Supreme Judicial Court Holds That Sick and Vacation Payments are not “Regular Compensation” Under Chapter 32 When Used to Supplement Workers’ Compensation Payments

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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.