Why Should Delaware Care?
The city of Wilmington depends on wage taxes from city employers as its largest source of revenue, but it has contended with an increasing number of remote or hybrid employees who look to avoid the tax. Its case against a major employer like Barclays could be a signal to its future strategy.
The city of Wilmington filed three separate lawsuits against one of its largest employers over unpaid wage taxes, a potentially precedent-setting move amid a growing acceptance of hybrid work scenarios.
The lawsuits, filed one day after Christmas, seek a more than $1.66 million judgement against Barclays, the major British bank that has its American credit operation headquarters in Wilmington’s Riverfront, after it allegedly refused to pay income and head taxes.
In its filings, the city said it audited Barclays to determine whether employees paid the city’s 1.25% income tax, and found they had not paid them from 2021 to 2023. Additionally, the city says Barclays failed to pay head taxes from 2021 to 2024.
Wilmington’s head tax charges businesses $15 a month for every employee working at a company in excess of five people.
Those suits were filed against Barclays Bank of Delaware, Barclays Services and Barclays Services Corporation in Delaware Superior Court. According to the New York Stock Exchange, Barclays has a market cap of more than $48 billion, and in Wilmington it employs around 2,000 people at its Riverfront office.
The suit claims it sent a preliminary assessment, or a notification of any tax liabilities an organization may have, to Barclays as to how much taxes it owed on those taxes on Oct. 31.
A month later, Wilmington made its final assessment, and claims the bank did not push back on the total, but instead “refused to issue payment.”
The following week, Wilmington would send demand letters to Barclays, requesting immediate payment on the taxes. Yet it appears those demands were not met, as the city would file its complaints weeks later.
Wilmington depends on city wage taxes to fund its annual budget. In its current budget, the city anticipates bringing in more than $68 million in such taxes, representing more than a third of the city’s $181 million budget.
Disputes over the taxes on city workers have become more pronounced since the COVID pandemic though, when many workers began hybrid schedules or were moved fully remote. Wilmington considers any job “based” in the city to be applicable to the city taxes, even if an employee is not present in the city each workday.
Barclays’ commitment to the city, where it arrived in 2003 after acquiring the former Juniper Bank, has waxed and waned over the years.
In 2019, Barclays moved 500 of its employees to New Jersey, as part of a regional operations goal. According to Barclays leadership at the time, the decision was motivated by the desire to expand regional operations.
The city was disappointed in the displacement of a chunk of its workforce, but hopeful it would bolster further Wilmington operations, Mayor Mike Purzycki told The News Journal/Delaware Online at the time.
“It was tough today to hear the final number of 500,” Purzycki said.. “If this move strengthens the company and sets it up for growth in the future, that’s good for Wilmington and Barclays.”
In June 2021, Delaware announced a $2.5 million taxpayer-backed grant aimed at creating 323 more jobs at Barclays’ Wilmington bank, the bulk of which were call center customer service workers.
A few months later, the bank bought its longtime headquarters for $83 million and committed to retaining its workforce in the city. It further added that it would add 300 more employees to support the investment here, and leaders said that it did not consider a move to remote-only work a viable strategy.
In a statement from Wilmington officials, the lawsuits came as the result of the city and bank not being able to come to a resolution.
“The city and Barclays had had brief discussions regarding amounts owed the city but were not able to resolve matters in a timely fashion, so the city filed legal action,” said John Rago, a spokesman for the mayor’s office.
According to a Barclays spokesperson, the bank is “working to satisfy the assessment as quickly as possible.” As of Jan. 3, the bank had not filed any kind of response in court.
The post Wilmington sues Barclays for $1.5M in unpaid taxes appeared first on Spotlight Delaware.