Massachusetts High Court Clarifies that Sick Leave is not Wages

Though most employment lawyers never thought of accrued sick leave benefits as a wage, it took only one, armed with a big enough sick leave balance, to test the question in Massachusetts’ highest legal venue. To the surprise of few, the law left the Massachusetts Supreme Judicial Court in the same form lawyers and lower court judges have long interpreted it. While accrued sick leave remains a benefit that employers now need to provide under Massachusetts law, it is not a wage that must be paid to departing employees who have accrued it on the company’s books.

The case’s high stakes lend a clue as to why it went as far as it did. At issue was $46,755 in accrued sick leave under a plan at the Massachusetts Port Authority. Though the benefits were ultimately paid to the employee, the check was cut about a year after he retired due to an arbitration proceeding that ultimately went his way. Under the Massachusetts Wage Act, wages due to employees must be paid promptly at departure from employment. The Plaintiff pressed a theory that this provision of the law was broken by the late payment and that he was consequently entitled to three times the amount of  accrued sick pay owed, plus reimbursement for all legal fees he incurred to collect his pay.

The SJC would have none of it, however. It cited to the Act’s definition of the term “wages,” which includes holiday pay, vacation pay and earned commissions but does not mention sick leave benefits. The court then contrasted the purposes of sick and vacation leave policies, noting that only the latter could be used for any purpose. Sick leave generally is not wages as a result, the court concluded, and could not be considered a wage under Massport’s specific policy of paying out accrued, unused sick leave under some circumstances. Those conditions made sick time at Massport a “contingent bonus,” such that it like other bonuses is not a wage covered by the Wage Act.

The case is Mui v. Massachusetts Port Authority, decided January 29, 2018.

Hiking of Minimum Wage to $15/Hour Makes its Way toward the Ballot Box for November 2018

Dissatisfied with the recent increase of the Massachusetts minimum wage to $11/hour and its failed efforts to get the state legislature to move the hourly rate to $15, a coalition of community, religious and labor groups has submitted the issue for referendum vote. Assuming the question moves through the process to the November 2018 ballot, Massachusetts voters will decide whether to increase the hourly rate to $15, a move that surely won’t go over well with some business people.

Proponents of the hourly wage increase are unmoved. They believe $15/hour is necessary to allow low paid workers to afford basic necessities such as groceries, housing and heating. As it is, they say, full-time workers earning the current minimum of $11/hour make only about $22,000 per year. About a million Massachusetts workers will benefit if the rate increase is approved, they contend, and most are above the age of 20. They include nursing assistants, childcare providers, and teachers’ aides, the group says. Anticipating objections to the wage hike, the coalition points out that, despite the increase in the minimum wage from $8 to $11 in recent years, the Massachusetts economy continues to grow strongly.

If approved at the ballot box, the minimum wage will increase by $1/hour each year for four years, beginning in 2019. The measure will also increase the minimum tip wage from $3.75 to $9/hour during the same 4-year period. Under Massachusetts law, tipped employees may be paid less than minimum if their hourly rate plus the tips they receive are equal to or exceed the minimum hourly wage. On December 21, 2017, the Massachusetts secretary of state confirmed that enough signatures were submitted to support the ballot measure. The proposed wage increase now moves to the state legislature, which will have the option to approve it prior to any voting by the public. If that does not occur by May 2, 2018 or if the governor fails to sign a passed measure into law, proponents of the minimum wage increase will need to obtain another roughly 11,000 signatures from Massachusetts voters by July 4 to place the question on the 2018 ballot.

With the New Equal Pay Act Set to Take Effect on July 1, 2018, it’s Time for Employers to Evaluate their Wage Practices

The effective date of the new Massachusetts Equal Pay Act is fast approaching, and employers who have not yet begun to evaluate wage disparities between men and women need to start the process. Beginning July 1, 2018, the revised law will require that employees be paid equally for work involving similar skill, effort and responsibility. Analyzing existing wage disparities and making progress to address them will help shield employers from double the amounts of wage disparities and other penalties under the Equal Pay Act.

The new Equal Pay Act revises an existing law that, due to court interpretation, has been effectively useless to address wage disparities. It mandates that all workers be paid the same for “comparable” work regardless of gender and bars companies from ordering their employees not to talk about their pay. Courts evaluating Equal Pay Act claims will ignore job titles and focus on whether jobs require “substantially similar skill, effort and responsibility” and are “performed under similar working conditions.” Penalties under the Act are substantial and include the payment of employee legal fees, but can be abated or avoided completely by self-evaluation and concrete action in advance of July 1, 2018. Implementation of the law was delayed two years from its passage in July 2016 to provide employers time to address pay disparities.

Employers who haven’t yet done so should proceed quickly to determine whether wage inequity exists. Doing this with the assistance of counsel, either in-house or from outside the company, should permit the initial findings of an Equal Pay Act audit to be kept confidential. This makes sense given the existence of a federal law on equal pay that does not shield audits in the same way the Massachusetts Equal Pay Act does. Once an initial audit is completed, employers should decide with the advice of counsel how to address the results and whether more audit work is needed. Under the Massachusetts Equal Pay Act, progress on abating unequal pay is required before the audit will be a useful defense to suit.

Supreme Judicial Court Rules that Employees get Interest on Unpaid Wages but not Statutory Penalties

The Supreme Judicial Court this week issued its latest interpretation of the Massachusetts Wage Act, Mass. Gen. L. ch. 150, §§148-150. It ruled that prejudgment interest on unpaid wages and other benefits awarded to employees should be added to judgments at the statutory rate of 12 percent. Importantly, however, the SJC decided that no interest can be awarded on the mandatory triple damage penalties that apply under the Wage Act.

The case is significant both as to its substance and the SJC’s break with a ruling by the U.S. Supreme Court regarding prejudgment interest on wages. On substance, the SJC’s ruling will likely result in substantially reduced judgments against employers in some cases. As to federal precedent, the Supreme Court decided in 1945 that employees cannot receive interest on wage judgments under the Fair Labor Standards Act (a federal law dealing with wage payments to employees) because its liquidated damages provision superseded it. In rejecting this logic, the SJC pointed to laws in Massachusetts that require interest at 12 percent annually on damages awards. It concluded that harmonizing the Wage Act with these laws requires a reasonable balance such that interest must be awarded on actual damages awarded but not on triple damage sums. [Read more…]

Minimum Wage Now at $11 Per Hour

Effective January 1, 2017, the minimum wage for Massachusetts workers rose from $10 to $11 per hour. The new rate applies to almost all employees. For employees who regularly receive tips as part of their pay, the minimum rate is $3.75/hour. Those workers’ total compensation with tips included must be at least $11/hour. All categories of workers remain eligible for overtime pay at 1.5 times their normal rates of pay for hours worked above 40 in a workweek. Some workers are exempt from overtime requirements based on job classifications and administrative requirements.

Legislator will Try Again to Impose Liability on Companies for Wage Violations by Entities they Contract With

After failing to pass what’s referred to as a wage theft bill in the recently ended legislative session, the bill’s sponsor is not giving up. According to published reports, Sen. Sal DiDomenico will reintroduce the controversial measure when legislators go back into session in January.

The proposal would make employers that contract with third parties to have labor performed or services provided to them guarantors of the payment of wages earned by the employees of those third parties. It appears to make such employers, in effect, co-employers of the third party’s employees. If, then, the third party doesn’t pay its workers, the company that received the benefit of the workers’ services would be liable. The proposal does not make an exception for companies that pay whatever is due under their third-party contracts. The effect could be, it seems, that company A pays for labor provided to it by company B and is nonetheless liable directly to the company B’s employees because it failed to remit wages earned by them. This could mean company A pays the same penalties — triple damages and legal fees — as it would if it failed to pay its own employees for work performed.

The statute is apparently aimed at upending a practice under which large companies hire third parties to be employers of workers who actually perform services for them directly. Whether it will ever becomes law remains to be seen.

Wage Act may not Require Pay for All Hours of Work

In a recent decision that some plaintiff-side employment lawyers found surprising and perhaps troubling, a judge of the superior court held that an employer does not need to pay for all hours that its employees work. The employer did not violate the Massachusetts Wage Act, Justice Robert Gordon found on February 5, because it honored agreements it entered with its workers and did not transgress minimum wage or overtime laws. He wrote,

“[A]n employer and employee who agree at the outset of their contract that the employee will be paid at an hourly rate for selected tasks, but not for all work, are plainly not violating the Wage Act when the employee is paid in accordance with this agreed understanding. To the contrary, an employer who pays an employee as he has agreed to be compensated—provided (as here) that it complies with all applicable minimum wage and overtime laws—has fulfilled the core aspiration of this statute.”

The facts of the case are important. The plaintiff sought to represent a class of auto mechanics who work on a rate pay basis — that is, they are paid specific hours at agreed rates for work they perform on automobiles. While this arrangement resulted in wages in excess of minimum requirements, it also caused the mechanics to necessarily perform daily task for which they were not paid, such as filing paperwork and cleaning their work stations. They also received no pay for down time despite being required to be present for certain hours each day. Because the employer and employee agreed to this arrangement and did not violate other laws, the court found that it did not violate the Wage Act.

The decision may be an important one for employers who do not pay their workers on either hourly or salary bases, such as those that pay only sales commissions or base employee pay on deliveries of good or services. It addresses a previously open question for those employers that is likely to be revisited by appellate courts in the future. The case is Salerno v. Baystate Ford and is pending in Middlesex Superior Court.

 

Massachusetts Attorney General Collects Pay Disparity Data from Employers

In apparent anticipation of proposed changes the state legislature is now considering making to the Massachusetts Equal Pay Act – or, perhaps, in an effort to help determine whether and what changes may make sense – the Massachusetts Attorney General is reportedly using its general records inspection authority to demand a wide range of new employee data.

A recent article by Massachusetts Lawyers Weekly reports that the requests differ from those normally sent by the AG. They seek more demographic data and job details with an apparent focus on whether pay disparities based on gender and/or race exist. The requests ask for information such as employee names, genders, ethnicities, job titles, pay, and job descriptions.

The AG has general authority to seek certain payroll and related information from Massachusetts employers. It typically does so as parts of audits or investigations that may be initiated by specific employee complaints about pay practices. Employers from whom such information is sought are generally required by statute to provide it, and it therefore behooves them to ensure that the full and complete records required by law are properly maintained. Penalties and other damages can flow from failures to do so.

Small Employer Forced to Pay more than $100,000 for Wage Violations

A local grocer is learning the hard way how important it is not only to properly pay employees under state wage laws but to keep good records demonstrating that it did so. Following an investigation by the Massachusetts Attorney General’s wage and hour office, the employer was compelled to pay $84,000 in back wages and $21,000 more in penalties. As if that’s not enough, the store and its owner also had their names posted on the Attorney General’s web site so that all could read about their violations of state laws.

The case illustrates the importance of understanding and complying with Massachusetts laws that cover the payment of wages. They include the state’s Wage Act, which requires that employees receive pay for all hours — and minutes — they work and provides mandatory triple damages and legal fees against employers who fail to comply. Massachusetts also has its own overtime and minimum wage statutes, each of which provides broader benefits to employees than do federal counterparts. The state mandates that all employers keep accurate records of hours worked by and payments made to their employees, among other things, and generally requires that workers be treated as employees and not independent contractors. The mandatory triple damage and legal fee rules normally apply to legal transgressions in any of these areas.

New Equal Pay Bill Makes Progress in State Legislature

A bill to replace Massachusetts’ aging equal pay law is making progress in the state legislature and may be heading for final approval. Late last week, a Senate committee produced a revised version of the pending legislation and recommended that it be passed.

The existing law, known as the Massachusetts Equal Pay Act (MEPA), was enacted in 1945. It generally prohibits employers from paying women less than men for comparable work. Because court interpretations of what’s required to demonstrate violations of the law have made enforcement difficult — women’s pay continues to lag behind men’s pay in the Commonwealth — a revised MEPA was proposed and is broadly supported in both branches of the state legislature. It would, among other things:

  1. Make enforcement easier by eliminating the requirement that plaintiffs prove that the substantive content — that is, the specific job duties — are “comparable;”
  2. Extend the statute of limits on comparable work claims to three years;
  3. Invalidate certain defenses and the requirement of filing with the Massachusetts Commission Against Discrimination (MCAD) as a prerequisite to suit; and
  4. Make employer rules against employees discussing their pay with each other illegal.

Employers that, within the 3 years that precede a claim, complete a pay practices self-evaluation and demonstrate reasonable progress in eliminating pay differentials based on gender may escape liability under the bill. Successful plaintiffs will be entitled to double damages and legal fees under the proposed new law, just as they currently are. Agreements to avoid equal pay will not be enforceable. The new law will, of course, be effective to protect both men and women against unequal pay for comparable work.