In a decision released February 13, 2018, the Supreme Judicial Court held that sick or vacation payments, when used to supplement workers’ compensation payments, are not “regular compensation” as defined in the Contributory Retirement Law, G.L. c. 32, § 1.

The decision, Public Employee Retirement Administration Commission v. Contributory Retirement Appeal Board & others, SJC-12331, involved an employee for the Town of Swampscott. The employee sustained injuries at work and began receiving workers’ compensation benefits. In addition to those benefits under G.L. c. 152, § 69, the employee received two hours per week of supplemental pay (i.e., sick or vacation pay) in order to maintain his union membership and life insurance. Under G.L. c. 152, § 69, a public employer may pay an employee who is receiving workers’ compensation all of their accrued vacation and sick time “in part until any sick leave allowance which the employee has to his credit has been used.”

The Town filed an application seeking to retire the employee involuntarily for accidental disability; the Retirement Board approved the application; and the employee received workers compensation benefits and supplemental pay through June 7, 2012. The Public Employee Retirement Administration Commission (“PERAC”) determined that the employee’s effective retirement date was July 7, 2012, because that was the last day he received “regular compensation” in the form of his supplemental pay. The Division of Administrative Law Appeals reversed PERAC’s decision, finding that the employee’s supplemental pay did not constitute “regular compensation.” Both the Contributory Retirement Appeal Board and a Superior Court judge agreed with DALA’s decision; an appeal followed; and the SJC took the case on its own motion.

The sole issue before the SJC was whether supplemental pay received in conjunction with workers’ compensation constitutes “regular compensation” under G.L. c. 32, § 1. “Regular compensation” is defined in the statute as “compensation received exclusively as wages by an employee for services performed in the course of employment.” The court has interpreted this to mean ordinary, recurrent, or repeated payments, as opposed to irregular payments such as bonuses or overtime pay. The court concluded that supplemental pay received while an employee can no longer provide employment services for the employer is not “regular compensation” for the following reasons:

• Regular compensation means wages paid to an employee for “services performed” and an injured employee on workers’ compensation, by definition, is unable to perform services;
• Regular compensation must be “of indefinite duration,” but sick and vacation time is limited in amount;
• The workers’ compensation statute implies that supplemental pay is intended to be a “substitute for an employee’s regular salary”; and
• Workers’ compensation itself is not regular compensation.

Please contact any of our attorneys if you have any questions about how this decision may impact you or if you have any other questions regarding labor and employment matters.

This update is provided for informational purposes only and should not be considered legal advice.

In a decision released January 29, 2018, the Massachusetts Supreme Judicial Court held that payment for accrued, unused sick time does not count as wages under the Wage Act, G.L. c. 149, §§ 148, 150. The decision, Tze-Kit Mui v. Massachusetts Port Authority, SJC-12296, addressed an employee’s claim that his former employer violated the Wage Act by failing to timely pay him for his accrued but unused sick time upon his retirement.

In 2013, the Massachusetts Port Authority (“Massport”) initiated disciplinary proceedings against its employee, Mui. A week later, he applied for retirement. Shortly thereafter, Massport discharged Mui from employment, an act later overturned by an arbitrator. The arbitrator ruled that Massport could not terminate Mui’s employment because Mui had already retired. In accordance with their sick pay policy, Massport paid Mui a percentage of his accrued, unused sick time. However, due to the length of the grievance and arbitration proceedings, the payment was not made until more than one year after Mui’s effective retirement date.

Mui sued Massport under the Wage Act, which provides that “any employee leaving his employment shall be paid in full on the following regular pay day,” and that “any employee discharged from…employment shall be paid in full on the day of his discharge…the wages or salary earned by him.” G.L. c. 149, § 148. Mui claimed his accrued, unused sick time constituted “wages” within the meaning of the statute. He sought treble damages of approximately $140,000 (representing three times the amount Massport had paid him under their policy).

The court was therefore tasked with determining whether the Wage Act encompasses sick pay. Looking to the language of the statute, the court noted the absence of any reference to sick pay and declined to expand the meaning of “wages” to encompass sick pay where it is not expressly mentioned. The court has previously declined to expand the meaning of “wages” to include other types of compensation not expressly named in the statute, such as discretionary bonuses, tax-exempt deferred compensation, and severance pay. The court also distinguished sick time from vacation time, which is expressly mentioned in the statute as a form of “wages,” because sick time may be used only when an employee or family member is sick. Vacation time, on the other hand, may be used for any reason.

Finally, the court considered whether sick time paid out in the form of a “contingent bonus” counts as “wages.” Here, Massport’s sick time policy provided for departing employees to be paid a percentage of their accrued, unused sick time as long as certain conditions were met – employees had to have worked at Massport for at least two years and they could not have been terminated for just cause. The court noted that the only contingent compensation expressly mentioned in the Wage Act is commissions. Previously, the court has declined to expand the term “wages” to include other types of contingent compensation. The court concluded that sick time paid in the form of a “contingent bonus” does not constitute “wages” under the Act.

This case serves as a very important decision for public employers and employees regarding claims under the Wage Act for accrued, unused sick time. Should you have concerns about how this decision impacts you, we strongly advise that you contact us with your questions.

This update is provided for informational purposes only and should not be considered legal advice.