Client Alert: Supreme Judicial Court reminds us that the Wage Act imposes strict penalties image

Client Alert: Supreme Judicial Court reminds us that the Wage Act imposes strict penalties

Client Alert: Supreme Judicial Court reminds us that the Wage Act imposes strict penalties image

Massachusetts provides workers some of the strongest wage protections in the country. Wages must be paid on time and in full. Employers who fail to do so are liable to the employee for three times the amount of earned wages not timely or properly paid (plus attorneys’ fees). This liability extends beyond the company to its president, treasurer, and any other officers or agents involved in management. These requirements are in a law called the Massachusetts “Wage Act.”

On April 4, 2022, the Supreme Judicial Court decided Reuter v. Methuen and clarified that the Wage Act’s penalty of triple damages attaches as soon as an employer fails to make a timely wage payment. This has implications for both employers and employees.

What happened?

Beth Reuter worked as a custodian for the city of Methuen school department. After her conviction for larceny over $250, Methuen terminated Ms. Reuter’s employer. However, on the date she was fired, Methuen owed $8,952.12 for accrued but unused vacation time. Even though the Wage Act requires that when a terminated employee “shall be paid in full on the day of his [or her] discharge” and states that wages include “any holiday or vacation payments due an employee,” Methuen did not pay Ms. Reuter for the vacation time until three weeks later.

Eventually Ms. Reuter sued Methuen claiming that because the city didn’t pay out her vacation days on the day she was fired, it owed her triple damages, not just the single damages she received. In addition to this $17,904.24, Ms. Reuter sought attorneys’ fees and costs. Following what had been established trial court rulings, the Superior Court judge declined to award Ms. Reuter anything more than 12% interest on the unpaid wages for the three weeks she waited to be paid.

After years of litigation (Ms. Reuter was terminated in 2013) the Supreme Judicial Court clarified that the Wage Act means what it says and that Methuen’s failure to pay out Ms. Reuter’s unused vacation time on her last day of work required them to pay it three times instead of once.

What this means for employers

In light of this decision, employers need to be very careful to make sure that all wages are paid on time and in full. For ordinary operations, this is not usually a big ask. Best practice dictates an employer use a payroll company to handle regular payment (as well as all necessary withholdings). These payment must generally be made weekly or bi-weekly within six days of the termination of the pay period.

Employers do, however, need to ensure compliance with the Wage Act when terminating an employee. As Reuter reminds us, when firing an employee, all wages (including unused vacation time) must be paid in full on the date of termination. If there’s underpayment, the employer (including the president, treasurer, and other officers and agents) is on the hook for the triple damages of whatever was underpaid. Therefore the Supreme Judicial Court suggested (and we also agree) that instead of making snap decisions to terminate, employers should suspend employees with pay while calculating (and double checking) the total amount owed as of a date certain for termination. Then the employer should set that date, notify the employer, and make a payroll payment on that day

What this means for employees

If you’re an employee who did not receive every dollar you were owed on the day your employer was obligated to pay it, you may have a claim against your (current or former) employer for additional damages. This is true even if your employer ultimately paid you what you were owed.

Because the prevailing interpretation of the Wage Act before Reuter was that an employer could cut off Wage Act liability by paying single damages before an employee filed suit, we expect to see a number of cases where this was the case. The statute of limitations for claims under the Wage Act is three years. If you think you may have a claim, please be in touch.

How we can help

At Lawson & Weitzen we regularly represent and advise both employers and employees. Whether you run a business and want advice to ensure compliance with Massachusetts wage laws or think you may have a claim against a current or former employer for unpaid wages, we can help. Please contact Josh Segal or any other of the other attorneys in our Labor & Employment practice area.