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Ask the Hotline | Fired Employee Wants Unused Sick Time

February 11, 2018

Our company just fired an employee. Apart from his final wages and vacation, he is asking for his accrued but unused earned sick time. Do we owe the employee that money?
According to a recent decision by the Massachusetts Supreme Judicial Court (SJC) accrued but unused earned sick time is not wages. It is instead a contingent bonus, meaning it does not qualify as “wages” under the Massachusetts Wage Act. That means that an employee may not claim earned sick time as unpaid wages and the ex-employee may not seek treble damages. 
The SJC recognized that the employer promised to pay out employee sick leave banks to long-term employees either at the end of the year or upon the termination of employment, provided they were not terminated for cause. In this case, after the employer began disciplinary proceedings via the grievance process, the employee retired. The employer did not pay the employee his sick pay due to the ongoing grievance procedure. After a year of waiting, he sued, claiming that the failure to pay him for his unused, accrued sick time violated the Wage Act as well as the treble damages provision. 
The SJC looked at how the law treated the other form of accrued payment, vacation time. The Court ruled that while vacation time is viewed as unpaid wages, it may also be used for multiple reasons, unlike paid sick time, which may generally only be used for certain purposes as set out in law, i.e. illness. 
Given that, the SJC concluded that the employer’s payout based on unused, accrued sick time at the time of termination to an employee should be properly classified as a “contingent bonus,” rather than a wage payment. That is because it is awarded only if an employee does not use all of his/her sick time and has not been terminated for cause. Since this type of contingent bonus is not covered by the Wage Act, the SJC ruled for the employer and held that sick pay is not covered by the Wage Act.
Employers must craft sick-leave policy to explicitly state how the company intends to handle accrued but unused sick time at the time of termination of employment. If you commit to a policy of paying out the sick time as unpaid wages, it will bring it under the Wage Act, exposing you to an unpaid wage claim and treble damages. 
Please contact the AIM Employer Hotline at 800-470-6277 if you have any questions about this or any other HR related matter. 
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