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Massachusetts Employers Beware: Late Wage Payments Result in Treble Damages

Posted by Lorna Hebert on April 28, 2022 at 8:29 AM

laws against not paying employeesOn April 4, 2022, the Massachusetts Supreme Judicial Court (SJC) issued a decision in Reuter v. City of Methuen, 489 Mass. 465, (2022), holding that employers are liable for three times the wages owed when they fail to pay wages timely pursuant to the Massachusetts Wage Act (Wage Act). According to the SJC, treble damages are mandated regardless of the length of the delay in payment, the intent of the employer, or whether the employer paid the employee prior to a complaint being filed.

Background
The Wage Act (M.G.L. c. 149, §148) requires employers to pay employees who are discharged from employment all wages earned on the day of discharge, including accrued, unused vacation. The Wage Act states that prevailing plaintiffs "shall be awarded treble damages, as liquidated damages, for any lost wages and other benefits and shall also be awarded the costs of the litigation and reasonable attorneys' fees." It also provides that, "[t]he defendant shall not set up as a defen[s]e a payment of wages after the bringing of the complaint."

Prior to Reuter, lower courts, beginning with Dobin v. CIOview Corp., 2003 Mass. Super. LEXIS 291 (Mass. Super. Ct. Oct. 29, 2003), interpreted this last provision to mean that an employee could not recover treble damages for late or otherwise owed wages if those wages were paid prior to the employee filing a complaint. Instead, the employee’s damages were limited to interest accrued on the wages from the date they were due until the date they were ultimately paid, trebled. The SJC decision in Reuter effectively upended the lower courts’ interpretation.

Reuter Facts and Proceedings
In Reuter, the City of Methuen (Methuen) terminated the plaintiff from her position as custodian after she was convicted of larceny. At the time of the termination, Methuen owed the plaintiff approximately $9,000 in accrued, unused vacation time. It did not pay her this amount until three weeks later. The plaintiff’s attorney sent Methuen a demand letter seeking triple the amount of the late wages minus setoff for the payment made, plus attorney’s fees. In response, Methuen paid the plaintiff $185.42 representing triple the interest accrued on the wages from the date of termination to the date of payment. The plaintiff then filed a complaint pursuant to the Wage Act seeking the additional damages requested. After denying plaintiff’s request for class certification, the trial court issued an order holding that the plaintiff was only entitled to treble interest for the three-week delay in receiving her vacation pay, which Methuen had already paid, plus costs and attorney’s fees. Methuen appealed the award of attorney’s fees and the plaintiff cross-appealed the court’s determination that she was not entitled to triple her lost wages.

SJC Decision
On appeal, the SJC held that late wage payments are considered “lost” wages under the Wage Act and constitute clear violations of the statute. Additionally, it determined that the purpose and explicit language of the Wage Act require the trebling of those “lost” wages as liquidated damages, not simply the trebling of interest payments on those wages. In rendering its decision, the SJC noted that by imposing strict liability on employers under the Wage Act, the legislature had decided that employers, rather than employees, should bear of cost of any delays or mistakes, “honest or not,” in the payment of wages.

In addressing Dobin and its progeny, the SJC concluded that the interpretation of the Wage Act by those cases was unsupported by the language of the statute and inconsistent with its purpose. Further, the SJC noted that the Wage Act includes no mention of the payment of interest as a remedy for violations of the statute. It also opined that limiting damages to interest only for late wage payments made before the commencement of litigation would encourage employer payments “right up to the filing of a complaint,” or even the nonpayment of wages. Notably, the SJC did not address the potential negative impact of its ruling, namely, that employers would no longer be incentivized to pay overdue wages promptly upon discovery because doing so would not result in the avoidance of treble wage damages.

The SJC recognized that its ruling could put employers in a difficult position when terminating employees for misconduct on short notice as they may not know the amount due to the employees on the date of termination or might miscalculate the amount. Addressing this situation, the SJC suggested that employers may need to suspend employees prior to termination in order to buy time to determine their final wages in order to comply with the Wage Act.

Takeaways for Employers
The Reuter decision underscores for Massachusetts employers the importance of taking all steps necessary to strictly comply with the Wage Act when terminating employees. Failure to pay employees the full amount due, including accrued, unused vacation, on the date of termination could subject employers to three times the amount of wages owed regardless of the whether the failure is the result of an honest, inadvertent mistake, or unexpected or unavoidable payroll errors. Consequently, before terminating employees, employers should consider taking steps to ensure that wage payments are properly calculated and payroll processes are in place to formalize final payment on the date of termination. If this is not feasible, such as when employees are terminated due to misconduct, employers may want to consider other approaches such as suspending employees until they are able to comply with the Wage Act.

If you have questions about the Reuter decision, its impact on your business, or other employment-related issues, please contact Lorna Hebert at lhebert@outsidegc.com or 617-512-8401.

 

Lorna Hebert (New England team) is an employment, labor, higher education, and litigation attorney with nearly 30 years of experience handling a broad range of complex employment and labor matters. Lorna advises clients on a wide range of employment matters, including workplace investigations, dispute resolution, hiring, performance management, discipline, terminations, reorganizations,  accommodations, employee benefits, wage and hour issues,  discrimination claims, policies and procedures, and training.

Topics: employment policies, treble damages for late wages, Massachusetts employers, Massachusetts Wage Act, termination of employees

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