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Labor Standards Act (a federal law dealing with wage payments to employees) because its liquidated damages provision superseded it.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.

Under the Wage Act, the SJC decided, “prejudgment interest is to be calculated based on the portion of damages reflecting lost wages and benefits alone.” This is consistent with Massachusetts law before the legislature amended the Wage Act in 2008 to make triple damages on unpaid wages mandatory. Prior to that, the award of such damages was discretionary under an earlier decision by the SJC.

Under the Wage Act, employees must be paid all money they earn for work performed. There are specific time limits for payment, and commissions constitute wages when they are definitely determined and due to employees. Failure to make payment is punished by mandatory tripling of any amount of unpaid wages. Employees are also entitled to all attorneys’ fees and costs they expend to collect wages due to them.