Superior Court Expands Wage Act to Include Severance Pay

In a departure from established precedent, a Massachusetts Superior Court has ruled for the first time that severance pay qualifies as “wages” under the Massachusetts Wage Act, G.L. c. 149, § 148.  In Juergens v. MicroGroup, Inc. (Docket No. 10-CV-2379-D), the plaintiff Albert Juergens successfully negotiated a six-month severance provision as part of his job offer at MicroGroup, Inc.  He began his employment in October 2008, and was laid off in February 2010.  When MicroGroup failed to make the severance payment, Juergens sued, alleging – among other things – violation of the Wage Act.

In its motion to dismiss, MicroGroup relied upon Prozinski v. Northeast Real Estate Services, LLC, 59 Mass. App. Ct. 599 (2003), which for nearly eight years has stood for the proposition that severance pay does not constitute wages under the Wage Act.  In his decision denying MicroGroup’s motion, Superior Court Judge Dennis J. Curran declined to follow Prozinski.  Instead, in an analysis notable in its brevity, he relied on Wiedman v. Bradford Group, Inc., 444 Mass. 698 (2005), which, according to him, “authorized a more expansive interpretation of the Wage Act;” one that “should not be limited to exclude severance pay.” The problem with this analysis is that Wiedman dealt with the issue of unpaid commissions, which are specifically included as wages under the Wage Act.  Severance pay, on the other hand, is not referred to in the Act at all.

While lawyers representing employees are undoubtedly salivating over the Juergens decision and the prospect of recovering treble damages and attorneys fees (both mandated under the Wage Act), they may want to wait and see whether the decision is upheld on appeal.  But assuming that plaintiff’s attorneys are not going to wait, employers must ensure that severance payments are paid on a timely basis.  Unless and until an appellate court overturns the Juergens decision, failure to make agreed-upon severance payments exposes employers to liability under the Wage Act, including treble damages and attorneys fees.