While Massachusetts is uniquely employee-friendly when it comes to final wage payments, its Supreme Judicial Court just narrowed the margin of error allowed for employers to nil. In a ruling handed down on Monday, April 4, the SJC ruled that in order to comply with the Massachusetts Wage Act, employers must pay terminated employees in full on the date of termination – and that employees are automatically entitled to treble damages (three times the late payment) without even needing to file a Wage Act complaint.

The Wage Act already mandates automatic triple damages, attorney fees, and interest for violations of the act, even if they are unknowing or technical errors. Accidents or mistakes are no excuse. Former employees may bring a private action under the Act “for injunctive relief, any damages incurred, and lost wages.” However, up until now the Massachusetts courts have employed a practical “post-complaint” payment defense. The idea was that an employer who has made a late payment due to a technicality, but has cured an error before the former employee files a complaint, is not liable for treble damages because the error was corrected and did not require legal enforcement.

In Reuter v. City of Methuen, the SJC departed from that approach and determined that an employer’s failure to pay an involuntarily-terminated employee imposes strict liability upon the employer for treble damages, fees, and interest. In this case, an employee was owed approximately $9,000 for accrued vacation time that, for whatever reason, the employer did not pay out to Reuter (the plaintiff) until three weeks later (and prior to Reuter filing a wage complaint)[1]. The suit demanded payment of treble damages due to the three-week delay, and the Court agreed. The issue of what happens when the “employer pays wages after the deadlines provided in the act but before the employee files a complaint” was, to the Court, clear: “[g]iven the strict time-defined payment policies underlying the Wage Act, and the liquidated damages provision providing for treble damages for ‘lost wages and other benefits,’ [the Court] conclude[d] that an employer is responsible for treble the amount of late wages, not trebled interest. As the prevailing party, the plaintiff is also entitled to attorney’s fees and costs.”

At the end of this lengthy fight, the employee who was delayed in receiving $9,000 in vacation for three weeks ended up getting $18,000 more for the trebling of the by-now paid vacation, plus all the employee’s attorney’s fees (through the appeal), plus interest dating back to the start of the case.

It is imperative that employers get their ducks in a row prior to involuntary terminations. In an ideal world, the amount of accrued vacation and other wage-related benefits should be calculated prior to any termination meeting, and a check should be cut to give the employee on their way out the door, settling all accounts.

The problem for many employers is that due to automated payroll systems, it can be impossible for a payroll company to issue a check or initiate a direct deposit at the drop of a hat. In this case, there are a few options. The first approach is described above: plan ahead for the termination, calculate the amount that will be owed on the day that the payroll company can issue the amount owed, and tell the employee that the payment will be in their account by the time they leave the building on their last day. The second approach, which is the safest, is to continue to pay the employee regular wages until such time as the final wage payment can be paid.

Additionally, errors that employers used to dismiss as technical, such as delays in commission or vacation checks, paying hourly employees bi-monthly, or paying anyone on a monthly basis, could now give rise to claims.

As always, if you have questions or would like advice on complying with the Wage Act or properly conducting employee terminations, please reach out to us.

[1] It is also worth noting that Reuter was terminated from employment after being convicted of larceny. The reason for termination has no impact on the availability of damages to a plaintiff.