Massachusetts SJC Allows Release of Wage Act Claims

The Massachusetts Supreme Judicial Court in December 2012 clarified an issue that has been in dispute between plaintiff-side and management lawyers for some time: whether claims under the Massachusetts Wage Act (“Wage Act”), M.G.L. c. 149, § 148, may properly be released in a settlement or severance agreement between an employer and an employee. The SJC held that Wage Act claims may be released, provided that the release is stated in “clear and unmistakable” terms.

In Crocker v. Townsend Oil Company, Inc., SJC-11059 (December 17, 2012), the two plaintiffs, former delivery drivers who were misclassified as independent contractors, brought suit against their former employer under the Wage Act for unpaid wages. They did so, though, after signing termination agreements with their employer containing a general release of claims. The release language stated:

[Each plaintiff] hereby forever releases, remises and discharges [Townsend] and its shareholders, directors, officers, employees and agents . . . of and from any and all debts, demands, actions, causes of action, suits, accounts, covenants, contracts, agreements, damages, and any and all claims, demands, obligations and liabilities whatsoever of every name and nature, both in law and equity . . . that [the plaintiffs] now have or ever had (or may in the future have, arising out of or in connection with any events occurring on or prior to the date hereof) against [Townsend] . . . . The foregoing release is intended to be a general release of all Claims, to the maximum extent permitted by law, whether or not the subject matter of any such Claim has been the subject of a previous claim or threatened claim made by [the plaintiffs].

In analyzing this release language, the SJC was faced with balancing two competing interests: the Wage Act’s strong language that “no person shall by a special contract” exempt himself from the requirements of the Act, and the equally strong public policy of enforcing general releases and allowing parties to settle employment claims, including Wage Act claims, when that is their intent.

The SJC struck a balance by holding that Wage Act claims may be released in settlement or severance agreements, provided the release language is “plainly worded and understandable to the average individual, and … specifically refer[s] to the rights and claims under the Wage Act that the employee is waiving.” The SJC stated that “[s]uch express language will ensure that employees do not unwittingly waive their rights under the Wage Act. At the same time, this course preserves our policy regarding the broad enforceability of releases by establishing a relatively narrow channel through which waiver of Wage Act claims can be accomplished.”

The Court found that because the general release quoted above did not contain clear and unmistakable language that the employees were releasing their Wage Act claims, those claims were not released and could continue.

In light of Crocker, employers must review their settlement and severance agreements to insure that the release language contained in those agreements specifically addresses claims under the Wage Act. Employers must also keep in mind that claims under the Fair Labor Standards Act may not be released without the approval of a court or the Department of Labor.

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