Prince Lobel Achieves Rare Victory For Employers Under Wage Act

The Massachusetts Payment of Wages Act (Gen. Laws c. 149 s. 148 et seq.) (“Wage Act”) is famously unfriendly territory for employers.  On January 29, Prince Lobel’s Employment Law Group achieved a rare appellate victory for employers when the state’s highest court ruled in favor of our client, Massport, in the case of Mui v. Massport.

The Mui case raised the important question of what constitutes wages under the Wage Act.  The question is vitally important because the act punishes employers who fail to timely pay “wages” by imposing severe penalties: automatic treble damages plus attorneys’ fees.  Prince Lobel partner Laurie Rubin, representing Massport before the Supreme Judicial Court, successfully advocated for a narrow definition of wages that would exclude most types of incentive compensation.

In Mui, the employee claimed that Massport violated the Wage Act by not paying him the value of his unused sick time when his employment ended.  Under Massport’s sick time policy, departing employees received sick time payouts if they met certain conditions, including not being discharged for cause.  There was a dispute over the grounds of the employee’s separation, and Massport did not provide a sick time payout until after the Wage Act’s deadline for paying final wages.  The employee brought a Wage Act claim, seeking treble damages and attorneys’ fees.

Although the trial court had ruled for the employee, Rubin’s brief and argument steered the SJC to a reversal.  The court began by establishing that while the Wage Act nowhere refers explicitly to sick time, employers may lawfully impose “use it or lose it” sick time policies that relieve them of any obligation to pay accrued unused sick time to departing employees.

Massport’s policy, however, was not as stark as a “use it or lose it” rule.  Rather, the court compared Massport’s sick time policy to an incentive bonus plan that rewards employees for not using sick time and for not engaging in conduct that would justify a for-cause discharge.  Noting that such contingent incentive compensation falls outside the protections of the Wage Act, the court ruled that the same should apply to Massport’s sick time policy.

The Wage Act has proved a boon for plaintiffs’ lawyers and a bane for Massachusetts employers.  Many employers faced with claims or potential claims relating to contingent compensation under the Wage Act have had no choice but to settle the claims due to the uncertainty of the law and the harshness of the potential penalties.  Now, with the Mui case in their arsenal, employers and their counsel will be in a much better position to resist such claims or to prevail in court.