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Time to Revisit the Wage Act

By John Regan
President & CEO

It’s time for the Massachusetts Legislature to revisit the state Wage Act.

The reason: The Massachusetts Supreme Judicial Court ruled recently that an employer is liable for treble damages even if the employer makes an inadvertent mistake in paying a terminated employee and rectifies the error in a timely manner.

The case before the court, as summarized in Mass Lawyers Weekly, involved a city of Methuen employee who was fired in 2013 after she was accused of stealing from her union’s bank account and convicted of larceny.

At the time she was fired, she had accrued $8,952 in unused vacation time. The city failed to pay her for the accrued time at the time it terminated her but sent four checks for the full amount three weeks later.

The plaintiff sent a demand letter to the city for $23,872, which represented a trebling of the unpaid vacation pay, which is considered wages.

The Wage Act, MGL Chapter 149, Section 148, provides that employees be paid for wages owed to them, including accrued vacation, at the conclusion of their employment. While employees who leave voluntarily don’t need to be paid until the next regular payday, employees who are terminated by the employer must be “paid in full on the day of discharge.”

Lower courts had previously ruled that as long as an employer paid what was owed before the employee filed a complaint in court, it would not be hit with treble damages on the unpaid wages. But in writing for the Supreme Judicial Court, Justice Scott L. Kafker noted that the remedy for late payments under the Wage Act was explicit: treble damages “for any lost wages and other benefits.”

Let me be clear: Associated Industries of Massachusetts unequivocally supports the right of workers to be paid for their labor in a timely manner. The question is whether the Wage Act provides the flexibility needed for employers to accomplish that objective.

Our colleagues at AIM HR Solutions will tell you that coordinating the final payment of wages for employees being terminated is a complex matter. AIM members regularly work with our HR team in good faith under tight time constraints to ensure that their companies meet their legal obligations to workers who are terminated.

The court decision, however, makes these companies subject to the same penalties as employers who willfully refuse to pay.

AIM urges the Legislature to develop a method to address good-faith errors in the calculation of paychecks.

The Massachusetts Wage Act as interpreted by the Methuen ruling represents overreach instead of smart regulation. AIM stands ready to work with the Legislature to make this important law work better for everyone.