Employers Beware – No Grace Period For Untimely Payment of Wages To Terminated Employee

Massachusetts employers are (or should be) aware of the Massachusetts Wage Acts strict requirements regarding the payment of wages to departing employees. Terminated employees must be paid all wages owed on the date of termination, while employees who resign must be paid on the next regular payday following the end of their employment. An employer who fails to comply with these deadlines faces stiff penalties, including mandatory awards of treble damages and attorneys’ fees. Certain officers and agents having management of companies also may face individual liability for Wage Act violations.

A recent decision from the First Circuit, Lawless v. Steward Health Care System, LLC, should serve as a reminder to employers that there is no “grace period” to comply with the Wage Act’s timing requirements. In the case, the employer terminated the plaintiff’s employment but failed to pay the amounts she was owed as paid time off and extended sick leave. That day, she filed a lawsuit claiming a violation of the Wage Act and an administrative complaint with the Attorney General, requesting leave to proceed with her lawsuit. The following week, before the Attorney General assented to the employee maintaining her lawsuit, the employer paid the amounts owed. The lawsuit continued with the district court finding in favor of the employee and awarding treble damages.

The employer appealed, making various arguments that boil down to the simple question: Must an aggrieved employee wait until she obtains consent from the Attorney General to file a lawsuit for a Wage Act violation? The First Circuit, predicting Massachusetts law, said no.

Had the First Circuit decided otherwise, this could have created a “grace period” for employers to pay amounts owed before the Attorney General consented to a lawsuit. The First Circuit expressly rejected the creation of this grace period. According to the First Circuit, nothing in the Wage Act supports its creation and doing so would be inconsistent with the legislature’s purpose when it enacted the Wage Act—holding employers strictly liable for dilatory payment of wages.

Employers should note that the First Circuit predicted Massachusetts law, and its prediction was contrary to a Massachusetts Superior Court 2015 decision, Littlefield v. Adcole Corp., which we discussed as providing guidance for employers to reduce their exposure for treble damages when facing a potential Wage Act claim for failure to make a timely payment of wages. In Littlefield, the Superior Court held that the measure of damages the aggrieved employee could recover (and that would be trebled) was the interest that accrued on the unpaid wages during the delay in payment. Neither decision is binding on a Massachusetts appellate court, and prudent employers should always present a discharged employee with a check with full payment of all earned wages (including earned vacation or paid time off) on the date of termination.

Employers also should note that this decision does not mean that earned, but unused, sick time is recoverable under the Wage Act, and employers should identify and raise that issue immediately if an employee attempts to bring a claim for a violation of the Wage Act based on an alleged failure to pay sick leave. As we previously discussed, the Supreme Judicial Court of Massachusetts held that such leave does not constitute wages under the Wage Act. Here, the employer paid the earned sick leave late and the trial court ordered treble damages on the late payment before the SJC’s decision. The First Circuit refused to reverse that order, because the employer never argued that the earned sick leave did not constitute wages required to be paid.

Employers with questions about the Wage Act and how to comply with its requirements regarding terminated employees should contact one of Conn Kavanaugh’s experienced employment lawyers.

ALEXIS P. THERIAULT

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HENRY H. TRAN

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