Massachusetts High Court Issues Guidance to Employers for Drafting Enforceable Release of Wage Claims

Client Alert
February 26, 2013

In a recent decision, the Massachusetts Supreme Judicial Court (SJC) clarified the language employers must include in their release of wage claims to ensure that they do not run afoul of Massachusetts Payment of Wages Law, Mass. Gen. Laws ch. 149, § 148 (Wage Act). The court also clarified the statute of limitations for a plaintiff to pursue claims for overtime under the Wage Act.

Background
In Crocker v. Townsend Oil Co., No. SJC-11059 (Dec. 17, 2012), two oil delivery drivers claimed they had been misclassified by the company as independent contractors. When their business relationship with Townsend ended, they each signed a termination agreement that contained a general release of claims. The drivers later brought claims against the company under the Wage Act, including claims for overtime pay.

Townsend argued that their claims were barred by their signed releases and that the two-year statute of limitations for pursuing overtime pay under the Wage Act had expired.

Release of Wage Act Claims
The court needed to consider the intent of the Wage Act that states, “[n]o person shall by a special contract with an employee or by any other means exempt himself from [the Wage Act],” against public policy favoring the broad enforceability of general releases. Employees need the protections of the Wage Act and employers need the ability to create enforceable releases from it. So the SJC took a centrist approach, deciding that an employee may enter into an agreement with an employer for the release of existing wage claims, but such release of claims will only be enforceable if it is:

  • Plainly worded and understandable to the average individual, and
  • Specifically refers to the rights and claims under the Massachusetts Wage Act that the employee is waiving; a general release of “any and all claims” without specific reference to the Wage Act will not suffice.

Employers should carefully review the release language in their standard separation or severance agreements to be sure that it meets the standards set forth by the SJC. It is important to note that such releases are enforceable only for existing claims, and cannot be used to protect the employer from liability for future violations.

Statutes of Limitations and Damages
In the Crocker decision, the SJC also clarified the applicability of and relationship between the three-year statute of limitations under the Wage Act and the two-year statute of limitations for unpaid overtime claims under the Massachusetts Overtime Law. The SJC held that an employee may only recover for unpaid wages that were earned within three years of the filing of the lawsuit, even if the employee can show that he or she also had unpaid wages in prior years due to the same improper practice. And while an employee may pursue claims for unpaid overtime under the Wage Act, if the two-year statute of limitations under the Massachusetts Overtime Law has elapsed, the employee may be able to recover uncompensated time at his or her regular rate, but not the enhanced overtime rate of time and a half.

Note: If the employee’s claims are under some other applicable state or federal statute, such as the Equal Pay Act or Title VII, as amended by the Lilly Ledbetter Fair Pay Act, which relate to discriminatory pay practices based on gender or other protected classes, another or different statute of limitations analysis could apply.

Prince Lobel attorneys will work with you to re-examine any outstanding claims, review existing releases, and offer counsel and guidance for drafting new releases that comply with the SJC’s decision.