Recently we were treated to a rare example of a court’s analysis of the Massachusetts Wage Act (G.L. c. 149, § 148), which imposes strict penalties on employers for late payment of wages. The Act subjects employers to penalties equal to treble damages plus attorneys’ fees for each violation of the Act—whether the payment is a day late or months late.
In the recent case of Nunez v. Syncsort, Inc., the Appellate Division of the District Court Department for the Northern District was asked to consider a single legal issue: whether an employee’s retention bonus constituted a “wage” under the Wage Act.
The Facts
At the beginning of his employment, Mr. Nunez and his employer, Synscort, Inc., negotiated a retention bonus of $15,000, payable in two installments. This bonus was contingent upon Mr. Nunez’ continued employment in good standing on the dates of the payments, conditions that both parties agreed were met. The employer subsequently paid one installment, but Nunez was terminated without cause on the day the second installment was due and his employer did not pay him the second installment.
When, a week later, the employee filed a claim under the Wage Act, the employer paid the remaining installment of the bonus, albeit late. While this untimely payment meant that the employer would have only been only liable for double, not treble damages, Nunez claimed that these damages were owed to him for failure to pay his wages timely. Both parties filed cross-motions for summary judgment based on whether the retention bonus constituted a “wage” under the Wage Act.
The Considerations
The court noted that there were no Massachusetts cases holding that a retention bonus is a “wage” under the Wage Act. The court reiterated that the Act itself does not explicitly define the term “wages,” but to qualify as “wages,” the amounts in question must be “earned” and “acquired by labor, service or performance.” The Act does state that holiday and vacation pay due, as well as commissions that are definitely determined and due and payable to the employee, are wages within the meaning of the Act.
The court then turned to two comparable cases. Citing Weems v. Citigroup, a 2009 Massachusetts Supreme Judicial Court case, the court noted that the appellate courts have held that the Act does not cover contributions to deferred compensation plans or severance pay. The Weems court determined that a monetary award under a bonus program that was discretionary per the terms of the program at issue did not constitute wages.
The court went on to review Mui v. Massachusetts Port Authority, a 2018 SJC case, in which the Court found that accrued sick time under a “use it or lose it” policy was contingent compensation but, since the only contingent compensation expressly recognized in the Act as a “wage” is “commissions definitely determined and due and payable to the employee,” the sick time was not deemed a wage under the Act. The sick time payout policy at issue in Mui, however, had two conditions which had to be met, one of which could not be resolved within the required time frames of the Act.
Turning to the type of bonus at issue in Nunez, the court acknowledged that unlike the facts in Mui, there was no dispute that the conditions for the payment of the retention bonus had been met. Nevertheless, relying upon the long line of appellate cases which have narrowly construed the term “wage” under the Act, the court found that the contingent compensation at issue in Nunez did not fall within the plain language of the Act. Accordingly, the compensation at issue was contingent, much like the sick time, and therefore not a “wage.”
P.S. The Parker Scheer Post Script
Despite the generally draconian nature of the Massachusetts Wage Act and its interpretative cases towards employers, it appears likely that the courts will continue to construe the term “wages” under the Act narrowly for any type of contingent bonus, besides commissions as defined in the Act. Employers wishing to avoid the Act’s application should make clear that any bonus or similar compensation is: (1) discretionary or (2) contingent on specified terms, which should be clearly set forth in any policy or agreement.Bear in mind that a decision from the Appellate Division of the District Court is not binding precedent on the Superior Court or the Appellate Courts of the Commonwealth. Stay tuned to see if other courts follow suit. If you have questions about the implications of this particular case or have an employment law question, contact experienced employment law attorney, Lonnie Murray.
