On October 22, 2025, in Nunez v. Syncsort Incorporated, et al., the Massachusetts Supreme Judicial Court affirmed the decision of the Massachusetts appellate court (and consistent with the position of federal courts) that retention bonuses are not considered wages under state law. The decision provides important assurance for employers and employees in the context of both employment law and in and mergers and acquisitions (M&A) transactions, confirming that retention payments (including change-in-control bonuses), which are typically contingent on continued employment through key milestones, are designed as incentives rather than compensation for past work. The ruling underscores the need for employers to carefully draft retention agreements to clearly distinguish them from wages and mitigate potential legal challenges under Massachusetts law.
Nunez v. Syncsort Incorporated, et al.
The Court’s decision arose from a tech employee’s claim against his former employer, Syncsort, for a delayed retention bonus payment following its merger with another company. The employee, a senior finance director, had a retention bonus agreement contingent on remaining employed through certain dates following the merger. After the company terminated him and paid the final bonus eight days later, he sued, alleging a violation of the Massachusetts Wage Act and seeking treble damages for the company’s failure to pay the bonus on his last day of employment.
The Court held that retention bonuses are not “wages” under Massachusetts law because they are not paid in exchange for services or labor rendered by the employee. Instead, these bonuses are typically contingent on the employee remaining with the company after a triggering event, such as a merger, acquisition, or reorganization. In the case at hand, the retention payment was designed as an incentive to retain the employee during and through the merger process, rather than compensation for work already performed.
As the Court explained, “We see no reason why retention agreements should be treated any differently from other types of compensation that are contingent upon continued employment to a particular date and are in addition to the compensation the employee receives in exchange for his or her labor and services.” In this context, retention bonuses serve as a strategic tool for employers to ensure key personnel remain engaged and committed during a transitional period.
M&A Considerations
In M&A transactions, retention bonuses and change-in-control bonuses are commonly used to incentivize key employees and designed to encourage employees to remain with the company through critical periods, such as the due diligence process and closing of the transaction. Change-in-control bonuses, specifically, are triggered by a change in ownership or control and provide additional compensation if employees are terminated or are asked to stay through the post-transaction integration.
For sellers, these agreements reward essential employees for their past contributions and help ensure a smooth transition during and following the sale process. In closely held businesses, retention or change in control bonuses can be particularly important in helping the business owners navigate the complexities of a sale. These agreements not only encourage employees to stay through the closing but also reduce the owner’s administrative and operational burdens, such as responding to due diligence requests while maintaining day-to-day business operations, by reducing potential attrition by key employees (which may make a potential buyer nervous). For the recipient employee, a retention or change-in-control bonus can help assuage fears of job loss as a result of the company’s sale by providing some certainty of an additional financial benefit and in some cases, promises of post-transaction employment.
Implications for Employers and Employees
The ruling in Nunez v. Syncsort Incorporated, et al. has important implications for both employers and employees. Under the Massachusetts Wage Act, wages and other types of compensation, such as accrued but unused vacation or sick pay or earned commissions, must be paid in full on the last day of an employee’s employment. Failure to do so results in mandatory treble damages under the Wage Act, as established by the Reuter v. City of Methuen decision, where even a brief delay in payment triggered severe penalties for employers.
As explained above, retention and change-in-control bonuses can be a strategic tool for owners entering into or in the midst of an M&A deal, helping ensure key talent stays through the process and maintaining operational stability during the transition. However, depending on the structure of the transaction, employees are often terminated by the selling company on the day of closing so that they can be simultaneously hired by the acquiring entity. Because a termination triggers the requirement to pay all wages due to an employee on the last day of employment, the decision makes clear that retention bonuses and change-in-control bonuses that are expressly to be paid as a result of (but are not paid at or prior to) the closing do not cause the former employer to be in a violation of the Wage Act. To be clear, however, all of the employees’ normal salary, accrued but unused vacation or sick pay, earned commissions and other owed compensation must still be paid on the date the employees are no longer employees of the selling company. As such, this emphasizes the need for employers to clearly define retention and change-in-control bonus agreements and ensure they are distinct from regular wages to avoid potential confusion or legal challenges.
For employees, the decision underscores that retention and change-in-control bonuses that are expressly contingent upon continued employment through specific dates or milestones, such as the closing of a transaction, are not guaranteed if an employee leaves early and does not give rise to a claim for breach of the Wage Act even if not paid on the day of termination of the employee’s employment by their now former employer. While the ruling may limit legal recourse for payments that are expressly intended to be paid on a delayed schedule, employees may still pursue claims for breach of contract if the terms of the bonus agreement are violated.
Takeaways
In M&A deals, the use of retention and change-in-control bonuses can be an essential tool for aligning the interests of key employees with the transaction’s success. However, this decision highlights the importance of ensuring these agreements are structured correctly to avoid potential legal disputes regarding the classification of such payments under Massachusetts law.
