On April 4, 2022, the Massachusetts Supreme Judicial Court (“SJC”) dispelled the notion that employers can avoid triple liability for late payment of wages under the Massachusetts Wage Act, M.G.L. c. 149, § 148 (“Wage Act”), by paying the wages before suit is filed. For nearly 20 years, employers relied on case law establishing that, so long as the wages are paid pre-suit, the employer need only pay the single amount to remedy the situation. Now, the late payment of wages automatically results in triple liability, even if the mistake is promptly corrected before a claim is made. This drastic change adds even more “bite” to the already strict Wage Act.
The case, Reuter v. City of Methuen, involved the termination of a custodian by the city of Methuen. The city did not pay the plaintiff her accrued unused vacation time on the day of her termination, which is considered “wages” under the Wage Act. The city paid the vacation time 21 days late, before the plaintiff filed a claim. Thereafter, the plaintiff sent a letter claiming that she was owed triple the amount of her vacation pay because it was late under the Wage Act. The plaintiff eventually filed suit. The trial court held that the plaintiff was only owed the single amount of her vacation pay (plus interest, attorney’s fees, and other damages under the Wage Act). On appeal, the SJC reversed, holding that the plaintiff was entitled to triple the amount of her vacation pay, even though she received it before filing suit (in addition to interest, attorney’s fees, and other damages under the Wage Act). In doing so, the SJC overruled a 2003 case indicating that interest is the only measure of damages when wages are paid late, but pre-suit, under the Wage Act. That interpretation was deemed “incorrect.”
What This Means for Employers
Employers now have even more reason to fear the Wage Act and ensure that all terminated employees are paid on the day of termination (and all employees who voluntarily leave are paid on the next regular pay day). Often, as the SJC acknowledged, it is difficult for employers to calculate final payments and issue checks by the day of a termination, especially if the termination is quick or unexpected. Employers need to be proactive and prepare for terminations well in advance. Consider suspending an employee instead of terminating them to give payroll time to double-check the final payment amount. Ensure that payments are actually received on the day of the termination, not just mailed out. This can be tricky in an increasingly remote world, where Massachusetts employees may be physically far away from the employer’s epicenter. Overall, employers should ensure that HR personnel, in particular those individuals charged with processing paperwork for employees who are being terminated, are properly trained and are fully apprised of the legal requirements imposed on employers upon termination of employment.
Although employers may be busy with return-to-office plans right now, it may be useful to review prior late payments of wages, at least in the past three years (the statute of limitations under the Wage Act). The retroactivity of the Reuter case has not yet been determined. An audit may give management a sense of whether any claims for triple wages may be forthcoming, and the potential exposure for such claims.
