Massachusetts Court: Employers Can’t Delay Workers’ Final Pay

Massachusetts’ top court has ruled that fired workers are entitled to triple wages as damages if not paid in full on their last day of employment.

According to legal experts, this is a “significant decision” that holds employers accountable if there is a delay in the payout of an employee’s wages.

Worker termination

In this case, the plaintiff had worked as a custodian for the city’s school department since 1988. The court said in its opinion that her employment was terminated in March 2013 after misconduct was discovered. She had about $9,000 in unused vacation time when she was let go. She received pay for the vacation time 3 weeks later.

Massachusetts wage law

The Massachusetts Wage Act requires that employees who voluntarily resign be paid their wages within 6 days following the end of the pay period in which the wages were earned. However, the rule is different for employees who are fired. The wage act requires that terminated employees be paid in full on the date they are discharged. This amount includes:

• Regular wages
• Earned commissions
• Unused vacation

Employers face substantial penalties for violating state law. They must pay triple wages, attorney’s fees, and court costs.

Demand for unpaid wages

The plaintiff challenged the employer’s decision to terminate her employment. While this was happening, her attorney sent a demand letter for $23,872. The amount included tripling the vacation pay and attorney’s fees, minus the setoff for the late payment.

The court upheld the firing. The employer sent a check shortly after the court decision. The amount included tripling the 12% interest on the plaintiff’s vacation pay accrued during the 3 weeks between her termination and payment.

Trial court ruling

The plaintiff sued her former employer over the pay in 2014. She alleged they had violated the state’s wage law. The worker claimed the employer failed to pay her vacation pay on the date she was let go.

The employer asked the court to dismiss the case. The court denied the request.

The trial judge said the plaintiff was only entitled to triple 12% interest for the three-week delay in receiving her vacation pay. The judge also awarded the plaintiff attorney’s fees.

Both the plaintiff and the defendant appealed the decision. The plaintiff appealed the judge’s determination that she was not entitled to triple lost wages. The defendant appealed the award of attorney’s fees.

Appellate ruling

The case came before the state’s top court. The Massachusetts Supreme Judicial Court ruled that employers will be strictly liable for triple all amounts owed in instances where the pay of an involuntarily separated worker is delayed. The court stressed the impact that a missed paycheck can have on an employee.

Strict liability is a high legal standard. It means that the defendant will be held liable merely by engaging in certain behavior, even if there is no criminal intent. Strict liability does not require a finding of negligence on the defendant’s part.

The court noted that the question in the case was whether the plaintiff was entitled under state law to triple the amount of the late-paid wages or the tripling of interest as the trial judge ordered.

Strict liability does not require a finding of negligence on the defendant’s part.

They said judicial tribunals have consistently recognized that Massachusetts’ wage law is intended to protect workers who are dependent for their daily support on the prompt payment of their wages. The court said that even a minor violation of the rule on prompt worker payment could have potentially severe financial consequences.

The Massachusetts wage law protects wage earners from the long-term detention of wages by “unscrupulous employers,” the court said. The law also imposes strict liability on employers who must suffer the consequences of violating the statute regardless of intent.

The court declared that the law was clear that fired employees must be paid in full on the day their employment ended.

Final wages must be paid promptly

“The statutory language and purpose of the Wage Act require prompt payment of wages and the trebling of those wages as liquidated damages when they are paid late,” the court said. “The remedy for late payment is, therefore, not the trebling of interest payments on those wages as found by the trial judge, but the trebling of late wages.”

“[W}e conclude that an employer is responsible for treble the amount of the late wages, not trebled interest,” the court said.

The court also awarded the plaintiff attorney’s fees and costs.

Court recognizes the impact on employers

The court was sympathetic to the impact that its decision might have on employers. The tribunal said it recognized that the ruling “puts employers in a difficult position when immediately terminating employees for misconduct.”

The tribunal noted that when a termination occurs with little or no advance notice, it might be unclear how much an employee should be paid. As a potential remedy, the court suggested that employers might have to suspend employees for a brief period of time. The suspension would prevent employers from violating the wage law.

Impact of the decision

Legal experts weighed in on the ruling.

The decision will have an immediate impact on Massachusetts employers regardless of whether the individual employer failed to pay owed wages on time in “good faith or intentionally dragged-out payments for their benefit,” according to a blog post by Burger Law Group PLLC.

Employers must ensure that they can pay a terminated employee a lump sum of their owed wages even if the termination date falls in between a payroll period, the law firm said.

The law firm noted that many employment attorneys view the penalties imposed by the decision as “particularly draconian,” considering that employers will now be liable for treble damages even if there are potentially unavoidable payroll mistakes. Employers must ensure that they can pay a terminated employee a lump sum of their owed wages even if the termination date falls in between a payroll period, the law firm said.

Small business owners could be particularly impacted. “Although the Reuter decision will affect large corporations, the impact of the decision will likely have a disproportionate effect on small business owners who may lack the funds to pay out an employee in full upon termination and will be devastated by treble damages,” Burger Law Group continued.

In a blog post, attorney William J. Miller noted that triple damages were not previously assessed as long as the employer paid the terminated employee in full before the employee filed a complaint with the court to recover the unpaid wages.

What should employers do?

Plan terminations in advance when possible.

“To prevent potential liability, all Massachusetts employers should take all reasonable measures available to plan out terminations well in advance. [They should also] minimize the potential for payroll errors or delays,” the Burger Law Group suggests.

Maine amends its wage statute

Immediate vacation wage payouts are now the law in Maine, as well. Lawmakers in the Pine Tree State amended its wage payment law last year to require that vacation pay be paid when a worker’s employment ends. All unused paid vacation accrued by the employee must be paid at the end of the worker’s employment. As a result, payment must be made in full no later than the employee’s next payday.

Private employers with 11 or more employees must comply with this law. However, the payout requirement does not apply to public employers.

The law went into effect at the beginning of this year.