system, known
as TotalPay. (Id. at ¶ 8.) This paycard system is issued and administered by ADP, and each
employee is provided with a VISA brand paycard that is loaded each pay period with the
employee’s net earnings. (Id.)
One of the employers that ADP contracted with for the provision of various payroll
services, including the use of the TotalPay paycard system, was ERG Staffing Services,
LLP's, Silfee’s employer. (Id. at ¶ 10.) ERG is a “staffing services that provides light
industrial, clerical, technical, professional, and skilled trade personnel to various businesses
and companies.” (Id. at ¶ 6.) Until approximately July 2013, Silfee was employed by ERG
in Pennsylvania. (Id. at ¶ 9.)
Each pay period, ADP processed payroll for all ERG employees and automatically
loaded the employees’ wages onto the TotalPay paycard. (Id. at ¶ 12.) Employees who
were paid wages through the paycard were charged a host of fees. (Id. at ¶ 13.) Those fees
were deducted by ADP from the balance of funds loaded onto employees’ paycards. (Id.
at ¶ 14.) According to Silfee, those deductions violate Pennsylvania's Wage Payment and
Collection Law. (Id. at ¶ 15.)
On August 22, 2014, Silfee, on behalf of himself and all others similarly situated,
commenced this action against ADP in the United States District Court for the Eastern
District of Pennsylvania on August 22, 2014. The action was subsequently transferred to
this Court by agreement of the parties. (Doc. 14.) In his Complaint, Silfee alleged that ADP
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violated WPCL’s, 43 P.S.§ 260.1 et seq., as a result of the fees associated with the use of
the TotalPay paycard system. (Compl.). Such fees are alleged to be in violation of the
WPCL, which only allows for “deductions provided by the law, or as authorized by regulation
of the Department of Labor and Industry.” (Id.)1
On November 21, 2014, ADP filed a motion to dismiss or to compel arbitration. (Doc.
8.). At that time, I ordered that Silfee's original complaint be dismissed for failure to state
a claim against ADP. (Doc. 23, 1). I held that Silfee failed to allege any facts to support his
contention that ADP, an entity which provided payroll services for his employer, had an
active role in decision-making on issues relating to wage and compensation decisions at
ERG. (Id. at 7). Silfee alleged that ADP was involved in the policy and decision-making on
matters of pay and compensation for ERG, but failed to support this “naked assertion” with
any “factual enhancement” as required under Iqbal and Twombly. Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). Silfee was granted
leave to file an amended complaint, which he filed on April 2, 2015, adding ERG, his former
employer, as a defendant. (Doc. 25.)
In his Amended Complaint, Silfee alleges that ERG delegated control and decisionmaking authority over employees’ wages to ADP, thus making ADP its agent. (Id. at ¶ 17).
Specifically, Silfee claims that ADP exercised its decision-making authority by selecting
paycards as a method of payroll distribution, affiliating with third parties to create and
administer the paycard system, and determining the terms of use of the paycards, including
the imposition of deductions from the funds loaded onto paycards. (Id. at ¶ 18; 50.) Silfee
alleges that, acting as an agent of the employer, ADP was directly responsible for the
1
I note here that federal law also sets forth obligations for financial institutions
related to electronic funds transfers, including payroll card accounts. See 12 C.F.R.
§205.18(a),(b) (2007); see also Requirements for Financial Institutions Offering Payroll
Card Accounts, 71 Fed. Reg. 51444 (Aug. 30, 2006).
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decision to implement the policy regarding the wage deductions and fees associated with
the TotalPay paycard system. (Id. at ¶ 19.)
On May 29, 2015, ADP filed a motion to compel arbitration (Docs. 36, 37) and a
motion to dismiss for failure to state a claim. (Docs. 38, 39). On May 29, 2015, ERG also
filed a motion to compel arbitration (Docs. 40, 41) and a motion to dismiss for failure to state
a claim. (Docs. 42, 43). On June 26, 2015, Silfee filed his briefs in opposition to Defendants’
motions. (Docs. 46-49). On July 13, 2015, both ADP and ERG filed reply briefs in further
support of their motions. (Docs. 50; 52). Silfee also submitted a Notice of Supplemental
Authority on June 3, 2016. (Doc.57). The motions are thus fully briefed and ripe for
disposition.
II. Motions to Compel Arbitration
No party addresses the standard I am to adopt to review Defendants’ motions to
compel arbitration. In the Third Circuit, the standard for motions to compel arbitration
depends on the circumstances. Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d
764, 774-76 (3d Cir.2013). “[W]hen it is apparent, based on ‘the face of a complaint, and
documents relied upon in the complaint,’ that certain of a party's claims ‘are subject to an
enforceable arbitration clause, a motion to compel arbitration should be considered under
a Rule 12(b)(6) standard without discovery's delay.’” Id. at 776 (citing Somerset Consulting,
LLC v. United Capital Lenders, LLC, 832 F. Supp. 2d 474, 482 (E.D. Pa. 2011)). However,
if the complaint and its supporting documents are unclear regarding the agreement to
arbitrate and the validity of the arbitration agreement is at issue, “the parties should be
entitled to discovery on the question of arbitrability before a court entertains further briefing
on [the] question.” Somerset, 832 F.Supp.2d at 482. Upon “limited discovery, the court may
entertain a renewed motion to compel arbitration, this time judging the motion under a
summary judgment standard.” Guidotti, 716 F.3d at 776.
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In light of Guidotti, a disposition of a motion to compel arbitration under the summary
judgment standard would be premature in this case. However, a disposition of the motion
to compel arbitration under the 12(b)(6) standard would also run afoul of Guidotti because
such a standard is to be applied only in cases where a party does not question the
arbitrability or applicability of the arbitration agreement. That is not the case here. (See Doc.
47). Moreover, without a clearly-articulated standard of review, Silfee cannot present facts
essential to justify its opposition to the motion to compel arbitration because he does not
refer to any standard of review; neither do Defendants.
I will therefore abide by the language of Guidotti which authorizes me to delay ruling
on Defendants’ motions to compel arbitration until a summary judgment stage when
discovery is underway. This is also in accord with Rule 56. As the Advisory Committee note
to the 2010 amendments to Rule 56 makes clear, “in many cases the motion will be
premature until the nonmovant has had time to file a responsive pleading or other pretrial
proceedings have been had.” Once “other pretrial proceedings have been had” in this case,
namely, at the very least “discovery on the question of arbitrability,“ Guidotti, 716 F.3d 776,
I will entertain a renewed motion to compel arbitration under the appropriate standard of
review, if ERG chooses to pursue this defense. As such, I will deny Defendants' motions to
compel arbitration.
III. Motions to Dismiss
A.
Legal Standard
Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint,
in whole or in part, for failure to state a claim upon which relief can be granted. See Fed.
R. Civ. P. 12(b)(6). When considering a Rule 12(b)(6) motion, the Court's role is limited to
determining if a plaintiff is entitled to offer evidence in support of the claims. See
Semerenko v. Cendant Corp., 223 F.3d 165, 173 (3d Cir. 2000). The Court does not
consider whether a plaintiff will ultimately prevail. Id. A defendant bears the burden of
5
establishing that a plaintiff's complaint fails to state a claim. See Gould Elecs. v. United
States, 220 F.3d 169, 178 (3d Cir. 2000).
“A pleading that states a claim for relief must contain . . . a short and plain statement
of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The
statement required by Rule 8(a)(2) must “‘give the defendant fair notice of what the . . .
claim is and the grounds upon which it rests.’” Erickson v. Pardus, 551 U.S. 89, 93, 127 S.
Ct. 2197, 167 L. Ed. 2d 1081 (2007) (quoting Twombly, 550 U.S. at 555). Detailed factual
allegations are not required. Twombly, 550 U.S. at 555. However, mere conclusory
statements will not do; “a complaint must do more than allege the plaintiff's entitlement to
relief.” Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). “While legal
conclusions can provide the framework of a complaint, they must be supported by factual
allegations.” Iqbal, 556 U.S. at 664. As such, “[t]he touchstone of the pleading standard is
plausibility.” Bistrian v. Levi, 696 F.3d 352, 365 (3d Cir. 2012).
The inquiry at the motion to dismiss stage is “normally broken into three parts: (1)
identifying the elements of the claim, (2) reviewing the complaint to strike conclusory
allegations, and then (3) looking at the well-pleaded components of the complaint and
evaluating whether all of the elements identified in part one of the inquiry are sufficiently
alleged.” Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011). Dismissal is appropriate only
if, accepting as true all the facts alleged in the complaint, a plaintiff has not pleaded “enough
facts to state a claim to relief that is plausible on its face,” Twombly, 550 U.S. at 570,
meaning enough factual allegations “‘to raise a reasonable expectation that discovery will
reveal evidence of’” each necessary element. Phillips v. County of Allegheny, 515 F.3d 224,
234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556). “The plausibility standard is not akin
to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant
has acted unlawfully.” Iqbal, 556 U.S. at 678. “When there are well-pleaded factual
allegations, a court should assume their veracity and then determine whether they plausibly
give rise to an entitlement to relief.” Id. at 679, 129 S. Ct. 1937.
In deciding a motion to dismiss, the Court should consider the complaint, exhibits
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attached to the complaint, and matters of public record. Mayer v. Belichick, 605 F.3d 223,
230 (3d Cir. 2010) (citing Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998
F.2d 1192, 1196 (3d Cir. 1993)). The Court may also consider “undisputedly authentic”
documents when the plaintiff's claims are based on the documents and the defendant has
attached copies of the documents to the motion to dismiss. Pension Benefit Guar., 998 F.2d
at 1196. The Court need not assume the plaintiff can prove facts that were not alleged in
the complaint, see City of Pittsburgh v. W. Penn Power Co., 147 F.3d 256, 263 & n.13 (3d
Cir. 1998), or credit a complaint's “bald assertions” or “legal conclusions.” In re Burlington
Coat Factory Sec. Litig., 114 F.3d 1410, 1429–30 (3d Cir. 1997).
B.
ADP’s Motion to Dismiss
ADP seeks dismissal of Silfee’s claim alleging that ADP’s fee assessment associated
with the use of the paycard system violated the WPCL. ADP claims that it complied with the
WPCL by enabling Silfee to collect his wages once each pay period without incurring any
fees and, to the extent that Silfee chose to incur card-related fees, the fees in question were
withholdings that Silfee authorized. (Doc. 39, 2). Further, ADP claims that Silfee has failed
to plead facts sufficient to demonstrate that ADP was an agent of ERG for the purposes of
the WPCL. (Id.) Specifically, ADP contends that Siflee failed to allege any facts to support
his contention that ADP had an active role in decision-making on issues relating to wage
and compensation decisions at ERG. (Doc. 39, 3-7).
As I noted in the Memorandum dismissing Silfee’s original complaint, because the
WPCL lacks the definition of an “agent”, the resolution of the question whether ADP
qualifies as an “agent” of ERG implicates “[t]he interpretation of [a] Pennsylvania statute[]
[which] is governed by the state’s Statutory Construction Act of 1972, 1 Pa. Cons. Stat. Ann.
§§ 1501-1991 (1995 Supp.).” Hofkin v. Provident Life & Acc. Ins. Co., 81 F.3d 365, 371 (3d
Cir. 1996). The Pennsylvania Statutory Construction Act provides that technical words are
to be construed according to their “peculiar and appropriate meaning.” 1 Pa. Cons. Stat.
Ann. § 1903(a); accord Scungio Borst & Assocs. v. 410 Shurs Lane Developers, LLC, 106
A.3d 103, 109-10 n.6 (Pa. Super. Ct. 2014) (noting that “agent,” an undefined term in the
7
Contractor and Subcontractor Payment Act, was to be construed according to its peculiar
and appropriate meaning).
An “agent” is defined as “one who is authorized to act for or in place of another.” Vine
v. Commonwealth, 9 A.3d 1150, 1158 (Pa. 2010) (quoting Black’s Law Dictionary 26-27 (3d.
pocket ed. 2006)). “A principal and agent can be in the relationship of a master and servant,
or simply in the status of two independent contractors.” Juarbe v. City of Phila., 431 A.2d
1073, 1075-76 (Pa. Super. Ct. 1981) (citations omitted). While a party “may stand as both
independent contractor and agent to another,” Tax Review Bd. v. Slater Sys., Inc., 398 Pa.
477, 482, 158 A.2d 561, 563 (Pa. 1960) (citing Commonwealth v. Minds Coal Mining Corp.,
360 Pa. 7, 60 A.2d 14 (Pa. 1948)), “[u]nder Pennsylvania law, it has been expressly stated
that not all independent contractors are agents.” Cohen v. Salick Health Care, Inc., 772 F.
Supp. 1521, 1528 (E.D. Pa. 1991) (citing Minds Coal, 360 Pa. 7, 17, 60 A.2d 14, cited with
approval by Moon Area School District v. Garzony, 522 Pa. 178, 189, n. 8, 560 A.2d 1361,
1367 n.8 (Pa. 1989)).
ADP's motion to dismiss Silfee's WPCL claim will be granted. Stripping the Amended
Complaint of its legal conclusion that ADP was an "agent" of ERG, the extent of Silfee's
factual allegations regarding the relationship between the two entities is that ERG
contracted with ADP for the provision of payroll services and that it was ADP that decided
to make the allegedly unlawful deductions. (Am. Compl. at ¶ 53.) Silfee’s Amended
Complaint, however, is fraught with inconsistences. On the one hand, Silfee contends that
ADP “select[ed] paycards as a method of compensation.” (Id. ¶ 18). On the other, he claims
that ERG in fact “authorized ADP to implement to utilize” the paycard system, (Id. ¶ 20
(emphasis added)), that “ADP provide[d] employers the option of paying their employee
through a paycard system,” (Id. ¶ 8 (emphasis added)), and that paycards are only one
option for paying wages to employees among a "suite of payroll products and services [that
ADP] offered to its clients.” (Id.) In support of his argument, Silfee also claims that “ADP
paid wages to ERG employees,” (Id. ¶ 11 (emphasis added)), when in fact, as Silfee admits,
APD merely “processed the payroll for all employees,” and “automatically loaded the”
8
wages, using funds provided by ERG. (Id. ¶ 12; Doc. 39 at 15). Therefore, a careful reading
of Silfee’s Amended Complaint reveals that ADP played a significantly more passive role
than Silfee aims to portray. It is much more plausible that ADP simply provided ERG with
the option of using the paycard system as part of ADP’s “suite of payroll products.” (See
Doc. 39, 16-17; Doc. 52, 16.).
As I made clear when I dismissed Silfee's original complaint, Silfee was obligated to
come forward with factual allegations showing that ADP was more than a payroll vendor,
and that it was “authorized to act for or in place of [ERG]” with respect to “corporate
decision-making or corporate advisement on matters of pay or compensation.” (Doc. 23, at
7, 9). Silfee again has failed to satisfy the requirements of Twombly, and, although
discovery is often “necessary when an agency relationship is alleged,” Jurimex Kommerz
Transit G.M.B.H. v. Case Corp., 65 F. App’x 803, 808 (3d Cir. 2003), Silfee again has not
alleged “enough facts to raise a reasonable expectation that discovery will reveal evidence”
that ADP was ERG’s agent. See Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir.
2008). Silfee’s narrative is inconsistent with facts essential to support the claim that ADP
decided “for or in place of” ERG that paycards would be utilized as ERG’s method of wage
distribution. Developers Sur. & lndem. Co., 2013 WL 6504751, at *10; Gainey, 177 F.Supp.
at 431.
Although the Pennsylvania Legislature has proclaimed that the WPCL should be
liberally construed “to effect [its] objects and to promote justice,” 1 Pa. C.S.A. § 1928( c),
and “[has] broadly defined ‘employer,’ . . . courts have narrowly construed this provision as
imposing liability only against agents or officers who had an active role in decision-making
. . . and only in the event the corporation has first defaulted upon its wage payment
obligation.” Scungio Borst & Associates v. 410 Shurs Lane Developers, LLC, 2014 PA
Super 260, 106 A.3d 103, 108 (2014) (citing Int'l Ass'n of Theatrical Stage Employees,
Local Union No. 3 v. Mid–Atlantic Promotions, Inc., 856 A.2d 102, 105 (Pa. Super. 2004)).
Therefore, even if ADP were an agent, any liability is contingent upon ERG' s inability to pay
due to ERG’s corporate managers diversion of funds that were intended to be used for
9
wages. Belcufine, 112 F.3d at 639 (stating that the purpose of the Pennsylvania Legislature
was to hold an agent or officer liable under the WPCL “in the event that a corporation failed
to make wage payments”); see also Panetta v. SAP Am., Inc., No. 05-4511, 2006 WL
924996, at *4 (E.D. Pa. Apr. 6, 2006) (“[A]n officer’s liability under the WPCL is contingent
on liability of the company to the employee.”). Although Silfee was compelled to come
forward with facts suggesting that ADP, acting as an agent of ERG, diverted ERG corporate
funds that were meant to pay wages, he asserts no such facts in his Amended Complaint.
Finally, ADP argues that the deductions Silfee complains about were in fact made
by a third-party financial institution, MetaBank, for Silfee’s use of the debit-card services,
and as such WPCL does not apply at all. (Doc. 39, 15.). Silfee counters that it is irrelevant
that MetaBank took the deductions, because “[a]s ‘employers’ under the WPCL, both [ADP
and ERG] had the duty to ensure that Plaintiff received his full wages.” (Doc. 48, 10). Such
an interpretation of the WPCL’s provisions is too significant a leap. Clearly, there is question
about the permissibility of the use of paycards as a means to pay employees, See, e.g.,
Office of N.Y. State Att’y Gen., Pinched by Plastic: The Impact of Payroll Cards on
Low-Wage Workers (2014), http://www.ag.ny.gov/pdfs/Pinched%20by%20Plastic.pdf.
I cannot, however, agree with Silfee that the WPCL’s pertinent provisions extend to ADP.
As the Third Circuit held in Belcufine, an employee's primary recourse for recovery of
unpaid wages is from his actual employer. 112 F.3d at 639-40. Silfee must seek recourse
for recovery of any unpaid wages from ERG.
Because Silfee has not adequately pled that ADP was an “agent” of ERG for the
purposes of the WPCL, Silfee fails to state a claim upon which relief can be granted as
against ADP, and ADP’s motion to dismiss will be granted.
C.
Leave to Amend
Rule 15 of the Federal Rules of Civil Procedure permits a court to grant a party leave
to amend its pleadings. See Fed. R. Civ. P. 15(a)(2). “The court should freely give leave
when justice so requires.” Id. As such, “if a complaint is subject to a Rule 12(b)(6) dismissal,
a district court must permit a curative amendment unless such an amendment would be
10
inequitable or futile.” Phillips, 515 F.3d at 245 (citing Alston v. Parker, 363 F.3d 229, 235
(3d Cir. 2004)). In this context, "‘futility' means that the complaint, as amended, would still
fail to state a claim upon which relief could be granted." Shave v. Fauver, 213 F.3d 113, 115
(3d Cir. 2000) (citing In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d
Cir.1997)). Silfee will not be given the opportunity to file a second amended pleading
against ADP.
D.
ERG’s Motion to Dismiss
Silfee’s employer, ERG, also seeks dismissal of Silfee’s claim that it violated the
WPCL with respect to the fees associated with the use of the TotalPay paycard system.
(Doc. 42).
The WPCL states, in pertinent part:
(a) Every employer shall pay all wages, other than fringe benefits and
supplements, due to his employees on regular paydays designated in
advance by the employer. . . . The wages shall be paid in lawful money of the
United States or check, except that deductions provided by the law, or as
authorized by regulation of the Department of Labor and Industry for the
convenience of the employee, may be made including deductions of
contributions to employee benefits plans, which are subject to the Employee
Retirement Income Security Act of 1974, 29U.S.C. § 1001 et seq.
43 P.S. § 260.3.2. Section 9.1 of the Pennsylvania Code lists twelve deductions from wages
authorized by the Department of Labor and Industry. 34 Pa. Code. § 9.1(1-12). It also
permits “[s]uch other deductions authorized in writing by employees as in the discretion of
the Department is proper and in conformity with the intent and purpose of the Wage
Payment and Collection Law. . . .” Id. at § 9.1(13).
The purpose of the WPCL has been to:
provide a vehicle for employees to enforce payment of their wages and
compensation held by their employers . . . [and] to remove some of the
obstacles employees face in litigation by providing them with a statutory
remedy when an employer breaches its contractual obligation to pay wages.
The WPCL does not create an employee's substantive right to compensation;
rather, it only establishes an employee's right to enforce payment of wages
and compensation to which an employee is otherwise entitled by the terms of
an agreement.
Thomas Jefferson Univ. v. Wapner, 903 A.2d 565, 574 (Pa. Super. Ct. 2006) (citing
Hartman v. Baker, 766 A.2d 347, 352 (Pa. Super. Ct. 2000)).
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ERG argues that Silfee fails to state a claim against it because ERG itself did not
make deductions from Silfee’s wages (Doc. 43, 6–9), and the deductions at issue were
authorized by Silfee (Id. at 9–13).2 Both arguments fail.
Under Pennsylvania law, “[e]very employer shall pay all wages” to his employees,
unless one of the permitted deductions applies. In this case, ERG did not pay wages directly
to employees, but rather authorized a third-party, ADP, to distribute them from a fund held
in a bank. (See ADP TotalPay Card Agreement, § 1(D) (Doc. 38-5). ADP then charged fees
against the employees’ wages. ERG now claims that, although the law requires it to “pay
all wages,” it nevertheless bears no responsibility for the actions of a third-party ERG hired
to disburse wages on its behalf. Apparently, neither the fee-laden debit cards nor the
allegedly cumbersome and arduous scheme ADP imposed on receiving wages are ERG’s
responsibility. Following ERG’s logic, a Pennsylvania employer can comply with the WPCL
by tendering its employees’ wages to another entity without regard to whether the wages
eventually reach the employees free of unauthorized deductions, or, in fact, reach them at
all. On the contrary, the plain meaning of 43 P.S. § 260.3.2 is that it requires that “all wages”
reach employees without any impermissible deductions, and holds the employer liable if that
is not so. See Barnhart v. Sigmon Coal Co., 534 U.S. 438, 461-462 (2002) (citing
Connecticut Nat. Bank v. Germain, 503 U.S. 249, 253–254 (1992)) (“We have stated time
and again that courts must presume that a legislature says in a statute what it means and
means in a statute what it says there. When the words of a statute are unambiguous, then,
this first canon is also the last: ‘judicial inquiry is complete.’”); Hannaberry HVAC v. Workers’
Comp. Appeal Bd., 834 A.2d 524, 531 (Pa. 2003) (“When the words of a statute are clear
and free from all ambiguity, they are presumed to be the best indication of legislative
2
ERG also argues that the deductions at issue were authorized by the Pennsylvania
Department of Labor and Industry but, except for an inference emerging from DLI’s opinion
letters (See, e.g., Doc. 43 at 12), ERG presents no evidence to directly support that claim.
In any case, at this stage, my inquiry is confined to evaluating whether Silfee stated a
plausible claim for relief, not whether he stated a winning one. See Semerenko, 223 F.3d
at 173.
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intent.”). The words of the WPCL are unambiguous. Nowhere does the law imply that an
employer can skirt its responsibility to “pay all wages” merely because it chose a third-party
vendor to administer a fee-laden paycard system. See Laborers Combined Funds v. Mattei,
359 Pa.Super. 399, 405-06, 518 A.2d 1296, 1299-1300 (1986) (stating that the obligation
for liability under the WPCL is placed on the decision makers of the corporation and “the
conduct of a third party will not be permitted to affect the [employer’s] contractual
obligations”). Section 260.3.2 places on the employer the burden to ensure that a pay
system complies with the law, and that includes ensuring that a chosen payment scheme
does not result in impermissible deductions, fees, or delay.
Silfee also argues that ERG steered workers to receive wages by paycards by
creating an arduous process which effectively discouraged the selection of a check as an
alterative method of payment. (Doc. 48, 5). Research has been unable to discover any
legislative history or caselaw discussing this novel issue of law. I am aided here, however,
by a letter dated October 31, 2012 from Peter Von Getzie, Assistant Counsel,
Commonwealth of Pennsylvania, Governor’s Office of Attorney General to which both
parties refer (See, e.g., Doc. 48, at 8; Doc. 43, at 12). Although the letter “does not
represent any type of formal opinion, ruling, or policy statement [and] . . . is not binding on
the courts,” (2012 Letter at 1), I nonetheless find it a helpful guide. As the letter explains:
Historically, we have viewed payment of wages in forms other than "lawful
money'' or "check" -such as debit or pay card programs- as permissible
only if an employee agrees to this form of payment. We have raised
concerns about any program of wage payment pursuant to which
employees are compelled to accept payment through a card instead of a
traditional paper paycheck. For example, any charges or fees associated
with a debit card method of payment may be seen as an invalid deduction
from wages, prohibited by the WPCL's regulations 34 Pa. §§ 9.1- 9.4.
(Id. at 2). The letter confirms that a paycard program that results in coerced consent may
run afoul of the WPCL. Without a doubt, ERG was on notice that, by contracting with ADP
to use the TotalPay Services, it was subjecting its employees to fees imposed by ADP. See
ADP TotalPay Card Agreement, § 2(B) (Doc. 38-5) (“[ERG] acknowledges that separate
fees and charges for Card maintenance and usage will be applied to Cardholders’ Cards.
13
Such Cardholder fees and charges are subject to change in accordance with the terms and
conditions of use of the Cards.”). ERG argues that because "cardholders can use Money
Network Checks to collect their wages without incurring a fee." (Doc. 43, at 14), and the
WPCL expressly allows wages to be paid in either “lawful money of the United States or
check” 43 P.S. § 260.3(a), it’s payment scheme is not violative of the WPCL. Indeed, the
abovementioned letter from the Attorney General’s office explains that some “debit or card
programs have alleviated our concerns by offering ‘self-issued’ paper checks.” ERG cites
to the Terms and Conditions of the TotalPay Card Money Network Services, which Silfee
received, as stating that,
[a]n initial stock of Money Network Checks is provided when you activate the
Money Network Service. You may choose to receive your pay each or any
pay period by completing a Money Network Check, rather than through any
use of the Card. . . . The first Money Network Check that you use during each
payroll payment is free.
(Doc. 36-4, 5.) Silfee, however, argues that the Money Network Checks do “not meet the
legal definition of a ‘check’ because they are not unconditional written orders when they are
given to employees, nor do they automatically become unconditional written orders on
paydays.” (Doc. 48, at 9).
The WPCL provides for a definition of “check.” It defines it as “[a] draft drawn on a
bank and payable on demand.” 43 P.S. 260.2a. A “draft” is an “order for the payment of
money . . . .” See Merriam-Webster’s Dictionary of Law 151 (1996). This is consistent with
the definition of “order” under the Uniform Commercial Code (“UCC”). See 13 P.S. §
3103(a) (defining “order” as “[a] written instruction to pay money signed by the person giving
the instruction”).
The WPCL does not define the phrase “payable on demand,” but it too has a
well-established meaning under the law. See 13 P.S. § 3108(a) (1992) (“A promise or order
is ‘payable on demand’ if it: (1) states that it is payable on demand or at sight or otherwise
indicates that it is payable at the will of the holder; or (2) does not state any time of
payment.”). Payable on demand “is an unconditional agreement to pay a sum certain on
demand . . . .” First Nat'l Bank v. Bartlett, 35 Pa. Super. 593, 1908 Pa. Super. LEXIS 87 (Pa.
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Super. Ct. 1908). See also Cook v. Carpenter, 212 Pa. 165, 61 A. 799, 1905 Pa. LEXIS 576
(Pa. 1905) (“The obligation to pay in such case is absolute and present; the only element
not fixed with certainty is the time of payment, and as that is at the option of the creditor,
and the debtor must be prepared eo instante, the time of payment, and with it the statute,
begins to run at once.”).
Silfee argues that the Money Network Checks offered by Defendants do not function
like checks for because “an employee is required to undertake a multi-step process over
the telephone to obtain prior authorization and a valid transaction code before the check
can be used.” (Doc. 48, at 9). Specifically,
to activate a Money Network Check, the employee must: 1) check the balance
of his Money Network Account so that he knows the amount he needs to
enter on his check. He can only check his balance by calling Money Network,
or visiting a website, and entering his TotalPay Card number; 2) fill out the
amount and payee of the check; 3) call a number listed on the back of the
check, get to the Money Network Check menu, enter the check number and
“digit” number using his phone’s keypad, enter the amount written on the
check on his keypad, and write down the “issuer number” and “transaction
number” provided by the automated phone system; 4) write the issuer number
and transaction number on the check; 5) if he does not want to incur a fee for
cashing the check, he must use the internet or call Money Network’s
customer service line to find a location that will cash the check for free; 6)
finally, he must take the check to that location to receive his wages. (See Doc.
42-7, at 4). It appears that only two Money Network Checks are provided to
the employee with the TotalPay Service materials; the employee is required
to call customer service to order more checks. Id.
(Doc. 48, at 5). In addition,
employees face the risk of incurring fees or not receiving their wages if they
make any mistakes while writing the check. For instance, if the employee
writes the check for an incorrect amount or writes an incorrect transaction
number, the check may be rejected because it is not an unconditional order
to pay; it must have a valid code. If the employee needs to make a stop
payment request on a check, he will also incur a $10 fee. (Terms and
Conditions, § 21(e)). If the employee requires the assistance of a human
operator while interfacing with the Money Network phone systems, he could
incur a variety of $1 “operator” fees. Id.
(Id. at 6). I find that it is too great a leap of statutory construction to assume that the
legislature meant for the word “check” to include the payment mechanism Silfee describes.
As such, in addition to stating a plausible claim for relief against ERG under the WPCL for
the complained-of deductions, Silfee also states a plausible claim that ERG violated the
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WPCL because it failed to pay wages in “lawful money” or “check,” irrespective of whether
any deductions were made.
III. Conclusion
For the above-stated reasons, I will deny Defendants' motions to compel arbitration,
deny ERG’s motion to dismiss, and grant ADP’s motion to dismiss. Silfee will also not be
given the opportunity to file a second amended complaint.
An appropriate order follows.
September 15, 2016
Date
/s/ A. Richard Caputo
A. Richard Caputo
United States District Judge
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