“A Day Late and a Dollar Short”: The Impractical Standard to Comply with the Massachusetts Wage Act

Introduction

The Massachusetts Wage Act (“Wage Act”) frequently leaves employers, employees, and even the courts scratching their heads in an attempt to decipher the meaning of an undefined key term: “wage.”¹ While an employee’s regular hourly pay for the work they perform is easily understood as wages, commission pay or reimbursement of work-related expenses prove more challenging to classify.² Prior to the Supreme Judicial Court’s (“SJC”) decision in Reuter v. City of Methuen, lower courts interpreted the Wage Act’s damages provisions for culpable employers as a “carrot and stick approach”; rewarding employers who swiftly rectify errors with minimal damages, while punishing others with hefty penalties for untimely payments to employees or intentional wage theft.³ Post Reuter, wage protection in Massachusetts, a state highly ranked for worker-friendly labor laws, is now even stricter.⁴ The Reuter decision clarified that the Court endorses only the “stick” not the “carrot” in the Wage Act’s approach to employer accountability and employee wage protection.⁵

The SJC’s decision in Reuter v. City of Methuen sent a shudder through the labor and employment legal community, who quickly realized the broad and harsh implications for employers of all sizes.⁶ The Wage Act requires an employee, who is discharged from employment, to be paid in full and all owed wages on the date of termination.⁷ These wages include any accrued holiday or vacation pay owed to the employee.⁸ Prior to Reuter, if an employer failed to comply with the provisions of the Wage Act, such as mailing a check for vacation pay two weeks later than the date of termination, the measure of damages was triple the amount of interest foregone during the delay in the payment of wages.⁹ The SJC ruled that this precedent misinterprets the Wage Act, thereby redefining the damages owed as triple the total amount of all delayed wages, no matter how slight the delay.¹⁰ At the core of employers’ objection to the ruling is the Court’s failure to distinguish between (1) an employer who deliberately swindles an employee out of the wages they are rightly owed, and (2) an employer who errs in good faith by miscalculating final pay or suffers an inadvertent payroll glitch.¹¹ In either case, the consequences to the employer are tantamount.¹²

Perhaps more troublesome than the new damage award is the notion that the ruling potentially incentivizes employers who unwittingly fail to pay an employee to cover up their mistake rather than make a timely amelioration.¹³ Surely, the purpose of the Wage Act is to prevent employer mischief and wage theft, yet the Reuter decision treats all employers as mischievous by imposing strict liability for any wage payment error regardless of the context.¹⁴ Employers now “must consider their exposure for treble damages when deciding how to address such an error.”¹⁵ Moreover, the Court’s decision is not strictly limited to terminated employees but reaches all violations of untimely payment, thus granting the possibility of a treble damage award to employees suing their employer while still employed.¹⁶

This Comment will argue that because of the broad application of the SJC’s decision in Reuter to all violations of the Wage Act, the Court’s failure to allow for an exception for good faith errors exceeds the bounds of legislative intent and imposes unreasonable strict liability on employers. Part I will address the fundamentals of the employer and employee relationship and laws controlling wages at a federal and state level. Part II will explore the facts and procedure of Reuter v. City of Methuen and the Court’s reasoning in overturning lower court precedent. Part III will argue why the broad application of the Court’s ruling to all Wage Act violations exceeds the scope of legislative intent. Part IV will argue that the Court should have adopted a more practical standard by limiting its decision to employers who acted in bad faith or restricting its application to terminated employees, thus avoiding an unreasonable burden on employers.

I. Background

A. Employee Pay Under the Massachusetts Wage Act

1. The Employment Relationship, Pay, and Timeline

The nature of employment reflects a covenant of mutual benefit and reliance, considering an employee does not exist without their employer and an employer’s business will not succeed without employees.¹⁷ Though this interdependence is often legally viewed as a contract, in reality it is often more of a relationship, where each party is invested in the other’s success because each parties’ interests are entangled in each other’s.¹⁸ Yet, not all employers have employees’ best interests at heart—illustrated by the chronic issue of wage theft, which results in billions of dollars of stolen wages each year nationwide.¹⁹ The impact on employees reveals the unfortunate reality that wage theft often adversely affects the most vulnerable employees, such as immigrant and low-wage workers, requiring heightened government attention and legal protections at a federal and state level.²⁰

The legal doctrine of vicarious liability is predicated on classifying employment as a subset of agency, where the employee/agent acts on behalf of the employer/principal, with the employer/principal’s assent, thus holding the employer accountable for the acts of its agent.²¹ An individual’s employment “status” refers to the state of their employment as either an employee or an independent contractor, triggering distinct rights and protections under the law.²² Common law tests have evolved to identify factors that help courts determine an employee’s status for the purpose of identifying an employer’s vicarious liability pursuant to worker protection laws like the Wage Act.²³ Once a person is determined to be an employee, further status distinctions are made internally by managers or human resources to distinguish between exempt and non-exempt employees, or part-time and full-time employees, which determine how wages and benefits are calculated.²⁴ Most states, including Massachusetts, follow the at-will employment doctrine; “meaning simply that either the employer or the employee is free to terminate the relationship at any time, without cause, and for any reason or no reason.”²⁵ However, prudent employers rarely rely on this doctrine and implement human resources best practices such as performance improvement plans and progressive discipline procedures before finally resorting to termination.²⁶

2. Federal and State Laws Controlling Wages

The U.S. Department of Labor (“DOL”) is charged with ensuring federal protections for employees and enforcing over 180 federal laws, including the Fair Labor Standards Act (“FLSA”).²⁷ The FLSA governs all areas of wage and hour law by establishing a federal minimum wage, regulating payroll procedures, and controlling overtime calculations for both private and public employers.²⁸ The FLSA preempts state employment laws and sets the statutory floor for basic employee protections, leading many states, including Massachusetts, to model their own labor laws after the FLSA and augment the law by providing greater safeguards for workers.²⁹

Massachusetts’s reputation as a labor-friendly state stems, in part, from the many amendments to its Wage Act that have continuously expanded wage protection.³⁰ Partially spurred by a catastrophic industrial accident in 1860 that killed and injured hundreds of workers due to unsafe working conditions,³¹ the Wage Act established long awaited protections for Massachusetts employees surrounding workplace safety, pay, and essential benefits—thus changing the landscape of employer liability.³² To protect employees against predatory employers, the Massachusetts legislature supplemented most FLSA provisions, granting greater protections for lost wages and increasing the statute of limitations for claims from two to three years.³³ Since the Wage Act’s enactment, Massachusetts has continued to pioneer protections for workers, becoming the first state to attempt to narrow the gender wage gap by enacting an equal pay law³⁴ and leading the charge to name Labor Day an official holiday in recognition of the labor movement.³⁵

By imposing strict civil and criminal penalties for violations, the Wage Act ensures that employers both pay employees all wages owed and that payment be timely.³⁶ Under the Wage Act, the term “wages” explicitly includes all holiday or vacation pay in addition to regular wages for hours worked.³⁷ The law also imposes a stringent timing requirement, that every employer must pay full-time employees “within six days of the termination of the pay period during which the wages were earned” on either a weekly or bi-weekly schedule.³⁸ The timing of a final paycheck is also regulated for all employees who leave their employment, whether voluntarily or involuntarily.³⁹ While an employee who resigns “shall be paid in full on the following regular pay day,” an employee who is discharged or fired from their employment “shall be paid in full on the day of [their] discharge.”⁴⁰

The Wage Act carefully articulates penalties for delays in payment, including timing violations for both active employees’ regular paychecks and terminated employees’ lump sum payment on the date of their discharge.⁴¹ If a violation occurs, an employee is deputized to bring a civil action against the employer “for injunctive relief, for any damages incurred, and for any lost wages and other benefits.”⁴² An employer may not avoid liability by simply paying the employee after they file a complaint.⁴³ If the employee prevails in their action, the Wage Act requires the employee to be awarded “treble damages, as liquidated damages, for any lost wages and other benefits” as well as reasonable costs and attorneys’ fees.⁴⁴ In sum, the Wage Act delivers a clear message to employers that any delay in payment of wages owed to an employee gives rise to strict liability and potentially costly consequences.⁴⁵

B. Court Precedent Prior to Reuter

Before Reuter, employers who sought to correct their mistake before an employee filed a complaint relied on the holding of Dobin v. CIOview Corp., which allowed the employer to pay treble the interest owed to the terminated employee for the delay in wage payment.⁴⁶ In Dobin, the defendant-employer deferred payment of the plaintiff-employee’s regular salary with the plaintiff’s consent when the company underwent a financial hardship and was contemplating bankruptcy.⁴⁷ The plaintiff was terminated and paid all owed wages in full two days after the date of her discharge.⁴⁸ In a decision penned by then-Associate Justice Ralph D. Gants, the Court drew a distinction between damages pre- and post-complaint, interpreting damages for a tardy wage payment pre-complaint to be the interest foregone from the delay, or in other words, the money “lost” by the wage earner.⁴⁹ The Superior Court derived its reasoning from a careful reading of the statute’s provision ⁵⁰ that an employer could not use payment of wages as a defense after the filing of a complaint.⁵¹ Justice Gants reasoned that if the statute specifically prevents an employer from reducing their damages by simply making a late payment post-complaint, the statute must allow for damages to be mitigated if a late payment was made pre-complaint.⁵² From this, the Court drew the inference that “[w]hen wages and benefits are tardy but paid before the complaint was brought, the [loss] is simply the interest foregone from the delay in payment.”⁵³Following the decision, courts continued to look to the Dobin reasoning in awarding interest damages for violations of the Wage Act when payment was made, albeit late, pre-complaint.⁵⁴

Twelve years later, in Littlefield v. Adcole Corp., the Court held that upon termination, an employee who was not immediately paid outstanding wages was owed the lost interest accrued as a result of the delay in payment, as well as litigation costs and attorney fees.⁵⁵ The Court applied the same reasoning as in Dobin that “lost” wages equate to lost interest because the statute only bars post-complaint payment as a defense, therefore implicitly allowing pre-complaint payment as a partial remedy.⁵⁶ Per the text of the statute, an employer who corrects their mistake by paying wages after the fact should be liable for only the money the employee actually lost.⁵⁷

II. Reuter v. City of Methuen

A. Factual and Procedural History

Beth Reuter (“Reuter”) was employed as a custodian for the City of Methuen School Department (“defendant”) from 1988 to 2013.⁵⁸ In 2013, the defendant terminated Reuter’s employment after she was convicted of larceny and thereby in breach of her employment contract.⁵⁹ At the time of her termination, Reuter had accrued a total of $8,952.15 in unused vacation time.⁶⁰ The defendant issued final payment to her in four separate checks three weeks after the date of her discharge.⁶¹ After Reuter unsuccessfully challenged her termination in the Massachusetts Superior Court, the defendant issued her a check for $185.42, representing the interest as a result of the three-week delay in payment of her vacation wages, without admitting liability.⁶² Reuter sued the defendant for violating the Wage Act and following a bench trial in Essex County Superior Court, she was awarded treble the statutory interest on her untimely wage payment.⁶³ After both parties appealed the judgment, the Supreme Judicial Court transferred the case from the Massachusetts Appeals Court.⁶⁴

The SJC reviewed the issue of damages de novo,⁶⁵ following inconsistencies amongst trial court rulings.⁶⁶ Reuter claimed on appeal that the $185.42 interest payment, in conjunction with litigation costs and reasonable attorney fees, was an improper measure of damages.⁶⁷ While both parties agreed the defendant violated the Wage Act by delaying payment, Reuter asserted that she was owed treble the amount of her total wages, which was three times her vacation pay or $23,872.40, according to the liquidated damages provision in the statute.⁶⁸ While the plaintiff also contested her termination and attempted to move for class certification, neither issue was reviewed upon the SJC appeal.⁶⁹

B. The Court’s Holding and Reasoning

The Court ruled in favor of the plaintiff, holding the liquidated damages provision dictates that the damages be calculated as treble the amount of total late-paid wages, not merely the interest on those late wages, thereby abrogating the Dobin and Littlefield precedent.⁷⁰ The SJC grounded its decision primarily in the legislative intent of the Wage Act: “for the protection of employees, who are often dependent for their daily support upon the prompt payment of their wages.”⁷¹ The Court’s holding redefined “lost” to mean the total wages unpaid or paid late, concluding the Dobin calculation misinterpreted the statute.⁷²

The Court leaned on the expansion of the Wage Act’s protections for employees over the years as evidence of the legislature’s increasing detestation for delinquent employers.⁷³ As originally written, the Wage Act only allowed the government to bring an action on behalf of the employee, but later amended to grant employees a private right of action in civil suits against their employers.⁷⁴ Further revisions to the act ameliorated the damages provision, which originally allowed for discretionary damages for outrageous employer conduct, but it was altered to impose strict liability on employers for any violation of the statute regardless of an employer’s good faith intent.⁷⁵

The Court embraced the spirit of these modifications, and it argued that only liquidated damages could properly reflect the potentially unmeasurable consequences of delayed payment for employees living paycheck to paycheck.⁷⁶ For vulnerable employees, missing a paycheck could have catastrophic consequences, such as defaulting on mortgages, missing rent payments, or eviction.⁷⁷ The Court recognized that actual damages are often difficult for an employee to prove, making the immediate trigger of trebled liquidated damages appropriate and congruous with the potentially severe impact on any given employee.⁷⁸

Conceding that the wording of the statute created ambiguity, the Court defended its decision to incorporate “late” into the meaning of “lost” wages by leaning on the fundamental need to protect vulnerable employees.⁷⁹ The statute expressly grants relief to an employee “for any damages incurred, and for any lost wages and other benefits.”⁸⁰ Though the Court admitted that “lost” does not mean “late,” it rationalized that “[t]he act is directed at prompt payment of wages . . . [and] any delay may have severe consequences for employees, and therefore the statute does not tolerate or in any way condone delay.”⁸¹ In doing so, the technical meaning of “lost” gave way to the importance of prompt payment of wages to employees who rely on their weekly paychecks, usurping the Court’s precedent of reading the statute verbatim.⁸²

Then the SJC went further, attacking the lower court’s determination of interest as the appropriate damage remedy as “unsupported by the language of the statute and inconsistent with its purpose.”⁸³ The Court pointedly critiqued the Dobin’s conclusion that the negative implication in the statute allowed pre-complaint payment to mitigate employer damages.⁸⁴ According to the SJC, Dobin’s reading of the Wage Act would thwart the legislature’s intent to ensure timely payment of wages upon termination.⁸⁵ Additionally, the Court stated that the payment of interest was never mentioned in the statute, and the negative inference allowing for a defense “should logically provide a total defense, not a partial defense.”⁸⁶ In other words, assuming the legislature implicitly allowed for pre-complaint payment by only articulating a ban on post-complaint payment, it follows that an employer could potentially walk away unpunished.⁸⁷ Therefore, the negative inference provided by Dobin was irrational by failing to provide the employer with a complete defense.⁸⁸ Revisiting its public policy rationale, the Court further stated that allowing for late payments pre-complaint would embolden employers to hold off paying an employee until just before a complaint was filed, incentivizing violations and disproportionately affecting employees who could not afford a lawyer.⁸⁹ For all these reasons, the Court abrogated Dobin and Littlefield, concluding that the proper measure of liquidated damages is not to treble the interest on delayed wages, but to treble the wages themselves.⁹⁰

In a concurring opinion, Justice Georges agreed with the majority that late-paid wages should rightly be incorporated into the meaning of lost wages.⁹¹ However, Justice Georges further argued that the language “any damages incurred” should be understood to also allow for consequential damages—penalties beyond liquidated damages—to properly account for the greater harm to employees that arise from the employer’s violation.⁹² He disagreed with the Court’s analysis that consequential damages are too obscure to calculate, instead pointing to the two distinct remedies articulated by the legislature, for “any damages incurred” and “for any lost wages and other benefits.”⁹³Justice Georges reasoned that ignoring the broad “any damages” remedy would harm workers, leaving “virtually no chance of being made whole by a Wage Act complaint,” and thereby incentivize employers to neglect their obligations under the statute, especially to low-income workers.⁹⁴

Analysis

III. The SJC Decision Misinterprets the Express Language of the Wage Act and Stretches beyond the Scope of Legislative Intent

A. As a Threshold Matter, the Court’s Opinion Applies to All Wage Act Violations

The Reuter decision can reasonably be read to apply to all Wage Act violations because nothing in the language of the decision limits the holding to terminated employees.⁹⁵ In describing the Wage Act’s purpose as being “for the protection of employees, who are often dependent for their daily support upon the prompt payment of their wages,” the Court chose the term “employees” not “terminated employees” thereby avoiding any limitation on the opinion’s reach.⁹⁶ The Court referenced an employee’s “daily support,” likely referring to a regular weekly or biweekly paycheck, rather than support received by pay upon termination.⁹⁷ In the event its language was at all unclear, the SJC expressly stated its intention behind the reasoning to apply to all requirements of the Wage Act by insisting “prompt payment of all wages owed is necessary for employees who often live paycheck to paycheck and who may not be able to pay rent or other necessities.”⁹⁸ The Court’s conclusion summarized that the language and intent of the Wage Act in its entirety ensures prompt payment of wages triggering treble damages when those wages are paid late—with no mention of any restriction to wages paid late after termination.⁹⁹

The Court’s standard of review in interpreting the statute “from all its words construed by the ordinary and approved usage of the language,” further supports a reading that the decision applies to all Wage Act violations and not merely violations for terminated employees.¹⁰⁰ This standard of review reads the statute as a whole, rather than narrowly focusing on its applicability to either active or terminated employees to determine whether the payment of wages was untimely.¹⁰¹ Pending legislation to amend the Wage Act would clarify an aggrieved person under its terms as “any employee, prospective or former employee, or person . . . against whom one or more of the alleged violations was committed by the alleged violator,” supporting the legislature’s intention all along to incorporate both active and terminated employees in its scope.¹⁰² This section of the proposed bill would clarify the Wage Act’s defined terms to ensure that the damages provisions apply to past, present, and future employees, thus reinforcing that any interpretation by the Court would have a broad impact unless specifically stated otherwise.¹⁰³

B. Misinterpretation of the Term “Lost” and Legislative Intent

In a cursory explanation, the Court declared: “[W]e conclude that ‘lost wages’ encompass all late payments under the Wage Act.”¹⁰⁴ Though the Court admitted that “a late payment is not the same as a lost payment,” it overlooked the plain meaning of each term and supported its conclusion that “lost” encompasses “late” merely because: (1) the purpose of the wage act is to protect employees; and (2) there is a possibility for severe consequences.¹⁰⁵ By changing the meaning of “lost” to include “late,” the SJC ignored the “fundamental principle of statutory interpretation” to construe terms by their ordinary and approved usage in accordance with legislative intent.¹⁰⁶ The ordinary definition of the word “lost” is “no longer possessed, taken away, or denied,” while “late” is defined as “coming or remaining after the due, usual, or proper time.”¹⁰⁷ The Court disregarded its own fundamental principle: if the legislature had intended a word to have a meaning other than its ordinary one, it would have been reflected in the statute.¹⁰⁸

While citing legislative intent as its primary justification for encompassing late wages into the meaning of lost wages, the Court failed to consider why the legislative amendments to the statute have not since clarified the term, despite refining other terms.¹⁰⁹ Specifically, the 2008 amendment to the Wage Act made a distinct change to its statutory language by “removing the provision that treble damages ‘may’ be awarded, and replacing it with the directive that treble damages ‘shall be awarded.’”¹¹⁰ These amendments demonstrate that the legislature is fully capable of writing a statute that clearly articulates its intent.¹¹¹ Even the legislature’s latest proposed amendment to the Wage Act entitled “An Act to Prevent Wage Theft, Promote Employer Accountability, and Enhance Public Enforcement” does not alter the term “lost” or redefine the term to include “late.”¹¹² By overlooking the past and future amendments to draw inferences about an ambiguous term, the SJC fell victim to a pitfall in statutory interpretation: allowing a term’s meaning to become so stretched that the conclusion results in “one inference too far.”¹¹³

C. Reuter Extends beyond the Intended Scope of the Wage Act

The Court admitted that “the scope, requirements, and enforcement mechanisms of the Wage Act have varied greatly since it was first enacted,” but justified its sua sponte expansion of employer damages as a necessary action for the protection of vulnerable employees.¹¹⁴ Consequently, Reuter represents a significant departure from the Superior Court’s balanced approach in Dobin, which better considered the realities of the workplace while still holding employers accountable.¹¹⁵ Both the Dobin and Littlefield Courts carefully contemplated the equity of damages for employers who rectified wage errors before a complaint was brought forward, perhaps even immediately after discovering the error, finding that an award of trebled interest, litigation costs, and attorneys’ fees was reasonable and properly incentivized employers to take corrective action.¹¹⁶

The reasoning in Dobin aligned more closely with the SJC’s precedent in George v. Nat’l Water Main Cleaning Co., when the Court declined to read the statute’s amended damages provision as “punitive” (intended to punish employers), but rather “compensatory” (intended to compensate the employee), thereby limiting the scope of damages.¹¹⁷ Similarly, when the First Circuit applied Massachusetts law in Knous v. Broadridge Fin. Sols., Inc., the Court also contemplated the limitations of the Wage Act’s scope, by denying liability when a defendant employer gave an employee advance notice of their termination date, stating, “[W]e cannot imagine that the legislature sought to punish [the employer] because it gave [the employee] prior notice of the day on which his pay and benefits would cease, plus full paid time off through that day.”¹¹⁸ Prior cases represent the impartial consideration of both employer and employee perspective when determining the outer limits of the Wage Act, yet Reuter’s departure from this balanced approach results in a sense of unfairness amongst well-intentioned employers.¹¹⁹

The Reuter interpretation of the liquidated damages provision to include more than what is actually lost transforms liquidated damages into punitive when an employer rectifies their error by paying the terminated employee all wages before a claim is filed.¹²⁰ At some point, if so-called liquidated damages “punish all employers rather than punishing only those acting with ‘evil motive’ or ‘reckless indifference,’” they cease to be liquidated damages, instead crossing the threshold into punitive.¹²¹

The ruling also represents a stark departure from other areas of Massachusetts employment law and the law in out-of-state jurisdictions.¹²² In alleged claims of discrimination controlled by Mass. Gen. Laws Ann. ch. 151B,¹²³ employers have an opportunity to be heard and rebut the presumption of discrimination after the plaintiff establishes a prima facie case.¹²⁴ In discrimination claims, punitive damages designed to punish employers are only awarded in egregious circumstances.¹²⁵ Even in California, a state similar to Massachusetts known for its employee-centered labor laws, the legislature differentiates between willful and involuntary violations:¹²⁶ California’s labor code awards penalties when an employer “willfully fails to pay” an employee the wages they are owed, and it distinguishes between employees who were discharged and employees who quit.¹²⁷ New York’s labor law is even less restrictive and does not require payment to terminated employees on the day of their termination, instead employers pay on the “regular pay day for the pay period during which the termination occurred.”¹²⁸ Further, New York law only imposes additional damages beyond the wages owed to the employee if the employer is a repeat offender or the violation is willful or egregious.¹²⁹ Even when an employer intentionally violates the statute, damages are limited to a civil penalty amounting to double the amount of total wages, benefits, or supplements owed.¹³⁰ The Reuter standard imposing strict liability on employers “who must suffer the consequences” of a potentially good faith error denies employers the opportunity to be heard and distinguishes Massachusetts as an anomaly even amongst other labor-friendly states.¹³¹

The Court’s ruling in Matthews v. Ocean Spray Cranberries is insular to the possibility that an employee could be partially responsible for a mistake in their pay.¹³² The operation of many large workplaces requires both the employer and employee to accurately track an employee’s hours.¹³³ Federal FLSA handbooks recognize that the burden of recordkeeping in wage disputes often shifts between an employee and employer, both of whom have a role to play in the accuracy of employee time cards.¹³⁴ According to one handbook, “employers are free to ask employees to keep track of their own hours, although employers also should keep records.”¹³⁵ Employee handbooks, or internal rules of workplace conduct, often describe disciplinary consequences for employees who falsify their time cards or “steal time”—a term used for transgressions such as “sleeping on the job . . . punching another’s time card, claiming pay not due, etc.”¹³⁶ The Reuter decision contemplates no circumstance where an error originates with the employee for incorrectly tracking their hours or violating a company policy, but rather shifts the full burden to the employer to bear the full cost.¹³⁷

IV. The Court Should Have Allowed for a Good Faith Exception or Limited the Scope of Its Decision to Terminated Employees

A. Good Faith Exception Provides a Reasonable Standard While Furthering the Wage Act’s Purpose

Considering the admitted ambiguity of the Wage Act, the Court was not restrained by the language of the statute and could have extended a lifeline to well-intentioned employers in their interpretation.¹³⁸ The Wage Act never mentions employer “intent.”¹³⁹ Therefore, the statute does not bind the SJC to find an employer strictly liable “regardless of intent,” but rather gives the Court the discretion to carve out an exception for good faith errors.¹⁴⁰ Legal commentators within the labor and employment community from opposing sides of litigation have mutually discussed the need for the legislature to amend the Wage Act following the Reuter decision.¹⁴¹ Proposed amendments to the Act offer multiple ways to temper the harsh penalty for honest employers, such as requiring the employee to make a demand prior to filing suit or restricting liability to late or unpaid regular pay rather than vacation or holiday pay.¹⁴² Lawyers with seemingly opposing client interests recognize the need to recalibrate the Wage Act to fairly account for well-intentioned employers while preserving protections for worker pay.¹⁴³

The good-faith exception allowed under federal law presents a model alternative to the Court’s austere ruling, allowing an employer to “escape liquidated damages by showing to the [C]ourt’s satisfaction that it acted in good faith and had a reasonable ground for believing that it did not violate the FLSA.”¹⁴⁴ The FLSA carefully considers the distinction between employers who “willfully” violate wage laws and those who make inadvertent mistakes, even adjusting the statute of limitations to balance the two circumstances.¹⁴⁵ Pursuant to the FLSA, courts have the discretion to evaluate the factual nuances of each case, such as when an employer believes they are fully complying with an employee’s collective bargaining agreement (“CBA”) in the calculation of overtime and only later learns the CBA itself violated the FLSA.¹⁴⁶ The FLSA appears more in touch with everyday employment situations, accounting for calculation errors and granting courts discretion when employers have reasonable grounds in believing they were in compliance.¹⁴⁷

The FLSA approach strikes the appropriate balance by demonstrating that protecting employees and absolving well-intentioned employers are not mutually exclusive concepts.¹⁴⁸ For example, the FLSA’s retaliation provision makes it unlawful for any employer to terminate or discriminate against an employee after filing a complaint, though the formality of the complaint to be in compliance is debated.¹⁴⁹ Courts have interpreted this provision as encouraging employees to come forward with alleged violations while giving their employer an opportunity to remedy the error without resorting to costly and time-consuming litigation for both parties.¹⁵⁰ Unlike the SJC’s interpretation of the Wage Act, federal law allows for an interactive dialogue between employer and employee aimed at rectifying errors to each party’s mutual benefit.¹⁵¹

Federal law similarly recognizes the possibility that employers are not always to blame for a payroll error.¹⁵² In 2004, the DOL established a safe harbor provision which accounted for situations where “an employer has a clearly communicated policy” prohibiting improper deductions but a manager engages in an actual practice (neither “isolated nor inadvertent”) of making improper deductions.¹⁵³ Under this provision, an employer who: (1) has a policy that includes a complaint mechanism; (2) reimburses the employee for a wrongful deduction; and (3) “makes a good faith commitment to comply in the future” will not be subject to a penalty unless the policy was willfully violated.¹⁵⁴ While the Court’s tone in Reuter gives the impression that inadvertent employer errors are a scarcity, the recent collapse of Silicon Valley Bank showcased a very real circumstance where an employer’s unintended inability to pay employees on time was on national display, a situation that could repeat itself in a future financial crisis.¹⁵⁵ Both the FLSA and the Wage Act recognize the importance of protecting employee wages, yet only the latter holds an employer accountable no matter the facts or circumstances of the case.¹⁵⁶

B. Failing to Limit the Decision to Terminated Employees Presents an Impractical Standard and Unreasonable Burden on Employers

The SJC recognized that its decision “put[] employers in a difficult position when immediately terminating employees for misconduct” and admitted “it may be unclear how much an employee must be paid on short notice” but understated the burden on employers when considering the decision’s application to all Wage Act violations.¹⁵⁷ The Court’s suggestion to mitigate this burden by suspending employees rather than terminating them until their pay can be correctly calculated does nothing to mitigate the burden on employers when the payroll mistake is for an active employee’s regular paycheck.¹⁵⁸ Just like terminated employees, active employees who bring claims against their employers are entitled treble damages for any late payment, thereby giving employers no opportunity to limit their liability.¹⁵⁹ Had the Court applied its decision to only terminated employees, it would have provided a “nuance to a statute that, in certain circumstances, may resemble a blunt instrument.”¹⁶⁰

The Court’s decision adversely affects all employers but creates the gravest consequences for small employers with limited resources for ensuring absolute payroll accuracy, and for whom a system-wide payroll glitch could trigger business-sinking damages.¹⁶¹

Contrary to the public policy goals expressed in Reuter to protect vulnerable employees, the decision will likely have the opposite intended effect by encouraging employers who make innocent mistakes to hide the violation rather than seek a swift remedy.¹⁶⁵ Reuter provides employers with no safe harbor, thereby granting an economic incentive not to pay and a publicity incentive to avoid exposure by admitting they violated the Wage Act, even if by mistake.¹⁶⁶ Though the Massachusetts legislature continues to focus on expanding protections for employees through proposed legislation, it has stopped short of altering the express language of the Wage Act’s “lost” wages provision.¹⁶⁷ Despite Reuter’s broad and harsh implications, the Court continues to push the scope of the Wage Act and contemplate possible consequential damages for employers in the future.¹⁶⁸ Reuter makes clear that the Court will continue to use a “stick” not “carrot” approach to liability, even when an employer’s payment is a day late or a dollar short.¹⁶⁹

Conclusion

Reuter’s application to all Wage Act violations presents employers with a troublesome dilemma and an unreasonable burden to avoid any and all payroll mistakes. The Wage Act already represented a stringent standard for employers by requiring prompt payment of employee wages. The Court stretched this standard beyond the express language and scope of the statute by imposing harsh penalties on benevolent and wrongful employers alike. Though the Court had ample avenues to soften its ruling, it opted not to adopt a good faith exception like that within the FLSA, nor to limit its decision’s applicability to terminated employees. Thus, the future is undoubtedly fraught for all employers, even those with the best of intentions.

1
David W. McBride, Massachusetts Wage Act: Protecting More Than Just Paychecks, 24 Mass. Emp. L. Letter, Mar. 2014, Westlaw, 24 No. 12 SMMAEMPLL 4 (“Two recent Massachusetts Appeals Court cases illustrate how the Wage Act’s lack of a concrete definition of wages leaves the door open for employees seeking allegedly unpaid compensation.”).
2
Id.
3
See generally Emily J. Miller et al., No Quarter: SJC Mandates Treble Damages for Any Late Payment of Wages—Even Honest, Corrected Mistakes, Seyfarth (Apr. 5, 2022), https://perma.cc/B5AH-NCWW (discussing lower court precedent that imposed less severe damages when wages were paid late but before a complaint was filed).
4
Best and Worst States to Work in America 2021, Oxfam , https://perma.cc/AGP2-83FY (last visited Sept. 12, 2024) (ranking Massachusetts third among all states in three dimensions of workers’ rights).
5
David Conforto, The Story of the Wage Act: A Goldilocks Moment, Mass. Laws. Wkly. (May 20, 2022), https://perma.cc/LU95-JUJY.
6
See Miller et al., supra note 3.
7
Mass. Gen. Laws Ann. ch. 149, § 148 (West 2009).
8
Daniel Schwartz et al., Don’t Be Late Paying Terminated Employees in Massachusetts, Law360 (Apr. 27,` 2022, 5:22 PM EDT), https://perma.cc/FQ4R-LXCJ.
9
Id. (emphasis added).
10
Reuter v. City of Methuen, 184 N.E.3d 772, 778 (Mass. 2022) (holding the trial judge’s conclusion that damages awarded should be measured by the interest for late wages is unsupported by the statute and contrary to its purpose) (emphasis added).
11
Miller et al., supra note 3 (advising how employers should adjust their payroll processes to operate at a “zero-margin-for-error environment” in light of the Reuter decision).
12
Miller et al., supra note 3 (recognizing the penalty for employers who make “inadvertent and potentially unavoidable payroll mistakes” are the same).
13
Schwartz et al., supra note 8 (emphasis added).
14
See Brief of Amicus Curiae Immigrant Worker Center Collaborative (IWCC) in Support of Plaintiffs-Appellees and Urging Affirmance at 22, Donis v. Am. Waste Services, LLC, 137 N.E.3d 1066 (Mass. 2019) (No. SJC-12842), 2020 WL 759510 [hereinafter Brief of Amicus Curiae IWCC] (claiming wage theft undercuts purpose of prevailing wage law’s intent).
15
Schwartz et al., supra note 8.
16
Schwartz et al., supra note 8 (“[W]hile the high Court only directly decided the payment of final wages upon discharge from employment, its reasoning appears applicable to all wage payments under the Wage Act.”).
17
See Marion Crain, Arm’s-Length Intimacy: Employment as Relationship, 35 Wash. U. J.L. & Pol’y 163, 167 (2011).
18
Id. at 165, 180 (describing employment as “[a] contractual framework characterized by the assumption of arm’s-length dealing”).
19
See Ross Eisenbrey, Wage Theft Is a Bigger Problem Than Other Theft—But Not Enough Is Done to Protect Workers, Econ. Pol’y Inst. (Apr. 2, 2014), https://perma.cc/Z83T-FCLA.
20
Brief of Amicus Curiae IWCC, supra note 14, at 11.
21
See 45 John F. Adkins et al., Massachusetts Practice Series: Employment Law, § 2:2 (3d ed. 2022).
22
See generally id. at § 2:1.
23
Id. at § 2:2 (suggesting common law right-to-control test applicability to federal and state employment laws).
24
See What Are Job Status, Employee Status, and Active Status?, HR Wize, https://perma.cc/H5VS-W439 (last visited Sept. 14, 2024).
25
Adkins et. al., supra note 21, § 3:1.
26
See generally Dana Wilkie, Right and Wrong Ways to Terminate: Avoiding Common Mistakes When Letting a Worker Go, SHRM (Sept. 12, 2013), https://perma.cc/X2AH-VGRW.
27
Summary of the Major Laws of the Department of Labor, U.S. Dept. Of Lab., https://perma.cc/63AY-Q943 (last visited Sept. 14, 2024).
28
Wages and the Fair Labor Standards Act, U.S. Dept. Of Lab., https://perma.cc/TA2X-95HQ (last visited Sept. 14, 2024).
29
See, e.g., Patrick M. Curran, Jr., Massachusetts Supreme Judicial Court Holds That FLSA Preempts Wage Act Remedies for Federal Overtime Violations, Ogletree Deakins (Apr. 18, 2022), https://perma.cc/Q9MK-U3JX.
30
See, e.g., Can the Massachusetts Wage Act Be More Employee Friendly?? YES!, Steffans Legal (Feb. 21, 2019), https://perma.cc/T3BY-6JY6 (citing a 2019 SJC decision which further expanded employer damages under the Wage Act).
31
See generally The Pemberton Mill Disaster, New. Eng. Hist. Soc’y, https://perma.cc/SM2U-7NHV (last updated 2024).
32
See generally Conforto, supra note 5.
33
Kaila Clark & Valerie Samuels, Massachusetts Limits State Wage Awards Citing FLSA Preemption, JD Supra (Apr. 28, 2022), https://perma.cc/R96X-HFYL.
34
Office of the Attorney General, Learn More Details about the Massachusetts Equal Pay Act, Mass.gov, https://perma.cc/T5TT-SYGK (last visited Sept. 14, 2024).
35
Benjamin Kail, How Did Labor Day Start? Massachusetts Was Among the First States to Make It a Holiday, Mass Live (Sept. 6, 2021, 11:30 AM), https://perma.cc/FBR5-ZRDS.
36
See Adkins et al, supra note 21, § 16:6.
37
Mass. Gen. Laws Ann. ch. 149, § 148 (West 2009).
38
Id.
39
See generally id.
40
Id.
41
Mass. Gen. Laws Ann. ch. 149, § 150 (West 2015).
42
Id.
43
Id. (stating “[an employer] shall not set up as a defense a payment of wages after the bringing of the complaint”).
44
Id.
45
Adkins et al., supra note 21, § 16:6.
46
Dobin v. CIOview Corp., 16 Mass. L. Rptr. 785, 789 (Mass. Super. Ct. 2003).
47
Id.at 785.
48
Id. at 786.
49
Id. at 788.
50
Id.
51
Mass. Gen. Laws Ann. ch. 149, § 150 (West 2015).
52
Dobin, 16 Mass. L. Rptr. at 788.
53
Id. at 789.
54
Reuter v. City of Methuen, 184 N.E.3d 772, 779 (Mass. 2022) (citing Littlefield amongst a string of cases that relied on the Dobin holding).
55
32 Mass. L. Rptr. 706, 709 (Mass. Super. Ct. 2015).
56
Id. at 708.
57
See id. at 708.
58
Reuter, 184 N.E.3d at 774.
59
Id.
60
Id.
61
Id.
62
Id.
63
Id. at 774.
64
Reuter v. City of Methuen, 184 N.E.3d 772, 775 (Mass. 2022).
65
41A Joseph F. Stanton, Appellate Practice and Procedure: Massachusetts Practice Series, app. A § 84 (4th ed. 2023) (explaining the duty of the courts to resolve issues of statutory interpretation using de novo standard of review).
66
Reuter, 184 N.E.3d at 777–79 (discussing the decision to take up the case and several trial court rulings on the issue).
67
See id. at 774–80.
68
Id. at 774 (emphasis added).
69
Id. at n.3 (“The plaintiff did not appeal from the denial of class certification.”).
70
Id. at 777–79.
71
Id. at 775–76.
72
Reuter v. City of Methuen, 184 N.E.3d 772, 777–79 (Mass. 2022).
73
Id. at 776.
74
Id.
75
Id. at 777–78.
76
Id. at 777.
77
See id.
78
Reuter v. City of Methuen, 184 N.E.3d 772, 777 (Mass. 2022) (quoting George v. Nat’l Water Main Cleaning Co., 77 N.E.3d 858, 863 (Mass. 2017)).
79
Id.
80
Id.(emphasis added).
81
Id.
82
Id.
83
Id. at 778–79.
84
Reuter v. City of Methuen, 184 N.E.3d 772, 779 (Mass. 2022).
85
Id.
86
Id. at 780.
87
Id.
88
Id. at 779–80.
89
Id. at 780.
90
Reuter v. City of Methuen, 184 N.E.3d 772, 780–81 (Mass. 2022).
91
Id. at 781 (Georges, J., concurring).
92
Id. at 783.
93
Id. at 781–82.
94
Id. at 783.
95
Schwartz et al., supra note 8 (“[W]hile the high [C]ourt only directly decided the payment of final wages upon discharge from employment, its reasoning appears applicable to all wage payments under the Wage Act.”).
96
See Reuter v. City of Methuen, 184 N.E.3d 772, 775–76 (Mass. 2022) (quoting Commonwealth v. New York Cent. & H.R.R.R. Co., 92 N.E. 766, 770 (1910)).
97
Id.
98
Id. at 777 (emphasis added).
99
Id. at 781.
100
Id. at 777.
101
See McGrath v. City of Somerville, 419 F. Supp. 3d 233, 255 (D. Mass. 2019) (applying a three-prong standard for Wage Act claims with no distinction for terminated employees); George v. Nat’l Water Main Cleaning Co., 77 N.E.3d 858, 861 (Mass. 2017) (discussing how failure to pay each employee any wages within time set by statute violates wage act).
102
H.R. 1610, 191st Gen. Ct., Sess. 10(a)(1) (Mass. 2019) (emphasis added).
103
Id.
104
Reuter v. City of Methuen, 184 N.E.3d 772, 777 (Mass. 2022).
105
Id.
106
Harvard Crimson, Inc. v. Pres. & Fellows of Harvard College, 840 N.E.2d 518, 521 (Mass. 2006).
107
Late, Merriam-Webster Dictionary, https://perma.cc/PG3H-LCVL (last visited Sept. 14, 2024); Lost, Merriam-Webster Dictionary, https://perma.cc/8ZFV-73FW (last visited Sept. 14, 2024).
108
Rowley v. Massachusetts Elec. Co., 784 N.E.2d 1085, 1089 (Mass. 2003) (“There is nothing in the statutory language itself that suggests that its effect is limited . . . If that was the legislative intent, the wording of the statute could have easily reflected it. It does not.”).
109
See e.g., George v. Nat’l Water Main Cleaning Co., 77 N.E.3d 858, 861–62 (Mass. 2017) (discussing the 2008 amendment to Wage Act).
110
Id. at 861.
111
See Peters v. United Nat’l Ins. Co., 762 N.E.2d 881, 887 (Mass. App. Ct. 2002) (reasoning “had the Legislature desired to create such a system, we believe it would have said so with considerably greater clarity”).
112
See H.R. 1610, 191st Gen. Ct., § 3(d) (Mass. 2019).
113
George, 77 N.E.3d at 863.
114
Reuter v. City of Methuen, 184 N.E.3d 772, 775–76 (Mass. 2022).
115
See Scott Connolly, Massachusetts Employers Beware: Any Late Wage Payment Means Liability for Triple Damages, JD Supra (May 23, 2022), https://perma.cc/UTH2-QNNR. Compare Reuter, 184 N.E.3d at 775–76, with Dobin v. CIOview Corp., 16 Mass. L. Rptr. 785 (Mass. Super. Ct. 2003).
116
Littlefield v. Adcole Corp., 32 Mass. L. Rptr. 706, 709 (Mass. Super. Ct. 2015); Dobin, 16 Mass. L. Rptr. at 791 (“When wages and benefits are tardy but paid before the complaint was brought, the ‘loss of wages and other benefits’ is simply the interest foregone from the delay in payment.”).
117
George, 77 N.E.3d at 862–863 (discussing the U.S. Supreme Court’s regard for liquidated damages as compensatory in nature, not punitive).
118
991 F.3d 344, 346 (1st Cir. 2021).
119
See generally Connolly, supra note 115.
120
George, 77 N.E.3d at 861 (describing treble damages as “punitive in nature” authorized by statute only); see also Reuter v. City of Methuen, 184 N.E.3d 772, 777–78 (Mass. 2022).
121
Terence P. McCourt, Removing Judicial Discretion Makes New Wage Law Punitive for Massachusetts Employers, 52 Bos. Bar J. 13 (2008) (noting that calling damages liquidated “does not make them any less punitive”).
122
See, e.g., McMillan v. Mass. Soc’y for Prevention of Cruelty to Animals, 140 F.3d 288, 298 (1st Cir. 1998) (demonstrating an employer’s ability to produce evidence to rebut the presumption of discrimination); Gonzalez v. Downtown LA Motors, LP, 155 Cal. Rptr. 3d 18, 18 (Cal. App. 4th 2013) (holding employers are liable when they willfully fail to pay).
123
Mass. Gen. Laws Ann. ch. 151B, § 4 (West 2023).
124
McMillan, 140 F.3d at 298.
125
Dalis v. Buyer Advert., Inc., 636 N.E.2d 212, 224 (Mass. 1994) (“In egregious cases, the statute also provides the legal remedy of punitive damages.”).
126
Best and Worst States to Work in America 2021, supra note 4 (ranking California fourth overall in three dimensions of workers’ rights).
127
Gonzalez v. Downtown LA Motors, LP, 155 Cal. Rptr. 3d 18, 31. (Cal. Ct. App. 2d Dist. 2013).
128
N.Y. Lab. Law § 191 (McKinney 2013).
129
52 Tracy Bateman et al., New York Jurisprudence: Employment Relations, § 157 (2d ed. 2022).
130
Id.
131
See Barry Miller et al., How New Bill May Affect Enforcement of Mass. Wage Laws, Law360 (May 17, 2022, 2:26 PM EDT), https://perma.cc/8PSE-WNV3 (“No other state in the country has adopted such a stringent approach to enforcement of wage and hour laws.”).
132
See generally 686 N.E.2d 1306 (Mass. 1997) (finding an employee was rightfully terminated for stealing time).
133
Susan Prince, Fair Labor Standards Handbook for States, Local Governments and Schools, ¶ 880 (2019).
134
Id.
135
Id.
136
Matthews, 686 N.E.2d at 1306.
137
Reuter v. City of Methuen, 184 N.E.3d 772, 778 (Mass. 2022).
138
See generally id. at 777 (recognizing the wording of the statute creates an ambiguity).
139
Mass. Gen. Laws Ann. Mass. 149, §§ 148, 150 (West 2023).
140
Reuter, 184 N.E.3d at 776.
141
Conforto, supra note 5.
142
Conforto, supra note 5.
143
Conforto, supra note 5.
144
Devaney v. Zucchini Gold, LLC, 184 N.E.3d 1248, 1256 (Mass. 2022).
145
Id. (“A claim for unpaid overtime brought under the Federal overtime law is subject to a two-year statute of limitations period, unless the claim arises from ‘a willful violation,’ in which case a three-year limitations period applies.”).
146
McGrath v. City of Somerville, 419 F. Supp. 3d 233, 259 (D. Mass. 2019) (recognizing that both parties “were represented by experienced counsel, none of whom questioned whether the CBA complied with the FLSA”).
147
See id. (finding a city employer who made a good faith error in the calculation of an employee’s overtime rate was not liable for liquidated damages).
148
See Jennifer Clemons, FLSA Retaliation: A Continuum of Employee Protection, 53 Baylor L. Rev. 535, 554 (2001) (discussing the FLSA goal to protect employees and the good faith exception).
149
Id. at 539.
150
Id.
151
See id. at 536.
152
See Prince, supra note 133, at ¶ 230; Effect of Improper Deductions from Salary, 29 C.F.R. § 541.603 (2022).
153
Prince, supra note 133, at ¶ 230; 29 C.F.R. § 541.603(c)–(d).
154
29 C.F.R. § 541.603(d).
155
Ari Levy, Companies Scramble to Meet Payroll, Pay Bills After SVB’s Swift Failure, CNBC , https://perma.cc/6RE3-JHEZ (Mar. 10, 2023, 8:59 PM EST). See generally Reuter v. City of Methuen, 184 N.E.3d 772 (Mass. 2021).
156
Compare Gordon v. Kaleida Health, 847 F. Supp. 2d 479, 489 (W.D.N.Y. 2012) (reiterating “the purpose of the FLSA to protect all covered workers”), with Reuter, 184 N.E.3d at 775–76.
157
Reuter, 184 N.E.3d at 778.
158
Id. (suggesting employers suspend rather than terminate employees until pay can be calculated).
159
Miller et al., supra note 3.
160
Conforto, supra note 5.
161
See Nicholas Nesgos et. al., Massachusetts Highest Court Awards Treble Damages Under the Wage Act, Even After Employer Remedied Violation, (Apr. 15, 2022), https://perma.cc/42QX-GQDK.
162
Brief of Amicus Curiae Northeast Human Resources Association, Inc. in Support of the Defendant-Appellant at 20, Reuter v. City of Methuen, 184 N.E.3d 772 (Mass. 2022) (SJC-13121), 2021 WL 4340990.
163
Id.
164
Id. at 16.
165
Id.
166
Id.
167
H.R. 1610, 191st Gen. Ct., 2019-2020 Sess. ¶ 11 (Mass. 2019).
168
Reuter v. City of Methuen, 184 N.E.3d 772, 780 (Mass. 2022).
169
Conforto, supra note 5.

Kate Barry

Kate is a JD Candidate 2024 and a Comment & Note Editor for the New England Law Review Volume 58.

Tagged in :

employment law, Massachusetts, Supreme Court, United States, Wage Theft