Employers who aim to avoid multiple damages and legal fee awards in wage cases — as all should, of course — today have even greater reason to carefully assess what’s owed to workers on their ways out the employment door. In a decision issued on March 4, the SJC held that post-employment payments to a worker who was owed for accrued but unused vacation time meant nothing under the Massachusetts Wage Act. Despite having paid the terminted work more money in continued wages than he was owed for unused vacation time, the court held, the employer did not satisfy the requirements of the Wage Act and is liable for punitive damages and legal fees.

The case is Dixon v. City of Malden and involves the termination of the director of a city-owned nursing home. Under City policy, Dixon had accrued 50 days worth of vacation time on the day his was fired, a value of about $13,600. The City continued to pay his salary for more than three months, and he received more than $19,000 during that period. The payments, however, were not characterized as wages in lieu of unused vacation time and, when the salary continuation ended, City records still reflected that the worker had 50 accrued days. After Superior Court Justice Thomas Billings dismissed the plaintiff’s suit for unpaid wages, writing that he’d suffered no damages, the SJC transferred the case on its own initiative and reversed.

Citing to the statutory requirement that all wages due be paid on the day a worker is fired, the court held, “We conclude that the failure to pay unpaid wages, as defined by G.L. c. 149, § 148, cannot be mitigated by gratuitous, after-the-fact payments … Employers must ‘suffer the consequences’ of violating the statute regardless of intent. In these circumstances, the plaintiff has incurred damages under the terms of the statute because the city did not pay his earned, unused vacation time, a definitive amount of $13,615.54, when he was terminated from the city’s employment.” In the particular case at issue, Plaintiff Dixon will not be eligible for the now mandatory triple damages provided by the Wage Act. That’s because his suit began prior to the Massachusetts Legislature’s amendment of the Wage Act to clarify that such punitive awards are required in all cases where earned wages are unpaid.

For the third time, a superior court judge has weighed in on the question whether managers of limited liability companies can be held personally liable for the severe penalties provided by the Massachusetts Wage Act. Mark the score now as two to one in favor of such liability. On December 17, 2012, a Middlesex County Superior Court judge ruled that the Act’s failure to reference LLC managers like it corporate presidents and treasurers does not absolve those managers of personal liability.

“The touchstone of section 149 liability remains that ‘[e]very person having employees in his service’ can be liable.  I decline, therefore, to rule that there can be no individual liability in the limited liabiliy corporation setting as a matter of law,” wrote Justice Paul Wilson. Instead, the court concluded, claims of individual liability against LLC managers can proceed if those managers have responsibilities that are functionally equivalent to those typically performed by corporate presidents and treasurers. The court went on to conclude that a plaintiff’s claim against a high-ranking manager stated a plausible claim while one against his report did not, despite the fact that the latter individual was in charge of the company’s Massachusetts operations and supervised the employee at issue. [Read more...]

The Massachusetts Supreme Judicial Court just made it even tougher for employers to avoid the broad implications of the state’s Wage Act. Given that law’s special provisions, it concluded, its terms cannot be waived by a general release from a departing employee unless the law is specifically mentioned and the waiver is “stated in clear and unmistakable terms.” A release of Wage Act claims “must be plainly worded and understandable to the average individual, and it must specifically refer to the rights and claims under the Wage Act that the employee is waiving.”

The decision could have broad implications in the severance arena, where employees commonly are paid a specific sum in exchange for waiving “any and all claims” they may have against their employers. In many cases, the release language in these agreements does not specifically address the Wage Act, at least not to the degree that may now be required. Part of the problem here is the difficulty discerning precisely what words will be sufficient going forward. Is mentioning the “Wage Act” or Mass. Gen. L. ch. 148″ sufficient? Or are employers required to both reference the law and describe its provisions to employees in detail? Cautious employers should do the latter to be sure employees cannot later say they did not  understand what they were doing. The likely result, of course, is overly broad, wordy waivers drafted by lawyers. Still, it’s better than finding out after the fact that a claim you paid to have waived is staring at you from the other side of a lawsuit.

Refusing to follow the lead of a fellow jurist, a Suffolk Superior Court judge ruled in June that managers of Massachusetts limited liability companies cannot escape personal liability under the state’s Wage Act by virtue of the corporate structure through which they may work. While agreeing that the Act’s presumption making corporate presidents liable as employers does not apply to LLC managers, the judge nonetheless refused to dismiss an individual liability suit for failure to pay wages to an employee. The Act, the court concluded, imposes liability on any “person” who violates it, and LLC managers can thereby be liable parties if they qualify as as employers who fail to pay wages due.  [Read more...]