Gratuitous Payments Cannot Be Re-Cast as Accrued Vacation Pay Required by Massachusetts Wage Act

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A favorite saying of my mentor and colleague in the Labor and Employment Group here at Burns & Levinson is “no good deed goes unpunished.” Over my years of practice, I have found that this phrase oft comes to mind when an employer just wants to “do the right thing” or wants to be generous to an employee by giving the employee money, or time off, to which the employee is not entitled. The phrase may be one that is recently being muttered around Malden City Hall, in light of the Massachusetts Supreme Judicial Court’s (SJC) recent decision in Dixon v. City of Malden.

In Dixon, Gary Dixon, the director of a city-owned nursing home, was terminated by the City of Malden. Mr. Dixon had accrued fifty days of vacation time at the time of his termination, approximately equal to $13,615. Although the City of Malden failed to pay him his vacation time, the City continued to pay Mr. Dixon’s salary and benefits for an additional three months after his termination, in the total amount of $19,700, even though the City was entitled to stop paying salary and benefits on the day of his termination.

Mr. Dixon accepted the additional salary and benefits, yet, in November 2007, sued the City for his accrued vacation time. The City argued that, because it gratuitously paid Mr. Dixon more than the actual amount of accrued vacation pay, it should owe nothing more. The SJC disagreed and determined that the additional salary and benefits that the City of Malden paid cannot be counted retroactively towards the accrued vacation pay because it was not designated as “vacation pay.” As a result, the SJC found that the City still owed Mr. Dixon vacation pay, plus costs and attorneys’ fees. (If Mr. Dixon’s employment had been terminated just one year later, he would have been entitled to treble damages in addition to costs and attorneys’ fees, as the Massachusetts Weekly Payment of Wages Act [“Wage Act”] was amended to make treble damages mandatory if the plaintiff prevails in his action.)

Notwithstanding the City’s gratuitous post-termination payment in an amount greater than what was owed to Mr. Dixon, the City still stood in violation of the Wage Act and could not offset any amount owed to Mr. Dixon with the amount gratuitously paid. In-house counsel are well-advised to educate their business people that a “good deed,” no matter how generous, cannot relieve an employer from, or be offset against, legal obligations, especially for payment of wages.

Topics:  Employee Benefits, Illegal Gratuities, Vacation Pay, Wage Act

Published In: Civil Remedies Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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