HB 567 — An Act providing for assumption of employment relationship, for terms of yearly employment contract, for prohibition on waivers or limitations of employment protections, for elements of wrongful discharge, for remedies for wrongful discharge and for probationary period of employment.

PRINTER'S NO.   571

                   THE GENERAL ASSEMBLY OF PENNSYLVANIA



                       HOUSE BILL
                       No. 567
                                              Session of
                                                2025

     INTRODUCED BY HOWARD, WAXMAN, KAZEEM, HILL-EVANS, ABNEY,
        SANCHEZ, MADDEN AND KENYATTA, FEBRUARY 12, 2025

     REFERRED TO COMMITTEE ON LABOR AND INDUSTRY, FEBRUARY 12, 2025


                                   AN ACT
 1   Providing for assumption of employment relationship, for terms
 2      of yearly employment contract, for prohibition on waivers or
 3      limitations of employment protections, for elements of
 4      wrongful discharge, for remedies for wrongful discharge and
 5      for probationary period of employment.
 6      The General Assembly of the Commonwealth of Pennsylvania
 7   hereby enacts as follows:
 8   Section 1.   Short title.
 9      This act shall be known and may be cited as the Employment
10   Clarification Act.
11   Section 2.   Declaration of purpose.
12      The General Assembly finds and declares as follows:
13          (1)   It is the intent of the General Assembly to overrule
14      the common law construct known as at-will employment, created
15      in whole cloth by the courts of this Commonwealth without
16      legislative input.
17          (2)   The common law assumption of at-will employment
18      presumes an unrealistic equality of bargaining power between
19      employer and employee.
 1          (3)   This assumption was created to fill a vacuum in the
 2      laws of this Commonwealth.
 3          (4)   The subsequent development of the legal and
 4      statutory concept of wrongful termination has implicitly
 5      nullified the assumption of termination without cause.
 6          (5)   The resulting legal vacuum and uncertainty needs to
 7      be addressed by a legislative enactment specifying the proper
 8      assumptions of employment relationships.
 9          (6)   It is in this Commonwealth's interest that
10      employees, bargaining from a position of comparative
11      disadvantage, should enjoy a greater presumption of
12      employment protection as a matter of law.
13          (7)   It is in the interest of employers to provide
14      certainty regarding the circumstances under which an
15      employment relationship may be severed, thus preventing
16      employers from being exposed to unexpected liability.
17   Section 3.   Definitions.
18      The following words and phrases when used in this act shall
19   have the meanings given to them in this section unless the
20   context clearly indicates otherwise:
21      "Breach of the duty of loyalty."       As follows:
22          (1)   An employee's breach of the duty of loyalty due to
23      the employee's employer in matters related to the employment
24      relationship by any of the following:
25                (i)     Using or disclosing the employer's confidential
26          information to serve an interest other than the
27          employer's interest.
28                (ii)    Directly and meaningfully competing with the
29          employer while employed by the employer.
30                (iii)    Appropriating the property of the employer or

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 1          engaging in self-dealing through use of the employer's
 2          property.
 3          (2)   The term does not include an employee's actions
 4      relating to the organization of a union or in furtherance of
 5      organizing other employees.
 6      "Constructive discharge."    The termination of employment by
 7   an employee due to a situation created by an act or omission of
 8   the employer that a reasonable person would find so intolerable
 9   that resignation is the only reasonable option. The term does
10   not include termination due to an employer's refusal to promote
11   the employee or improve wages, responsibilities or other terms
12   and conditions of employment.
13      "Discharge."    The termination of employment, including
14   resignation, elimination of position, layoff, failure to recall
15   or rehire or any other cutback in the number of employees.
16      "Employee."    An individual employed by an employer, other
17   than a temporary or seasonal employee hired for a specific
18   period of not more than six months, an independent contractor or
19   an individual in a business relationship not deemed an
20   employment relationship under the laws of this Commonwealth.
21      "Employer."    An individual, partnership, association,
22   corporation, governmental body or other entity operating within
23   this Commonwealth that provides employment to no less than 15
24   employees.
25      "Fringe benefits."    The value of an employer-paid vacation
26   leave, sick leave, medical insurance plan, disability insurance
27   plan, life insurance plan or pension benefit plan in force on
28   the date of discharge.
29      "Good cause."    Reasonable job-related grounds for an
30   employee's dismissal based on any of the following:

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 1          (1)     Gross incompetence or dereliction of duty, including
 2      a breach of the duty of loyalty.
 3          (2)     Commission of felonious acts in the workplace.
 4          (3)     Repeated or gross violations of terms of employment
 5      as stated in an employee handbook or similar notice.
 6          (4)     Financial exigency.
 7          (5)     Conviction of a crime for which the employee must
 8      serve a sentence in a correctional setting, whether job
 9      related or not.
10          (6)     Being otherwise indisposed in a way that would make
11      continued performance of duties impossible.
12      "Leave of absence."    An employee's absence from work for any
13   reason other than an anticipated or scheduled absence, including
14   sick leave, a holiday or vacation.
15      "Lost wages."    The gross amount of wages that would have been
16   reported to the Internal Revenue Service as gross income on Form
17   W-2, including additional compensation deferred at the option of
18   an employee.
19      "Public policy."    A policy in effect at the time of the
20   discharge concerning public health, safety or welfare as
21   established by Federal or State law.
22      "Start date."    Unless otherwise specified, the date when an
23   employer is obligated to begin paying wages and benefits, or the
24   date when a written contract offering employment is signed by
25   the employee, whichever is earlier.
26   Section 4.   Assumption of employment relationship.
27      Except as otherwise provided in a clear, written and signed
28   employment contract, it shall be presumed that an employment
29   relationship between an employer and an employee is based on a
30   yearly employment contract prohibiting the employer from

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 1   terminating employment without good cause.
 2   Section 5.     Terms of yearly employment contract.
 3      (a)   One-year term.--Except as otherwise provided in a clear,
 4   written and signed employment contract, employment under the
 5   assumption of a yearly employment contract under section 4 shall
 6   be for a term of one year from the start date of employment.
 7      (b)   Automatic renewal.--On the date when the term of
 8   employment under subsection (a) ends, unless the employer
 9   provides written notice of the employer's intent to terminate
10   employment and a written reason for the decision to not renew to
11   the employee no less than 30 days before the end date, the
12   employment relationship shall be automatically renewed for
13   another one-year term.
14      (c)   Termination of employment.--
15            (1)   An employee may terminate an employment relationship
16      under this section at any time with or without notice to the
17      employer.
18            (2)   An employer may terminate employment in a yearly
19      employment contract under this section before the term of
20      employment ends for good cause.
21   Section 6.     Prohibition on waivers or limitations of employment
22                  protections.
23      (a)   Prohibition.--The provisions of section 5 shall be
24   considered minimum standards of job security, and any terms in a
25   written employment contract limiting or waiving the provisions
26   of section 5 shall be invalid and unenforceable.
27      (b)   Modifications.--An employer and employee may modify an
28   employment relationship under section 5 by entering into a
29   written and signed employment contract agreed to by the employer
30   and employee after the start date. Nothing in this act shall be

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 1   construed to prohibit an employer and employee from entering
 2   into a written employment contract after the commencement of an
 3   employment relationship under section 5.
 4   Section 7.     Elements of wrongful discharge.
 5      An employer engages in the wrongful discharge of an employee
 6   if any of the following apply:
 7            (1)   The discharge was in retaliation for the employee's
 8      refusal to violate public policy or for reporting a violation
 9      of public policy.
10            (2)   The discharge was not for good cause.
11            (3)   The employer materially violated an express
12      provision of the employer's written personnel policy before
13      the discharge, and the violation deprived the employee of a
14      fair and reasonable opportunity to remain in a position of
15      employment with the employer.
16            (4)   The discharge violates a term of the employment
17      contract, including the provisions of section 5.
18            (5)   The employer's conduct resulted in the constructive
19      discharge of the employee.
20   Section 8.     Remedies for wrongful discharge.
21      (a)   Remedies.--If an employer engages in the wrongful
22   discharge of an employee under section 7, the employee may bring
23   an action in a court of competent jurisdiction for appropriate
24   damages. The following shall apply:
25            (1)   The court may award the employee reasonable attorney
26      fees and lost wages and fringe benefits for a period not to
27      exceed four years from the date of discharge, as well as
28      reasonable amounts expended by the employee in searching for,
29      obtaining or relocating to new employment, together with
30      interest on the lost wages and fringe benefits calculated by

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 1      applying any upward change in the Consumer Price Index for
 2      All Urban Consumers for the Pennsylvania, New Jersey,
 3      Delaware and Maryland area for each year since the date of
 4      discharge.
 5            (2)   The court shall deduct from the amount awarded to
 6      the employee for lost wages under paragraph (1) the
 7      employee's interim earnings derived from a new kind, nature
 8      or type of work, hire, contractor status or employment that
 9      did not exist at the time of discharge.
10            (3)   The court shall consider the monetary payments,
11      compensation or benefits the employee received from the
12      employer arising from or related to the wrongful discharge,
13      including early retirement pay, and shall deduct that amount
14      from the amount awarded for lost wages under paragraph (1).
15            (4)   The court may award punitive damages to the employee
16      if it is established by clear and convincing evidence that
17      the employer acted fraudulently, maliciously or with wanton
18      disregard for the employment protections specified under this
19      act or an employment contract in the employer's wrongful
20      discharge of the employee.
21      (b)   Statute of limitations.--An action under subsection (a)
22   must be brought no later than four years after the date of
23   discharge.
24      (c)   Nonexclusive remedy.--
25            (1)   Nothing in this section shall be construed to
26      prohibit, limit or restrict any other cause of action or
27      remedy regarding the wrongful discharge of an employee by an
28      employer as specified under Federal or State law.
29            (2)   An employee may prove, by a preponderance of the
30      evidence in a court of competent jurisdiction, that an

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 1      employer's decision to not renew an employment contract with
 2      the employee is motivated by retaliation, discrimination or
 3      any other motive prohibited by Federal or State law for which
 4      a remedy exists. In assessing the employer's decision to not
 5      renew an employment contract with the employee, the court may
 6      regard the employer's reason for the decision under section
 7      5(b) as pretextual if the evidence indicates that an unlawful
 8      motive was a proximate cause of the decision.
 9   Section 9.   Probationary period of employment.
10      A written and signed employment contract may establish a
11   specific probationary employment period from the start date,
12   which shall not exceed three months. The following shall apply
13   to a probationary employment period:
14          (1)   The employer may discharge the employee by providing
15      written notice to the employee no later than two days prior
16      to the date of discharge. An employer that discharges an
17      employee during a probationary employment period in
18      accordance with this paragraph shall not be civilly liable in
19      an action brought by the employee under section 8.
20          (2)   If the employee takes a leave of absence during the
21      probationary employment period, the time of the leave of
22      absence may not be considered a part of the probationary
23      employment period unless the employer affirmatively elects to
24      include the leave of absence as part of the probationary
25      employment period.
26          (3)   No less than 14 days before the end date of the
27      probationary employment period, the employer shall notify the
28      employee whether the employer is electing to continue the
29      employment relationship. If the employer either elects to
30      continue the employment relationship or fails to provide the

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1      notice required under this paragraph to the employee at least
2      14 days before the end date of the probationary employment
3      period, the provisions of sections 4 and 5 shall apply on the
4      end date of the probationary employment period. If the
5      employer elects not to continue the employment relationship,
6      the employment relationship shall terminate on the end date
7      of the probationary employment period.
8   Section 10.   Effective date.
9      This act shall take effect in 90 days.




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