Massachusetts Highest Court Awards Treble Damages Under the Wage Act, Even After Employer Remedied Violation

Beth Reuter was terminated from her employment with the City of Methuen (the “City”). On her termination date, the City failed to pay Ms. Reuter for her accrued, unused vacation time, as required by M. G. L. c. 149, § 148 (the Massachusetts Wage Act). Instead, the City waited three weeks after her termination to make this payment. One year later, after receiving a demand from Ms. Reuter’s attorney, the City paid a further small sum, representing treble the amount of interest that had accrued on the unpaid vacation time between her termination date and the date of payment for the accrued, unused vacation.

Plaintiff brought suit for violations of the Wage Act, claiming she was entitled to treble the amount of the accrued vacation time the City had failed to pay on her last day of work. Following a trial, the Superior Court held that the City had violated the Wage Act but concluded that treble damages were only due and owing on interest accrued during the three weeks the vacation time remained unpaid.[1] The trial court also found that the Plaintiff was entitled to attorney’s fees totaling $75,695.76. The parties cross appealed.

Analysis

The Wage Act requires that a terminated employee’s wages “shall be paid in full on the day of his discharge.” See Gen. L. c. 149, § 148. “Wages” include holiday or vacation payments due to an employee under an oral or written agreement. The Supreme Judicial Court (SJC) concurred with the lower court that the City’s failure to pay Ms. Reuter $8,952.15 for her accrued, unused vacation time on her termination date constituted a violation of the Act.

Damages for violations of the Wage Act are set forth in M.G.L. c. 149, § 150. In 1993, when the SJC first created a private right of action for employees whose rights under the Wage Act had been violated, treble damages were only available where the employer’s conduct was “outrageous”; at the time, multiple damages were thus discretionary, rather than mandatory. Since 2008 when the Wage Act was further amended, however, § 150 has provided that an employee “shall be awarded treble damages, as liquidated damages, for any lost wages and other benefits.”

Noting the important public policy underlying the Wage Act (recognizing that late payment of wages can result in circumstances detrimental to the health and well-being of workers) and the fact that employers are found liable for violations of the Act regardless of intent, the SJC concluded that the explicit language of § 150 unequivocally requires an award of treble damages where an employee does not receive all unpaid wages on the termination date.[2]

Takeaways

The potential impact of Reuter on employers cannot be understated: employers face significant exposure in the form of treble damages and attorneys’ fees for failure to strictly comply with the Wage Act’s requirement to pay accrued wages (including amounts for accrued but unpaid vacation or holiday time) on the termination date. It is no longer the case that an employer can avoid treble damages by paying accrued wages after the termination date, as long as payment occurs prior to the employee filing suit. Critically, an employer’s exposure for treble damages for final wages paid to an employee after the termination date lasts for three years. The SJC’s decision in Reuter may well create practical concerns for employers seeking to immediately terminate employees for misconduct. Employers of all sizes should ensure that procedures are in place to comply with the Wage Act’s strict final pay requirements. Employers may also wish to consider providing terminated employees with paid leave for a day or two following the decision to terminate to provide sufficient time for a final tally and payments of all wages due.