Massachusetts Supreme Judicial Court Clarifies When Employers May Make Deductions From Wages For Amounts Owed

January 27, 2011

Massachusetts Supreme Judicial
Court recently issued a decision of wide practical
application for employers, addressing the question of when it is permissible to
make deductions from wages for employee debts. Under the Massachusetts Weekly
Payment of Wages Statute, deductions can be made for "valid
set-offs," but this term is not defined. Employers who violate this
statute face hefty penalties, including the potential for triple damages and
payment of the employee’s attorney’s fees. Accordingly, employers often proceed
at their peril in docking an employee’s wages for amounts deemed to be owed.

The case of Camara v. Attorney General,
decided by the Massachusetts
Supreme Judicial Court on January 25, 2011,
revolved around a written policy of ABC Disposal Service, Inc., which
authorized wage deductions for drivers that the company found at fault for damage
to company trucks or to other property. Under the company’s policy, drivers
could choose between discipline or deductions from their wages to cover the
cost of the damage. The Massachusetts Attorney General cited ABC for improper
wage deductions. The Superior Court reversed, upholding the company’s policy.
On appeal, the Massachusetts
Supreme Judicial Court reinstated the finding of
liability, holding that the term "valid set-off" did not encompass
the amounts deducted by ABC.

The Court’s Analysis: The Supreme Judicial
Court found that ABC failed to afford its employees sufficient protections to
ensure that the amounts were truly owed, noting that the company was the
"sole arbiter" and made a "unilateral assessment of liability as
well as amount of damages," with no independent input or an opportunity
for employees to challenge these determinations. Citing an earlier decision,
the Supreme Judicial Court
noted that to have a valid set-off, there needs to be a "clear and
established debt." The Attorney General had presented the following as
examples of valid-set offs: proof of an undisputed loan or wage advance,
determination of theft based on an independent and unbiased determination and
with due process protections for the employee, and a court judgment affirming
that the employee owed the employer a set amount. The Supreme Judicial Court noted that there
could also be other valid set-offs, including an agreement in a collective
bargaining agreement.

Direction to Employers: Employers need to
take special care before making deductions for amounts owed. To avoid
liability, there must be clear evidence of the debt. As the Supreme Judicial Court explained in Camara,
an employer will need to show that "the parties have voluntarily agreed to
a set of appropriately independent procedures for determining, in a manner that
adequately protects the employee’s interest, both the existence and the amount
of the debt or obligation owed by the employee to the employer."

For more information about this recent court
decision, or for any employment law matter, please contact Laurie F. Rubin,
the author of this alert at 617 456 8020 or

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