On February 19, 2019, the Massachusetts Supreme Judicial Court ("SJC") held that two employees asserting claims under the Massachusetts Wage Act ("Wage Act") were entitled to recover attorneys' fees from their former employer where the parties entered into a private settlement.  See Ferman v. Sturgis Cleaners, Inc., No. SJC-12602 (Feb. 19, 2019), available here: https://www.mass.gov/files/documents/2019/02/19/12602.pdf.

In the lawsuit, Belky Ferman and Veronica Guillen alleged that their former employer failed to pay them approximately $28,000 in regular and overtime wages as required under the Wage Act.  Approximately two years after the lawsuit was filed, the parties entered into a private settlement agreement in which the employer agreed to pay the former employees $20,500, approximately 70 percent of their monetary demand.  Following the settlement, the employees separately sought recovery of their attorneys' fees associated with their pursuit of the lawsuit.  

In affirming the lower court, the SJC held that the employees were entitled to recovery of their attorneys' fees under the Wage Act as a result of the "catalyst test," finding that the lawsuit was a necessary and important factor in causing the employer to pay a material portion (i.e., 70 percent) of the employees' requested relief.  This, the Court reasoned, qualified the employees as prevailing parties for purposes of an award of attorneys' fees, regardless of whether the private settlement was court approved.  

The SJC emphasized that its holding promotes expeditious settlements of meritorious cases, has the potential to deter lengthy, drawn-out lawsuits, and provides financial incentive for attorneys to provide representation in cases that would otherwise be financially risky or challenging to handle.   

As a result of Ferman, employers should be vigilant about the language of any drafted settlement.  It is now clear a settlement at any stage will likely include a provision for attorneys' fees which is required by the Wage Act.  Moreover, where an employer is considering entering into a settlement agreement for a substantial portion of what the employee demanded, the employer should consider including payment of the employee’s attorneys' fees as part of the settlement or else risk a separate attorneys' fees claim in court.