April 5, 2022
On April 4, 2022, the Massachusetts Supreme Judicial Court (“SJC”) issued a pointed reminder to employers that the failure to comply with the strict technical requirements of the Massachusetts Wage Act will be costly. The Wage Act requires an employer to pay all wages, including accrued but unused vacation time, on the date that it terminates an employee. The SJC confirmed that if an employer misses that deadline, even by a little bit, the employer will be liable for treble damages on the whole amount, not just for interest on the late payment, plus attorneys’ fees. This decision will have significant ramifications for employers and employees.
In 2003, a Superior Court judge held in Dobin v. CIOView that if an employer paid an employee’s final wages after the termination date — but before an employee filed a complaint with the Attorney General’s office — the employer would only be liable for interest.
This week, in Reuter v. City of Methuen, the SJC reached a dramatically different conclusion. In Reuter, the employee was owed nearly $9,000 in vacation pay when she was fired after being convicted of larceny. She did not receive her vacation pay until three weeks later. A year after that, the employer paid her $185 as compensation for the interest accrued during the three week delay, multiplied by three. The employee argued that she was entitled to triple damages on the entire amount of the late payment plus attorneys’ fees, for a total of more than $23,000. After trial, a Superior Court judge decided that the employee was only entitled to the $185 interest payment because she had already received the vacation pay, and the only issue was how much she was owed for attorneys’ fees. The SJC has now rejected the Superior Court’s ruling and agreed with the employee that she is entitled to treble damages on the entire amount.
In its opinion, the SJC emphasized the Wage Act’s purpose of protecting employees. “Because of the potentially severe financial consequences of even a minor violation, the [Wage Act] not only ‘protect[s] wage earners from the long-term detention of wages by unscrupulous employers’ … but also ‘impose[s] strict liability on employers,’ who must ‘suffer the consequences of violating the statute regardless of intent.’… The statute leaves no wiggle room…. The Legislature’s command is clear: if you choose to terminate an employee you must be prepared to pay him or her in full when you do so.”
The Court addressed the situation where an employer needs to act quickly to fire an employee for misconduct. The employer might not have time to run a final paycheck, or could make a mistake in the amount owed. Both of these situations would lead to treble damages. The solution, according to the Court, is to suspend an employee for a few days before termination to allow time to get the calculation right. The Court decided that just paying interest is not sufficient under the Wage Act. A small amount of interest will not protect an employee from the loss of money needed to pay for family necessities. In fact, one member of the Court suggested that the scope of damages under the Wage Act might not be limited just to treble damages, but could even include “other damages” caused by a violation of the Wage Act.
The SJC called its decision “a significant victory [for the employee] and an important clarification of existing law.” We can expect the decision to have a meaningful impact on Wage Act litigation. To avoid these drastic consequences, employers must prioritize compliance with the Wage Act when making termination decisions and must be willing to delay a formal termination to make sure that final wages are paid on time and in full. Our team is available to help ensure that you comply with this and other aspects of the Wage Act.
This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice.