Earlier this week, the Massachusetts Supreme Judicial Court sharply limited employers’ ability to deduct losses from employees’ wages under the Massachusetts Wage Act. The Wage Act requires the timely payment of wages but states that a “valid set-off” is a defense to a claim of failure to pay wages. Until now, there has been little guidance as to what constitutes a valid set-off, and it had been widely believed that the provision allows employers to make deductions for a variety of losses or damages caused by employees. However, in Camara v. Attorney General, the Supreme Judicial Court held that an employer could not dock employees’ pay based on its unilateral determination that employees had caused a loss and were liable to the employer for damages.

In Camara, ABC Disposal Service, Inc., a waste disposal company, had a policy regarding damage to its trucks or property belonging to third-parties. If a member of management determined that an employee was at fault for an accident which caused property damage, the driver could either accept discipline for the accident or agree to pay for the damage over time through a deduction from wages. The Office of the Attorney General audited ABC and determined that the company had deducted more than $21,000 from employees’ wages pursuant to this policy. ABC was ordered to repay those amounts and to pay a civil penalty of over $9,000.