Condo Media - May 2023 - 37

The penalties for non-compliance with the final pay laws in Massachusetts are steep,
and the Supreme Judicial Court recently issued a significant decision that holds employers
accountable if there is a delay in the payout of an employee's wages.
What has been unclear is an employer's
ability to avoid liability for
treble damages, specifically when it
comes to the final paycheck. In 2022, the
Massachusetts Supreme Judicial Court
addressed the issue in Reuter v. City of
Methuen. Specifically, the court held that
an employer is strictly liable for treble
damages under the Wage Act where
discharged employees are not paid owed
wages on the date of termination. Prior
to this ruling, an employer could avoid
treble damages by making a late payment
in full prior to the filing of
a lawsuit by the employee.
Failing to ensure compliance with
this decision and the other provisions
of the Massachusetts Wage Act has
potential for harsh results. In Reuter
v. City of Methuen, the plaintiff was
discharged from employment by the City
of Methuen after she was convicted of
larceny. On the date of her termination,
Methuen owed Ms. Reuter $9,000 for accrued
vacation time. Rather than pay this
amount on the day of her termination, as
required by the Massachusetts Wage Act,
Methuen paid her three weeks later. In
finding Methuen liable, the Supreme Judicial
Court concluded " that an employer
is responsible for treble the amount of
the late wages, not just trebled interest,
along with attorney's fees and costs.
This may mean that employees who, like
the plaintiff, have engaged in illegal or
otherwise harmful conduct may have to
be suspended rather than terminated for
a short period of time until the employer
can comply with [the Wage Act]. "
Before Reuter v. City of Methuen,
delivering final pay to the discharged
employee on the next business day
likely would not lead to a lawsuit.
Although technically a violation of the
Massachusetts Wage Act's requirement
to pay discharged employees their wages
on the date of termination, at worst
the employee may be owed triple the
amount of a few days of interest on the
amount due. It would have not amounted
to much. But after this recent court
decision in Reuter v. City of Methuen,
the discharged employee above is owed
triple damages on the entire amount of
the owed salary (any earned commissions)
and unused vacation time. So
if you owed $10,000 to that employee
on Friday, you would now be liable for
three times that $10,000 and not just
three days of interest (approximately
$10) on that $10,000.
THE FINAL PAYCHECK: WHAT IS
OWED TO A FORMER EMPLOYEE
" Wages " under the Wage Act includes
final earned salary or wage payments
for time worked, accrued but unused
vacation time, and commissions (if
such commissions are due and payable
under the commission plan on the date
of discharge). While what is owed to
a departing employee is set out in the
Wage Act, both employers and employees
are often left to question whether
certain accruals or benefits must be included
in the final paycheck, regardless
of when that check should be issued.
l Severance Pay
As an initial matter, unless a departing
employee has a contractual goldenparachute
clause, Massachusetts
law does not require an employer to
provide any severance payment to any
at-will employee.
l Earned Sick Time
While Massachusetts enacted an
Earned Sick Time Law in 2015, the law
does not require an employer to pay
a departing employee for any unused
time. Under the Sick Time Law, almost
all employers must provide earned sick
time, but only employers of 11 or more
employees must provide earned sick
time that is paid. Smaller employers
must also provide earned sick time,
but it may be unpaid. However, neither
the Wage Act nor Earned Sick Time Law
require an employer to pay out unused
earned sick time when an employee
leaves. In contrast to unused vacation
time, unused sick time is not considered
wages under Massachusetts law.
l Unused Vacation
An employee is owed their earned but
unused vacation time at the time their last
paycheck is due. If an employee has two
weeks of vacation, he/she is entitled to
those two weeks in a lump-sum payment at
the time of the final paycheck. Employers
must also be aware that in some instances,
there are vacation policies in place where
an employee is entitled to vacation time
on their work anniversary or immediately
upon hire. Under such policies, even if the
employee only worked a few days or just
accrued their two weeks of vacation last
week, they are entitled to be paid for all
their vacation time.
l Commissions
Commissions are often a point of contention
when an employee is terminated or
quits. Massachusetts law provides some
protections for the employee where the
question often arises as to whether the
commission is due to them or do they lose
it at the time of separation. If a commission
is definitely determinable, and due
and payable to the employee, it is a wage
owed to the employee that the employer
must pay. In other words, if the employee is
owed the commission, and the commission
can be arithmetically determined, then it
is a wage and must be paid to the employee.
Employers must also be aware that an
effort to characterize this type of payment
as a bonus may often be met with objection
because legally it is a commission.
Massachusetts wage laws are complicated
and widely recognized as providing
some of the strongest protections to
employees across the country. Because
employers that violate this law may be
sued for treble damages and attorneys'
fees, employers should consult with experienced
counsel when questions arise
about their wage payment obligations.
n SETH BARNETT, ESQ. IS A
PARTNER WITH MARCUS, ERRICO,
EMMER & BROOKS, PC.
May 2023 CONDOMEDIA 37

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