Massachusetts SJC Takes Interest in Wage Act Claims

On June 26, 2017, the Massachusetts Supreme Judicial Court issued its decision in the case of George, et. al. v. National Water Main Cleaning Company, which addressed the question of whether statutory prejudgment interest is available for claims brought under the Massachusetts Wage Act. The underlying case involved a class action brought by a group of employees against their employer for nonpayment of wages. The SJC, which heard the case as a certified question of law from the United States District Court for the District of Massachusetts, held that interest should be added to the amount of lost wages and other benefits awarded as damages, but not to the additional amount of the award arising from the trebling of damages under the statute.

In issuing its decision, the Court considered the legislative history of the Wage Act and its damages provisions. In particular, it noted that in 2008, the statutory interest language was amended to make treble damages mandatory as “liquidated damages.” The debate between the parties was whether the characterization of the damages as “liquidated” precluded the application of statutory prejudgment interest. The Court found that it did not, holding that to interpret “liquidated” in a way that would preclude prejudgment interest would be to impliedly repeal the interest statutes. Instead of taking such a drastic measure, the Court found that the two statutes could be read in harmony by applying prejudgment interest only to the portion of the award reflecting lost wages and benefits, not to the portion reflecting liquidated damages.

Although the Court’s holding means employers won’t be hit with interest on the treble damages portion of a Wage Act claim, Massachusetts employers should still take great care to comply with the requirements of the Wage Act in order to minimize potential liability.

– Lauren Corbett

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SJC Finds LLC Managers Individually Liable Under Massachusetts Wage Act

On June 13, 2013, the Massachusetts SJC issued its decision in Cook v. Patient EDU, LLC (SJC–11272), holding that a manager of a limited liability company (“LLC”) may be held individually liable under the Massachusetts Wage Act (G.L. c. 149, §§ 148, 150) the same way that the president, treasurer, or other officers with management responsibilities of a corporation may be held individually liable.

In Cook, the plaintiff sued his former employer – an LLC – and its two managers for unpaid wages under the Wage Act. The Act requires “[e]very person having employees in his service” to pay those employees their wages on either a weekly or bi-weekly basis, or on a less frequent basis in certain circumstances. Violation of the Act results in mandatory treble damages and the award of reasonable attorneys’ fees and costs to the successful plaintiff. The Act provides that the president and treasurer of a corporation, as well as “officers or agents having the management ” of the corporation, “shall be deemed to be the employers of the employees of the corporation within the meaning of this section.” G.L. c. 149, § 148. Similarly, the Act imposes individual liability on “‘[e]very public officer whose duty it is to pay money, approve, audit or verify pay rolls, or perform any other official act relative to payment of any public employees’ who fails to do so.” This means that individuals in those roles may be held personally liable for violations of the Act, including for treble damages, attorneys’ fees, and costs.

In moving to dismiss the plaintiff’s complaint against them, the two managers argued that because the Act does not specifically mention managers of LLCs, they could not be held individually liable for failing to pay the plaintiff his wages. The Court rejected the managers’ argument. It refused to read the language of the Act as “an effort to single out for individual liability only the officers or managers of the specific types of entities mentioned in the statute.” Instead, the Court wrote, “We discern from the inclusion [in the Act] of the provisions regarding corporate and public officer liability a clear legislative intent to ensure that individuals with the authority to shape the employment and financial policies of an entity to be liable for the obligations of that entity to its employees.” The Court concluded that the legislative purpose of the Act would not be served by holding officers and agents of a corporation liable for failure to pay wages but not managers of an LLC, who likewise control the policies and practices related to the timely payment of wages to employees. “To interpret G.L. c. 149, § 148, so as to distinguish between such actors would produce a result at odds with the intent of the statute.”

While not necessarily a shocking result, Cook clarifies an issue that has been the subject of opposing decisions in the superior court. With Cook, there is no longer any doubt that the Massachusetts Wage Act imposes individual liability on managers of an LLC and other limited liability entities. Individuals in these types of roles must recognize their exposure in the event the LLC itself is unable to pay a damages award. This is yet another reason why employers – and their most senior leaders – must insure that they are complying with the strict requirements of the Wage Act.

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.

SJC Clarifies Leave Limit Under Mass. Maternity Leave Act

In an August 9, 2010 decision, the Massachusetts Supreme Judicial Court clarified that job-restoration rights under the Massachusetts Maternity Leave Act (“MMLA”) do not extend beyond eight weeks. In Global NAPS, Inc. v. Awiszus (No. SJC-10586), the Court, by a 4–3 margin, held that “[o]nce a female employee is absent from employment for more than eight weeks, she is no longer within the purview of the MMLA, and, consequently, is not afforded the protections conferred by the statute.” The decision represents a victory for employers that are faced with an ever-increasing barrage of state and federal statutes and regulations designed to protect the rights of employees in the workplace.

The MMLA, which has been in existence since 1972, provides that a female employee – the statute does not cover male employees – who has completed her employer’s probationary period, or who has worked full time for the same employer for three consecutive months, is entitled to take up to eight weeks of leave for the birth or adoption of a child. As long as the employee gives her employer at least two-weeks’ notice of her anticipated date of departure and her intention to return to work, she must be restored to her previous or similar position with the same status, pay, length of service credit, and seniority. The maternity leave may be paid or unpaid at the employer’s discretion. Employers are free to provide maternity leave benefits greater than those required under the statute. An employee who believes her MMLA rights have been violated may file a charge with the Massachusetts Commission Against Discrimination (“MCAD”), the agency charged with enforcing the statute.

In late June 2000, Sandy Stephens informed her employer, Global NAPS, Inc., that she would begin her maternity leave on July 14. She was told that she could remain out of work until October 2. When Stephens telephoned Global on September 27 to confirm that she would be returning within the week, she was told her employment had been terminated. Stephens subsequently sued Global under the MMLA, alleging that Global failed to comply with the MCAD’s Maternity Leave Guidelines, which state in relevant part that “if the employer does not intend for full MMLA rights to apply to the period [of leave] beyond eight weeks, it must clearly so inform the employee in writing prior to the commencement of the leave.” After trial, the jury awarded Stephens more than $2 million in damages (this amount was later reduced to $1.3 million).

Following a series of complicated post-trial legal maneuvers, the case made its way to the SJC. A majority of the Court concluded that neither the MMLA, nor its regulations, require an employer to notify an employee taking more than eight weeks of leave whether MMLA rights will apply to the period of leave extending beyond eight weeks. The Court also concluded that to the extent the MCAD’s Maternity Leave Guidelines suggest that MMLA rights extend beyond the eight-week statutory limit, they are inconsistent with the statute and do not provide a basis for legal relief. The Court pointed out that an employee may have other rights that protect her from termination while on maternity leave, including breach of contract and detrimental reliance, but unless those claims are plead, the employee has no right to her job back after eight weeks under the MMLA.

An important caveat. The MMLA covers eligible female employees who work for a Massachusetts employer with at least six employees. Employees – both female and male – who work for employers with at least 50 employees within a 75-mile radius may be eligible for parental leave of up to twelve weeks under the federal Family and Medical Leave Act. Parental leave under the FMLA runs concurrently with MMLA leave, not in addition to it.