Massachusetts SJC Upends Existing Law, Requires Treble Damages on Late-Paid Wages
- The Massachusetts Supreme Judicial Court (SJC) recently held that the Massachusetts Wage Act requires that employers that fail to pay wages owed to employees by the date required must pay treble the amount of the wages as liquidated damages, even if the employer paid those wages to the employee before the employee brings suit.
- This decision disrupts nearly two decades of decisions from lower Massachusetts state and federal courts that had consistently held that when wages were paid late but prior to the filing of a complaint, the late-paying employer was liable for interest on the late payment, but not three times the amount of the late-paid wage.
- The SJC's decision requires that employers ensure careful compliance with payment-timing requirements and may impose costly liability on employers, even for unintentional and minor payroll errors the employer attempts to correct.
The Massachusetts Supreme Judicial Court (SJC) on April 4, 2022, handed down a decision with major implications for Massachusetts employers accused of wage-and-hour law violations or late payment of wages. In Reuter v. City of Methuen, No. SJC-13121 (Mass. April 4, 2022), the SJC held that the Massachusetts Wage Act (M.G.L. ch. 149, § 150) requires that employers that fail to pay wages owed to employees by the date required must pay treble the amount of the wages as liquidated damages, even if the wages were paid to the employee before the employee brings suit. This decision disrupts nearly two decades of decisions from lower Massachusetts state and federal courts that had consistently held that when wages were paid late but prior to the filing of a complaint, the late-paying employer was liable for interest on the late payment, but not three times the amount of the late-paid wage.
The Wage Act sets forth requirements for timely payment of wages to Massachusetts employees. Among its requirements is that employers must pay all wages to an employee whose employment is involuntarily terminated on the date of termination. The Wage Act further provides that that employee-plaintiffs who bring and prevail on claims for untimely payment "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." The Wage Act 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."
Recent Decision and Change in Interpretation of Law
Reuter involved a City of Methuen custodian who was discharged after having been convicted of larceny. Methuen did not pay Reuter the approximately $9,000 it owed her in accrued and unused vacation time (included in "wages" subject to the Wage Act) on her date of termination, but did make the payment to her three weeks after her termination. After receiving the vacation pay, Reuter sent a demand letter to Methuen demanding that it pay her triple her vacation pay, plus attorney's fees. Methuen responded by sending Reuter a check for $185, which represented a trebling of 12 percent interest accrued on the vacation pay during the three weeks from date of discharge to the date of payment. Reuter sued and the case eventually found its way to the SJC.
Prior to the SJC's decision, courts interpreting the Massachusetts Wage Act had held that the late payment of wages to employees was a partial defense to claims of Wage Act violations, provided that such payment occurred prior to the employer receiving notice of a complaint. These now overruled cases had held that in such situations, the employer was liable for payment to the employee of treble interest on the late wages (i.e., what Methuen had provided Reuter) but not treble the amount of the wages paid late. In its ruling, the SJC directly addressed these cases – including Dobin vs. CIOview Corp., Mass. Sup. Ct., No. 2001-00108 (Oct. 29, 2003) and Clermont v. Monster Worldwide, Inc., 102 F. Supp. 3d 353, 357-359 (D. Mass. 2015) – and held that their interpretation of the Wage Act was incorrect.
The SJC ruled in Reuter that the Wage Act provides no defense for late-paying employers. Employers are liable for treble damages, interest and attorneys' fees even if they make payment one day late. Based on the SJC's decision, unintentional delays or good-faith efforts to comply with the Wage Act and later correct payment errors would still result in an employee's entitlement to treble damages. The SJC reasoned that the Wage Act was designed to protect employees from losing the wages that they need to pay their rent, buy food and otherwise sustain their lives. According to the Court, the Wage Act read in this light provides "no wiggle room" for the late payment of wages.
The Court recognized that its interpretation of the Wage Act puts employers in "a difficult position when immediately terminating employees for misconduct," as with employees such as the plaintiff in Reuter. The SJC suggested that such employees may need to be suspended for a period of time while the correct amount of their wages is calculated rather than terminated on the spot. Still, the Court held that such concerns were outweighed by the potential for an employee to unexpectedly lose out on, or be delayed in receiving, previously earned income.
Conclusion and Key Takeaways
Reuter v. City of Methuen represents a particularly harsh rule for employers who will now face costly liability for payroll errors or delays that result in the late payment of wages even by one day. Massachusetts employers should exercise caution and consult legal counsel to minimize risk of exposure to treble damages, interest and attorneys' fees for late payment of wages under the Wage Act. These issues most frequently arise in connection with involuntary employee terminations, but may arise in other contexts as well. There are preventative steps that employers can take to ensure payment is in compliance with the law and reduce risk of exposure. For more information on this topic, please contact the authors or your Holland & Knight attorney.
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