Late payment of final compensation has become much more costly for employers with workers in Massachusetts. In a notice dated April 4, 2022, Reuters c. City of Methuen, the Massachusetts Supreme Court has ruled that companies that do not pay wages owed to employees on the day they are fired can be held liable for up to three times the amount of wages previously owed. These treble damages are based on strict liability principles, meaning they can be applied regardless of the employer’s intent or how quickly they correct the error. The decision marks a major break with the interpretation that has prevailed since 2003.
Massachusetts Previously, only the tripling of interest was required
Before the Methuen decision, Massachusetts had only demanded that treble damages be paid on accrued interest on any wages owed at the time of termination. Section 148 of the Massachusetts Wages Act (the Act) requires employers to pay all wages owed to employees on the day of their involuntary termination (eg, dismissal, termination, layoff). These wages may include benefits such as accrued vacation or vacation days subject to individual agreement between employer and employee. Section 150 of the Act provides that any employee who prevails in a private cause of action to recover unpaid wages in violation of Section 148 “shall be awarded treble damages, as liquidated damages.” plus attorney’s fees and costs.
Since the 2003 decision in Dobin vs. CIOview Corp., Massachusetts courts have interpreted these treble damages as applying only to interest accrued between release and the time of actual payment. In Dobinthe plaintiff was terminated on December 13, 2000, and on the same day her employer gave her checks that fully covered her salary — checks dated December 15, 2000. On the same day she received the checks, the plaintiff filed a Complaint alleging violations of the Act.
the Dobin interpreted article 150 (“the defendant must not constitute a defendant[s]ea payment of wages after filing of the complaint”) to conclude that the provision of post-dated checks amounted to payment “before the complaint”, so that the plaintiff was not entitled to three times damages on wages. However, the plaintiff was still entitled to “lost interest which she had suffered as a result of the delay in the payment of her monthly salary, tripled”. This amounted to three times the interest for the two days of late payment, significantly less than three times the total salary owed to him.
This interpretation, according to which employers could mitigate penalties by late or delayed payment after termination, was the law after Dobinand remained so until this year.
Reuters c. City of Methuen Overthrow established law
In Reuters, a city watchman was fired after being found guilty of theft. At the time of her termination on March 7, 2013, she had accumulated approximately $9,000 in unused vacation time. His employer did not pay him the accumulated vacation until March 28, 2013, three weeks after his dismissal. Between the dismissal and the receipt of the checks, the employee sent a demand letter to the employer requesting an amount equal to three times the vacation pay due less the amount actually sent to her, plus the fees avocado (about $23,000). Consistent with Dobin, the employer responded to the formal notice with an amount equal to three times the interest accrued on the value of the money between March 7 and March 28, or approximately $180. The employee sued, demanding triple her salary, as she had originally requested.
The Massachusetts Supreme Court noted that the law’s purpose was “to protect employees, who often depend for their day-to-day support on prompt payment of wages.” The court therefore reviewed the specific wording of the law, saw no intention to prohibit tripling wages, and found “no wiggle room” in the wording requiring that “any employee terminated from such employment … be paid in full on the day of his release. The court held that because the consequences of not receiving such payments in a timely manner can be “serious” for an employee, even late payments constitute unambiguous violations of the law.
the Reuters the court flatly rejected Dobin, opting instead for a more literal reading of the statute’s provision that “the defendant may not raise as a defense the payment of wages after the filing of a complaint”. The tribunal expressed concern that employers are taking advantage of the leeway granted by Dobin avoid paying the salary until the day before a complaint is filed. the Reuters The court also found that simply tripling the interest was not enough to properly compensate unpaid employees, who “rely on these payments to pay [their] accommodation, transportation, family food and clothing, school fees and medical expenses.
This decision imposes serious consequences on employers; even inadvertent miscalculations of compensation at the time of termination can result in treble damages. In an effort to lessen the harsh effects of his decision, the Reuters The court pointed to section 148 of the law, which distinguishes discharge from other forms of separation. While, according to the court, “if you choose to terminate an employee, you must be prepared to pay them in full when you do so,” suspensions fall outside the protection of the law.
If conducting an involuntary dismissal, an employer who cannot meet the employee in person to deliver a check should explore other payment methods to comply with the Act’s same-day payment requirement (e.g., eg direct deposit on the date of dismissal, delivery by check courier).
Finally, the court left open whether this outfit can apply retroactively. As such, until the matter is resolved in subsequent litigation, legislation or regulation, employers should be prepared for the possibility of legal action seeking to triple damage liability for past cases of arrears. erroneous payments dating back up to three years (the statute of limitations).
Given the severe consequences and extremely slim margin for error under the court’s interpretation of the law, Massachusetts employers should consult with a qualified compensation and hours attorney.