On April 4, the Massachusetts Supreme Judicial Court handed employees there yet another victory in Reuter v. City of Methuen, holding that they are automatically entitled to triple damages for any late payment of final wages even where the employer already has paid the employee the total wages due before a claim or complaint is filed. The court’s decision marks a stark departure from almost two decades of what Massachusetts employers had understood to be settled law under the state’s Wage Act.
Employers Relied on Dobin v. CIOView for Almost 20 Years
Massachusetts has one of the strictest wage payment laws in the country – rivaling even the draconian remedies available to employees across the country in California. Under the Massachusetts Wage Act, employees are automatically entitled to triple damages, attorneys’ fees, and interest for even technical or unknowing violations of the state’s wage laws.
In the context of the requirements for an employee’s final pay, Mass. G. L. c. 149, § 148 (Section 148) mandates that when an employee is involuntarily terminated, the employer must provide the employee’s final wages and the balance of any unused vacation time on the day the employee is terminated. Further, under Mass. G. L. c. 149, § 150 (Section 150), a “defendant shall not set up as a defence [sic] a payment of wages after the bringing of the complaint.” In other words, under Section 150, an employer may not use a “post-complaint” late payment of unpaid wages as a defense in future litigation.
Almost 20 years ago, in Dobin v. CIOView, 2003 WL 22454602 (Mass. Super. Ct. Oct. 29, 2003), an employee sued claiming entitlement to triple damages for late wage payments despite acknowledging that her employer had paid her all that she was due prior to her filing of a complaint. In denying the employee’s claim for triple damages, the court – taking into account Section 150’s provision barring a “post-complaint” payment defense – held that “an employer is not required to pay treble the lost wages and benefits if the wage and benefit payments were tardy but made before suit was brought.” Thus, under Dobin,in the case of a tardy but “pre-complaint” payment, the employee’s compensatory remedy is limited to interest on the tardy payment.
As the Dobin court recognized, “[u]nder this interpretation, tardy pre-complaint payment may not classically constitute a ‘defense’ to a Wage Act violation, but it would greatly mitigate the amount of damages.” In other words, Dobin acknowledged that a tardy, pre-complaint payment constituted a technical violation of Section 148 andcompensated the employee for that tardiness by awarding interest on the late-paid wages. However, Dobin foreclosed an unearned windfall to the employee when the owed wages have been paid, albeit belatedly, before a complaint is filed.
In the ensuing almost 20 years, the Dobin court’s reasoning was adopted by numerous state and federal courts in Massachusetts.
The Supreme Judicial Court Upends Dobin
In Reuter, the city of Methuen terminated a custodian in its school department in 2013 following her conviction for larceny. At the time of her termination, she had accrued nearly $9,000 in unused vacation time. However, the city did not pay out the accrued vacation balance until three weeks after she was terminated. In response to a 2014 demand letter, the city paid an additional amount to cover the trebled interest on the late payment as required by Dobin. The custodian then filed suit in the Superior Court seeking full treble damages, attorneys’ fees and interest.
Applying Dobin, the Superior Court entered judgment in the employee’s favor only for the attorneys’ fees and interest. The Supreme Judicial Court reversed and remanded, instructing the trial court that “[t]he remedy for late payment is … not the trebling of interest payments on those wages … , but the trebling of the late wages.”
To that end, the Supreme Judicial Court “decline[d] to adopt the negative implication drawn by the Dobin court,” finding instead that the state’s Wage Act mandates triple damages for the amount of the late-paid wages regardless of whether a complaint has been filed before payment of those late-paid wages is made. The court reasoned that “a reading of [Section] 150 allowing a defense for late payments made before litigation is commenced [as permitted under Dobin] would essentially authorize, and even encourage, late payments right up to the filing of a complaint.” In the court’s view, the “purpose and thrust” of Section 148 and Section 150 “cut against this interpretation.”
Accordingly, the Supreme Judicial Court enunciated that “the Legislature’s command is clear: if you choose to terminate an employee you must be prepared to pay him or her in full when you do so.” It recognized that “[t]his may mean that employees who, like the plaintiff, have engaged in illegal or otherwise harmful conduct may have to be suspended rather than terminated for a short period of time until the employer can comply with [Section] 148].” But if an employer terminates an employee and the employee’s final wages are not timely paid on the date of termination, then the employer is automatically liable for treble damages.
Thus, with Reuter,the Massachusetts Supreme Judicial Court proscribed the only avenue that had been available to employers to avoid being liable for treble damages as a result of late final wage payments.
What’s Next for Massachusetts Employers?
While Reuter was decided in the final pay context, the court’s interpretation of Section 150 could also apply to a failure to timely pay wages duringemployment as required by Section 148. Indeed, the court placed no limits on its ultimate holding: “The statutory language and purpose of the Wage Act require prompt payment of wages and the trebling of those wages as liquidated damages when they are paid late.”
At a minimum, employers will need to be diligent when considering involuntary termination decisions. Where an in-person termination is planned ahead, the final paycheck should be cut in advance of the actual termination and provided to the employee at the time of termination. Where the termination is unanticipated (e.g., due to unforeseen unsafe conduct in the workplace requiring immediate termination), the Supreme Judicial Court seemingly endorses the strategy of an employer suspending the employee for a short period of time so it can process any final payments that must be paid at termination.
Where an employer cannot physically meet with a terminated employee to provide their final paycheck, as is often the case during the pandemic, employers should consider issuing the employee’s final payment(s) (either by check or direct deposit) prior to informing the employee of their discharge (if a suspension is unworkable) and/or using a courier to deliver the employee’s final payment on the date of termination. Of course, there is potential for the employee to receive their final pay (and/or a COBRA notice) before they receive notice that they have been terminated – but such ill-timed notice of the termination will usually be better than automatic treble damages liability. One final point as to when Reuter will apply: While the Supreme Judicial Court does not state whether its decision applies retroactively, Massachusetts courts are historically hostile to arguments that a new decision should not apply retroactively, even where the practice was recommended by a government agency or, as in this case, specifically endorsed by court decision. Accordingly, employers should operate under the assumption that Reuter will apply retroactively and should assess their late final wages payment treble damages liability exposure (if any) for involuntary terminations over the past three years (i.e., the limitations period for a wage claim) to determine when such liability exposure will be time barred and/or whether other risk management strategies should be implemented.