On April 4, 2022, the Massachusetts Supreme Judicial Court issued a decision in Reuter v, City of Methuen, No. 13121 (2022), holding that an employer who failed to pay a discharged employee for accrued vacation time on the day of her termination, as required by the Wage Act, G.L. c. 149, §148, is strictly liable for treble the amount of the late wages, and not merely trebled interest. In doing so, the SJC rejected the reasoning of a trial court decision, Dobin v. CIOview Corp., Mass. Sup. Ct., No. 2001-00108 (Middlesex County Oct. 29, 2003), which many employers have relied on to argue that wage payments paid after the date they were due under the statute can be properly made if they include trebled interest.
Reuter involved a school custodian who was terminated for just cause. At the time of termination, she had accrued nearly $9,000 in unused vacation time. Even though the Wage Act expressly requires that this accrued, unused vacation is “wages” and must be paid on the date of termination, the City did not make this payment until three weeks after this date. Subsequently, after receiving a demand letter for treble the amount of the late vacation pay plus attorney’s fees, the City paid an amount which represented a trebling of 12% annual interest on the tardily-paid wages. Following a superior court judgment for the City, an appeal was filed and the SJC took the case on direct appeal.
In its decision, the SJC reviewed the express language of the Wage Act, its legislative history, and its purpose to protect employees who often rely on prompt payment of wages to cover basic necessities. The SJC noted that the liquidated damages provision of the Wage Act makes employers strictly liable for treble damages, meaning that the provision applies regardless of the employer’s intent. The SJC reasoned that the Legislature therefore intended that employers, and not employees, bear the consequences of late payments, whether intentional or not. Reasoning that “the statute does not tolerate or in any way condone delay,” the SJC concluded that all late payments must be trebled as damages under the Wage Act.
The consequences of this decision for employers are notable. Employers must pay an employee for all wages, including accrued, unused vacation time, on the day of termination. The alternative is liability for treble that amount. As the SJC noted, this may mean that an employee who has engaged in illegal activity or other misconduct may have to be suspended with pay for a short period of time before termination to allow the employer time to calculate wages and benefits. Obviously, that option is not available for an employee whose employment is terminated for other reasons or who resigns. Frequently, municipalities and school districts encounter practical obstacles of various kinds in dealing with payroll departments regarding prompt compliance with the statute. The consequences should be clearly explained.
If you have questions about the application of this update or related questions, such as the legality of vacation carryover/“use it or lose it” policies, please contact us. We are pleased to assist employers with Wage Act compliance.
This update is provided for informational purposes only and should not be considered legal advice.