SJC Clarifies the Proper Measure of Damages for Wage Act Violations

Source: Melick & Porter, LLP

The SJC recently issued an opinion in Reuter v. City of Methuen regarding the proper measure of damages for violations under the Commonwealth’s Wage Act. The Plaintiff had worked as a custodian for the City of Methuen’s school department for 25 years when she was convicted of larceny in 2013. The City formally terminated her on March 7, 2013. The Plaintiff had accrued $8,952.15 in unused vacation time at the time of her termination. The City sent to the Plaintiff payment for her unused vacation time on March 28, 2013. The Plaintiff unsuccessfully challenged her termination before the Civil Service Commission and appealed to the Superior Court. While the appeal was pending, Plaintiff’s counsel sent to the City a demand for $23,872.40 representing a trebling of late vacation pay, plus $5,986.10 for attorney’s fees. The City sent the Plaintiff a check for $185.42, representing a trebling of the twelve percent annual interest on the Plaintiff’s vacation pay accrued during the three weeks between her termination on March 7 and payment by the City on March 28. The Plaintiff sued to recover the difference between her $23,872.40 demand and the City’s $185.42 payment. The trial court found that the Plaintiff was entitled only to treble twelve percent interest for the three-week delay in receiving her vacation pay, which she had already received. The trial court also found that the Plaintiff was entitled to attorney’s fees totaling over $88,000. The City appealed from the award of attorney’s fees and the Plaintiff cross-appealed the determination that she was not entitled to recover treble lost wages. The SJC transferred the appeals on its own motion.

The Massachusetts Wage Act, M.G.L. c. 149, § 148, requires that employees who are terminated are paid in full on the day of their discharge, and includes within its definition of “wages” any holiday or vacation payments. The SJC commented that the statute “leaves no wiggle room” and that prompt payment is necessary regardless of whether the failure to make prompt payment is intentional or not. M.G.L. c. 149, § 150 permits employees who are not paid in full and on time to bring a private action for injunctive relief, damages incurred, and any lost wages and other benefits. The SJC held that “lost wages” encompasses all late payments under the Wage Act, including unpaid accrued vacation pay. The statute permitting the private cause of action further provides that the employee “shall be awarded treble damages, as liquidated damages, for any lost wages and benefits.”

The SJC rejected the trial court’s finding that the Plaintiff was entitled to treble twelve percent interest for the delay in receiving her vacation pay because such an interpretation was not supported by the language of the Wage Act and was incongruent with its purpose. The SJC noted that there is no language in § 150 suggesting that the payment of interest is the proper remedy for a violation of the act and that the statute demands prompt payment of wages to employees who rely on such payments to pay for rent and other necessities. Therefore, the SJC found that “much more is therefore at stake than the loss of the time value and depreciation of sums owed” and that the remedy for late payment is not the trebling of the interest on those wages but the trebling of the wages themselves. The SJC remanded to the trial court the question of whether the Plaintiff could be compensated for some or all of her attorney’s fees, a portion of which was incurred in unsuccessful class certification.

The SJC’s Reuter decision serves as an important reminder to employers that plan to terminate employees to prepare for disbursement of all final wage payments before terminating the employee. Employers must also keep in mind that the term “wages” under the Wage Act is broad and includes accrued holiday and vacation payments. Employers should also note that the strict payment requirements under the Act for employees who are terminated are relaxed for employees who voluntarily resign their employment. In those instances, the Wage Act requires that employees are paid in full on the following regular payday or, in the absence of a regular payday, on the following Saturday.

If you have any questions regarding the SJC’s Reuters decision, the Wage Act, or any other employment-related inquiry, please contact our firm’s Employment Law Practices Group at (617) 523-6200.