Many Massachusetts employers are aware that the Commonwealth’s Wage Act, G.L. c. 149 sec. 148, is uncompromising regarding an
employer’s obligation to pay wages in a timely fashion and imposes harsh penalties (including mandatory treble damages) for non-compliance. Also, most Massachusetts employers understand and try to comply with the Wage Act’s requirement that terminated employees be paid their final wages (including accrued vacation pay) on the date of termination.
In
a statutory scheme that is otherwise entirely inflexible and harsh, one bit of
“wiggle room” has been an influential line of superior court cases (the leading
case being Dobin v. CIOview Corp. from 2003), which held that so long as
final wages were paid before the employee files a lawsuit, the employee’s
damages under the Wage Act would be limited to the lost interest on the money
(trebled) from the date of termination to the date of the payment. These
rulings provided some comfort that when an employer was not in a position to
provide final pay on the day of termination, the failure to do so would not
devolve into a hefty legal claim.
All
this changed on April 4th, when the SJC, in the case of Reuter v. City of
Methuen, 2022 WL 996270, at *4, overruled this line of cases, and held that
nearly any failure to provide final wages and vacation pay on the date of
termination entitles the employee to three times the wages and vacation pay, as
well as reasonable attorneys’ fees incurred in pursuing a claim. In essence,
the SJC held that the rule articulated in these cases may be laudable or
sensible, but is not supported by the statutory language or history. As the SJC
itself recognized, its ruling has major implications for how and when employers
terminate employees.
The basic rules of the Wage Act are
well-known:
- Employers must pay their employees within either six or
seven days of the “termination of the pay period during which the wages
were earned.”
- “Wages” include all regular wages, accrued and unused
vacation pay, and commissions when due and determined.
With
respect to final pay upon termination, however, the Wage Act treats employees
who resign or quit differently than those who are terminated. With respect to
the former, an “employee leaving his employment,” must “be paid in full on the
following regular pay day.” With respect to the latter, an “employee discharged
from such employment,” must “be paid in full on the day of his discharge.” In Reuter,
the SJC described this distinction as likely emanating from the Legislature’s
determination that, while employers may not have advance notice of an
employee’s resignation, they control the timing of when they terminate an
employee. By and large, this distinction may be valid, and the employer that
has decided to terminate an employee has time to organize final payment for the
employee’s last day.
However,
there are numerous circumstances where an employer may have difficulty
arranging final payment for the date of termination. These range from:
administrative or technical difficulties with payroll; a sudden termination due
to misconduct; or the employee not being in the workplace to receive final
payment (think, “remote workers”). In these and similar circumstances, employers
often find themselves playing “catch-up,” and having to make final payment
shortly after the employee’s last day.
Under
the Dobin line of cases, employers had some comfort that a small “miss”
would not result in a big “hit” under the Wage Act. Now, with the Reuter decision,
all that has changed: a miss by a day, a month, or a year all entitle the
employee to treble damages for the entire amount that should have been, but was
not, paid on the employee’s last day.
Practical Considerations
The
question then is, what is an employer to do if it needs to “part ways” with an
employee but cannot arrange final payment right away? The SJC addressed this
scenario directly in Reuter, and suggested that the only viable solution
is to suspend the employee pending termination and final payment. Further,
while the SJC did not directly address whether this type of suspension –i.e.,
one simply to arrange for final wages – must be paid or unpaid, it would be
prudent to provide the suspension with pay in order to avoid any
appearance that the employee’s employment ended on the date of suspension.
Some
special mention needs to be made about the complicating aspect of remote work,
especially in light of the dramatic increase in this mode of working. For a
variety of reasons, it is very difficult for an employer to correctly time and
sequence termination and final payment for the same day for a remote worker. It
is also awkward, to say the least, to call a worker “in,” just to terminate him
or her. How then to heed the Reuter decision when it comes to remote
workers?
One
of the only exceptions in the Wage Act’s strict timing mandates is when workers
are “absent” from their “regular place of labor at the time of payment.” Does
this exception apply to remote workers? Unfortunately, there is no clear answer
to this question as yet, and a remote worker might be able to successfully
argue that the situs of their work has shifted to their home so that they
are not absent from their regular place of work. For this reason, we suggest
that for now, and until this question is clarified, an employer should either
arrange for payment on the remote worker’s last day, or suspend or place the
remote work on leave, with pay, until final payment can be made.
In
sum, in light of the Reuter decision, employers must carefully plan and
prepare for nearly all terminations in order to avoid a failure to pay all
final wages on the last day of employment.
Chair
of the employment law practice group at Prince Lobel Tye LLP, Dan has more than
25 years of experience in the field of employment law and litigation. He has
represented businesses of all sizes in a wide range of matters, from
discrimination and harassment complaints to claims involving misuse of trade
secrets, privacy rights actions, and wrongful termination litigation. Dan can be contacted by email at dtarlow@princelobel.com.
If you have any questions about the
information presented here, or have any employment law concerns, please contact
Daniel Tarlow, chair of the firm's Employment Practice Group, at
617 456 8013 or dtarlow@PrinceLobel.com.
