On April 4, 2022, the Massachusetts Supreme Judicial Court held, in Reuter v. City of Methuen, that employers are strictly liable for treble wages as liquidated damages if they fail to make timely payments upon an employee’s termination of employment in compliance with the Massachusetts Wage Act. With its holding, the Court rejected a longstanding trial court precedent that employers who failed to make timely wage payments were liable only for treble interest.
The Massachusetts Wage Act
Section 148 of the Massachusetts Wage Act requires employers to pay unpaid wages to any employee discharged from employment “in full on the day of [the employee’s] discharge.” Mass. Gen. L. C. 149 § 148. As an enforcement mechanism, the Act provides a private right of action for employees and mandates that employees who prevail on § 148 claims “shall be awarded treble damages, as liquidated damages, for any lost wages and other benefits and shall be awarded the costs of litigation and reasonable attorneys’ fees.” The Act specifically defines “wages” to include, among other things, “any holiday or vacation payments due an employee under an oral or written agreement.”
Prior to Reuter, Massachusetts lower courts followed the 2003 precedent set in Dobin v. CIOview Corp., Mass. Sup. Ct., No. 2001-00108 (Middlesex County Oct. 29, 2003), which 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.” In so holding, the Dobin court interpreted the statute to say that the proper award was treble interest on the late wages.
In Reuter, the City of Methuen terminated the employment of the plaintiff, Beth Reuter, for larceny. After her employment termination, however, the City failed to pay Reuter for her accrued vacation time until three weeks after her last day of employment. After the lower court applied the Dobin precedent and awarded Reuter treble interest on the late wages and attorney’s fees, both parties appealed the decision.
The Massachusetts Supreme Judicial Court ultimately held that, based on the statutory language of the Act, the proper remedy was treble wages as liquidated damages for failure to timely pay a terminated employee—regardless of how quickly the violation was remedied. The Court held that legislative intent to place the burden of violation on the employer also supported this interpretation, stating that “any delay may have severe consequences for employees, and therefore the statute does not tolerate or in any way condone delay.”
Further, the Court rejected Dobin’s interest-based approach, remarking that not only did the term “interest” not appear anywhere in the relevant text, but that limiting damages on untimely payments to interest alone might encourage late payments right up to the filing of a complaint, undermining the fundamental purpose of the Act.
In the aftermath of Reuter, Massachusetts employers must be careful to comply with § 148 of the Act or face steep penalties for any late payment of wages upon any termination of employment. The Court itself noted that its interpretation could cause difficulties for employers seeking to terminate employees immediately for misconduct or illegal behavior, but suggested that employees who 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 § 148.” Furthermore, because employers will be held strictly liable for violations, treble damages will be incurred regardless of how quickly a violation is remedied or why the violation occurred.
Therefore, going forward, Massachusetts employers seeking to avoid such substantial damage liability must be prepared to pay, in full, any wages owed to an employee at the time of termination. Where employers want to maintain the ability to take immediate action with respect to employee misconduct, they should either seek to put those employees on administrative leave or have systems in place to make the necessary payments quickly.