Massachusetts Supreme Court Rules That Paying Employee Even One Day Late Can Lead to Triple (Treble) Damages

By John S. Gannon - Skoler, Abbott & Presser, P.C.

April 19, 2022

Picture this.  You are getting ready to leave work late on a Friday.  You’re excited for the weekend, but as you take a final stroll through the office, you notice that Jane Smith left her paycheck at her desk.  This is strange, you think, because like everyone else Jane usually gets paid on Thursday via direct deposit.  Then you remember that Jane requested a paper check this week because she was switching bank accounts.  The paper check was not ready until Friday afternoon, and Jane was already gone for the day.   You play HR Hero and overnight the check to Jane so she has it first thing Saturday morning.  And, Jane is thrilled when she gets the check the next day.  The bad part?  In Massachusetts, you actually owe Jane three times the amount in her paycheck because she received her pay late.

In Reuter v. City of Methuen, No. SJC-13121 (Mass. April 4, 2022), a recent decision from the Massachusetts Supreme Judicial Court (SJC), the Court ruled that paying employees late is the equivalent to not paying at all, thereby entitling them to triple damages if they are not paid on time.  As many of you know, under the Massachusetts Wage Act, employers who fail to pay wages are liable for three times the unpaid wage amount (treble damages).  The Wage Act also requires employers to pay all wages, including any accrued, unused vacation time, to employees who are terminated on their last day of work (this rule is a little different for employees who voluntarily resign).

In the Reuter case, the employer mistakenly failed to pay an employee for her vacation time on her last day of employment.  Instead, she was paid her unused vacation time three weeks late.  About a year later, her lawyer sued the city for three times the amount of her late vacation pay, plus attorney’s fees.  Consistent with several lower court decisions in Massachusetts, the trial judge determined that the employee was not entitled to three times the entire amount of vacation pay, only the interest that accrued between the date of termination and the date of payment (about $185 in this case).

The employee appealed her case to the Massachusetts SJC, arguing she should have been paid treble damages on the entire amount of the check for the employer’s mistake.  The SJC agreed, and in so doing, effectively reversed all of the earlier court decisions that ruled an employer was not liable for treble damages for late payment of wages as long as the wages were paid before the plaintiff filed a complaint.  The SJC reasoned that “employers rather than employees should bear the cost of such delay and mistakes, honest or not.”  The SJC recognized this “puts employers in a difficult position when immediately terminating employees for misconduct,” but also explained that this challenge can be overcome by suspending employees until their final check is ready.

Takeaways

This decision has several important takeaways for employers in Massachusetts. First, it underscores how important it is to pay terminated employees all wages, including vacation time, on their last day of work.  Otherwise, if you are even one day late, you owe the employee triple damages.

Paying all wages due can be a challenge when an employee engages in unexpected misconduct, warranting immediate termination.  In those cases, employers should have a process in place to suspend the employee while you work out cutting the final paycheck.  

The more difficult part of this case is that it puts employers in a very tough spot when they discover inadvertent payroll errors.  Previously, employers in Massachusetts that identified payroll errors could promptly pay any wages owed so that liability for treble damages could be avoided.  In light of the Reuter case, employers do not have the same incentive to pay back wages, and actually could put the company in a worse position by only paying single damages when they discover payroll errors.  Given the risks associated with failure to comply with the Massachusetts Wage Act, employers should consult with experienced wage and hour counsel when they have questions about paying wages to employees.

www.skoler-abbott.com