Federal Court Finds That Agreement to Defer Payment of Salary Violates the Massachusetts Payment of Wages Statute

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An increasingly common practice among employers, particularly start-ups, is to enter into agreements with senior managers to defer salary payments until certain financial targets are reached. The employees typically welcome these arrangements because they often own a portion of the business. However, a recent decision by the federal court in Massachusetts warns that these types of arrangements may be unlawful. In Stanton v. Lighthouse Financial Services, Inc., the court held that an agreement to defer the payment of salary violated the Massachusetts Payment of Wages statute and was therefore void.

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