(Reuters) - After slashing public employees' pay to minimum wage on July 6, the mayor of cash-poor Scranton, Pennsylvania, has struck a deal to pay them back what they are owed with interest.
Mayor Christopher Doherty agreed that the city would pay approximately $750,000 in compensation owed to firefighters, police officers and public works employees, plus at least $5,100 in interest, said Tom Jennings, a lawyer for the employees' unions.
In exchange, the unions said they would drop their bid to have the mayor held in contempt of court, according to the agreement, reached Saturday and presented to a judge on Monday.
Scranton, the setting for "The Office" television show, is one of several cities in Pennsylvania and across the United States that are struggling to make ends meet, because of lowered revenue collections and increased spending.
Doherty made headlines around the world after cutting employees' pay to the state's $7.25 minimum wage for the July 6 payroll period.
A local judge had ordered Doherty not to make the cut, but he did so anyway, prompting unions to push the court to have Doherty held in contempt.
SCRANTON RESUMED FULL PAYROLL
Doherty did not immediately reply to a request for comment about the settlement. Shortly after he cut the employees' pay, Doherty said he had no other choice because the city didn't have enough money to make full payroll of about $1.1 million for its nearly 400 employees.
After paying them about $315,000 altogether at the minimum wage, the city had just $5,000 left in its coffers, he has said.
For the following payroll on July 20, the city was again able to pay the full amount due to employees under collective bargaining agreements.
The settlement calls for Scranton to repay the compensation by August 16, plus a 6 percent interest payment that amounts to at least $5,100 for the missed pay periods.
Scranton, nicknamed the "Electric City" for having one of the nation's first electric streetcar systems, will get $2.25 million in state aid if it can enact a plan by August 15.
If it doesn't meet that goal, Scranton can extend reimbursement of the back-pay until August 31 but must pay nearly $7,000 in interest instead, the agreement said.
Scranton officials have said they can't guarantee that they won't again slash pay if the city runs low on cash.
"Hopefully gives us some stability here and some assurances that this isn't going to happen again," said John Judge, president of Scranton's firefighters' union. "I'm still cautious."
The court injunction that bars the mayor from slashing wages is still in effect, he said.
(Reporting By Hilary Russ, Editing by Tiziana Barghini and David Gregorio)