The Massachusetts Wage Act (the "Wage Act") provides protections for employees by requiring the prompt payment of wages within six (6) days of being earned. G.L. c. 149 § 148. The purpose of the Wage Act is to limit the interval between the completion of an employee's work and the payment of wages. American Mutual Liability Ins. Co. v. Commissioner of Labor and Industries, 340 Mass. 144, 145 (1959). It is designed to cure the evil of unreasonable detention of wages by unscrupulous employers and to prevent unwise employees from squandering their pay. Id. at 147. It is not, however, as was recently noted, "a model of legislative draftsmanship." Dobin v. CIOview Corporation, No. 01-00108, 2003 Mass. Super. LEXIS 291, at *1 (Mass. Super. Ct. October 29, 2003).
Until recently, only the Attorney General and the Massachusetts Department of Labor and Industries had standing to bring civil actions under the Wage Act. In 1993, however, the Legislature amended the Wage Act to allow employees to bring civil actions. G.L. c. 149 § 150; St. 1993, c. 110 § 182. At the same time, the Legislature added provisions allowing for the recovery of treble damages and attorney's fees for successful Wage Act claims. Id.
Understandably, the provision of a private right of action, the boom in the late 1990's of often cash-starved start-up companies, and the subsequent downturn in the economy have created fertile ground for Wage Act claims. Consequently, employment lawyers are litigating claims under a statute that, prior to 1993, had only a handful of opinions interpreting its provisions. Within the last several years there has been a significant increase in claims requiring the courts to interpret the Wage Act, although there is still very little guidance from the Appeals Court or the Supreme Judicial Court on the issues raised by the Wage Act. This article will review some of the key provisions of the Wage Act, and discuss the more recent caselaw applying those provisions to the following issues: (1) who is an employee; (2) who is an employer; (3) what compensation is protected; (4) what damages are recoverable; and (5) what defenses, if any, are available.
WHO IS AN EMPLOYEE PURSUANT TO THE WAGE ACT?
The Wage Act requires prompt payment of wages to "employees." G.L. c. 149 § 148. Although there is some confusion on the issue of who is an "employee" protected by the Wage Act, the few decisions directly addressing the question have given the term its common usage, excluding only independent contractors, and rejected invitations to exclude certain categories of employees. For example, in Kohli v. Res Engineering, Inc., No. 00-2458, 2000 Mass. Super. LEXIS 463, at *1 (Mass. Super. Ct. December 19, 2000), the court held that "[t]he plain and unambiguous statutory language demonstrates that executive and professional employees, no matter how highly compensated they may be, are protected by the Wage Act from the unreasonable detention of their salary." Id. at *6. Similarly, in Dobin it was found that the language of the Wage Act "demonstrates that it recognizes that these high-ranking employees are protected under the Act." Dobin, 2003 Mass. Super. LEXIS 291, *12.
Notwithstanding the apparently plain language of the Wage Act, some courts have implied that highly paid employees or professionals are not protected by the Wage Act, although none have explicitly stated as much. For instance, the Appeals Court in Commonwealth v. Savage, 31 Mass. App. Ct. 714 (1991), found that the purpose of the Wage Act was "to assist employees who would ordinarily be paid on a weekly basis, such as retail sales people, and for whom commissions constitute a significant part of weekly income." Id. at 716 (emphasis added). Also, in denying an executive's Wage Act claim for stock options in Baptista v. Abbey Healthcare Group, Inc., No. 95-10125-RGS, 1996 U.S. Dist. LEXIS 22797, at *1 (D. Mass. April 10, 1996), the court stated that there was no "reason to extend the protections of a wage earner's statute to cover bonuses potentially owing to highly paid executives, who were confident enough to resign their employment if their demands for accelerated (and contingent) stock options were not met." Id. at *12 (emphasis added). Several years later, in Dennis v. Jager, Smith & Stettler, No. 98-4974-G, 2000 Mass. Super. LEXIS 114, *1 (Mass. Super. Ct. April 10, 2000), a contract attorney's Wage Act claim for unpaid salary was denied, in part, based on plaintiff's status as a "highly paid professional." Id. at *3. In Cumpata v. Blue Cross Blue Shield of Massachusetts, Inc., 113 F. Supp. 2d 164 (D. Mass. 2000), the court denied a claim for commissions, reasoning in part that the Legislature did not intend to provide treble damages and attorney's fees and costs to "professionals enforcing their asserted contract rights." Id. at 168 (emphasis added).
Nonetheless, given that the foregoing decisions did not deal directly with the issue of whether the employee was afforded the protections of the Wage Act, practitioners should be cautious in relying on the Savage, Baptista, Dennis and Cumpata lines of cases for the proposition that the plaintiff's status as a certain type of employee excludes them from the protections of the Wage Act.
WHO IS AN EMPLOYER FOR PURPOSES OF THE WAGE ACT?
One of the reasons the Wage Act is so appealing to plaintiffs is the fact that it extends liability to individuals as well as corporate employers. The Wage Act, however, defines the employer differently depending on whether the employer is a public or private entity. The Wage Act provides that "[e]very public officer whose duty it is to pay money, approve, audit or verify pay rolls, or perform any other official act relative to payment … shall be deemed to be an employer of such employees, and shall be responsible … for any failure to perform his official duty relative to the payment of their wages or salaries." G.L. c. 149 § 148. This language indicates that in order for a public employee to be found personally liable there must be some nexus between the individual and payment of the wages. G.L. c. 149 § 148. For private employers, the employer is defined as "the president and treasurer of a corporation and any officers or agents having the management of such corporation." G.L. c. 149 § 148. This definition focuses on whether the individual defendant was involved in some way with the "management of the corporation," but does not appear to limit personal liability to only those employees that have a direct role in the payment of wages, as is the case for individual defendants working for a public employer. Consequently, for Wage Act claims against individuals working for private employers, the litigation will likely focus on the meaning of the phrase "having management of such corporation" and whether the individual defendant "managed" the corporation.
Unfortunately, there is no definition of these terms in the Wage Act and there is very little in the way of analysis from the courts on the issue of who has management of a private corporation for purposes of the Wage Act. One court held that where the defendant was a 93% shareholder in his son's corporation, a director of the corporation, and someone who gave advice and advanced funds for corporate endeavors he deemed valuable, the plaintiff had failed to establish that the defendant was an agent having management of the corporation, but the decision contained no analysis of the relevant statutory language. York v. On-Site Communications, Inc., No. 97-2459-B, 2000 Mass. Super. LEXIS 378, *7 (Mass. Super. Ct. September 19, 2000). In contrast, a defendant that was the general manager of the corporate defendant and managed the office was found to have the management of the corporation. Wiedman v. The Bradford Group, Inc., d/b/a BBA Technical Services, C.A. No. 01-3980 (Middlesex Super. Ct. June 5, 2003). Again, however, there was no analysis of the Wage Act on this issue.
Given the absence of a definition in the Wage Act of the term "management," the courts will likely look to the term's plain meaning, which has been defined in one instance as "the executive function of planning, organizing, coordinating, directing, controlling . . ." Animal Legal Def. Fund, Inc. v. Fisheries & Wildlife Bd., 416 Mass. 635, 639 (1993) (quoting, Webster's New International Dictionary (3d ed. 1968) in defining the term management in a statute relating to wages). Accordingly, for claims against private employers, if the individual defendant is neither the President nor Treasurer, it appears that establishing individual liability for an employee of the corporation will require a factual inquiry focused on the individual defendant's efforts to plan, organize, coordinate, direct and control the corporate defendant.
WHAT "WAGES" ARE PROTECTED BY THE
WAGE ACT?
The most contentious and heavily litigated area in the recent Wage Act claims has been the definition of the term "wages." The Massachusetts Appeals Court, however, recently provided some much-needed guidance on the meaning of the term. In Prozinski v. Northeast Real Estate Serv., LLC, 59 Mass. App. Ct. 599 (2003), the Appeals Court determined that severance pay was not wages for purposes of the Wage Act. Id. at 603. In making that decision, the court rejected several arguments by the plaintiff analogizing the definition of wages provided for in other statutes and cases to the term as used in the Wage Act. Id. at 604. The court indicated that the Wage Act already defined "wages" and, given the history of narrowly construing the Wage Act, there was no reason to look beyond the express language of the statute. Id. at 605. In relying on that express language, the court noted that the statute does not refer to "severance or any similar term." Id. at 603. As a result of the Prozinski decision, plaintiffs hoping to carry the day on the argument that a particular form of compensation should be included in the definition of "wages," will likely need to rely on an explicit textual basis in the statute. Given that limitation, it appears that wages will include only the following categories of compensation:
(1) periodic salary or wages earned while employed for a specified period of time; (2) holiday pay; (3) vacation pay; and (4) "definitely determined commissions."
There has not been significant controversy over the first three categories of compensation, however, there has been substantial confusion over whether commissions are excluded from the protection of the Wage Act, which provides that it shall apply to commissions that have "been definitely determined and [have] become due and payable." G.L. c. 149 § 148. Much of the confusion stems from a line of cases that has limited the applicability of the Wage Act in circumstances involving commissions or other contingent compensation. As previously discussed, in Savage, the Appeals Court held that the purpose of the Wage Act was to assist employees paid weekly or for whom commissions constitute a significant part of weekly income. Savage, 31 Mass. App. Ct. at 716. Applying that test, the court concluded that a real estate broker's commissions that were episodic and substantial were not a significant part of weekly income and therefore were not "wages" subject to the protection of the Wage Act. Id. at 716-17. In Baptista, the court drew a distinction between "assured" compensation, such as ordinary wages or wage equivalents, i.e., vacation pay, which was protected by the Wage Act and compensation "triggered by contingencies," which was not afforded the protection of the Wage Act. Baptista, 1996 U. S. Dist. LEXIS 22797, at *12-13. As a result, the court held that stock options were not "wages" within the meaning of the Wage Act. Id. at *13. In Dennis, the court relied on the language in Savage and Baptista to conclude that compensation "triggered by contingencies" is outside the scope of the Wage Act; only commissions paid on a weekly basis and that constitute a significant portion of weekly income are covered by the Wage Act. Dennis, 2000 Mass. Super. LEXIS 114, at *4. Finally, relying on the decisions in Savage, Baptista, and Dennis, the court in Cumpata held that where commissions were over and above a base salary, not paid weekly and were "triggered by contingencies," they are not protected by the Wage Act. Cumpata, 113 F. Supp. 2d at 168.
Several decisions have attempted to reconcile these cases with the language of the statute apparently protecting commissions. In Lohnes v. Darwin Partners, Inc., No. 02-1299, 2002 Mass. Super. LEXIS 318, at *1 (Mass. Super. Ct. July 24, 2002), the court held that the Wage Act should not be limited to employees who ordinarily would be paid on a weekly basis and for whom commissions constitute a significant part of weekly income. Id. at *6. Moreover, the language "triggered by contingencies" does not mean that any commission "triggered by a contingency" is excluded from the scope of the Wage Act. Id. at *8. Rather, it means that the contingency must have been met, i.e., definitely determined and capable of being precisely ascertained, in order for it to be a "wage" for purposes of the Wage Act. Id. Similarly, in Wiedman, the court agreed with the Lohnes decision and held that if the contingencies on which a commission is based have been met, the commission is otherwise definitely determined and the amount due is capable of being precisely ascertained, the commission is protected. Wiedman, C.A. No. 01-3980 (Middlesex Super. Ct. June 5, 2003). Like the decisions discussed earlier that apparently exclude certain types of employees from the protection of the Wage Act, there should be great caution in relying on the line of cases casting doubt on whether commissions are protected by the Wage Act. The better argument seems to be the one advanced in the Lohnes and Wiedman decisions — that once commissions are "definitely determined and capable of being precisely ascertained," they are wages for purposes of the Wage Act.
WHAT DAMAGES ARE RECOVERABLE FOR A
VIOLATION OF THE WAGE ACT?
The Wage Act is also of interest to potential plaintiffs because it allows for the recovery of treble damages, costs and attorney's fees. G.L. c. 149 § 150. The Wage Act provides that an aggrieved employee may seek treble damages and that an employee who prevails on his claims "shall be entitled to an award of the costs of the litigation and reasonable attorney fees." Id. Given the remedial purposes of the statute, courts have interpreted the foregoing provision as making an award of treble damages, costs, and attorney's fees mandatory in successful Wage Act claims. See Gibbs v. Archie, 2002 Mass. App. Div. 205 (Mass. App. Div. 2002); Bollen v. Kingsmont, 2000 Mass. App. Div. 56 (Mass. App. Div. 2000); Chiappetta v. Lyons, 1999 Mass. App. Div. 276 (Mass. App. Div. 1999).
The timing of any payments by the employer appears to be critical, however, in determining the amount of damages. The Wage Act provides that payment by the employer after the "bringing of the complaint" is no defense. G.L. c. 149 § 150. In the lone decision interpreting this provision, the court trebled only the interest on the unpaid wages where the employer failed to pay the wages within six (6) days of the end of the pay period, but did pay the wages "prior to the bringing of the Complaint." Dobin, 2003 Mass. Super. LEXIS 291, at *23. Left unresolved in Dobin was the issue of how to calculate damages where the employer made payments after the "bringing of the complaint." In dicta, the court stated that the employer would be liable for treble the amount of lost wages given the explicit terms of the statute and its purpose. Id. at *20. In other words, the employer would not be entitled to reduce the damages by any payments made after the bringing of the complaint. Id. Although such a result would be draconian, it would also appear to be consistent with the Supreme Judicial Court's interpretation of the damages provision in G.L. c. 93A. See R.W. Granger & Sons, Inc. v. J & S Insulation, Inc., 435 Mass. 66, 85 (2001) (refusing to grant insurer credit for late payment of underlying claim and affirming trial court's doubling of the original amount of the claim under G.L. c. 93A for a willful failure to settle).
WHAT DEFENSES ARE AVAILABLE TO THE DEFENDANT?
The defenses to a Wage Act claim are strictly limited. G.L. c. 149 § 150. In fact, the statute explicitly states that an employee may not waive his rights under the Wage Act. G.L. c. 149 § 148 ("No person shall by a special contract with an employee or by any other means exempt himself from this section or from section one hundred and fifty"). Consequently, an employer will still be liable for unpaid wages or tardy payments even if the employee agreed to a deferment of the wages. Dobin, 2003 Mass. Super. LEXIS 291, at *23.
Unfortunately, for employers, assuming the plaintiff is an employee earning wages protected by the Wage Act, the statute of limitations appears to be one of the few defenses to a Wage Act claim. The Wage Act provides that claims must be brought within three years of the violation of the Act. G.L. c. 149 § 150. However, an employee can only file a claim after the expiration of ninety (90) days after the filing of a complaint with the attorney general, or sooner, if the attorney general assents in writing to the complaint. Id.
CONCLUSION
As is apparent, given its treble damages provision, extensions of employer liability, and limitation of defenses, the Wage Act provides sweeping protections for employees. However, recent caselaw has created some confusion as to the extent of these protections, particularly in the area of employee commissions and the definition of an employee. Further, the definition of management and the effect of payments after the bringing of a Wage Act complaint have yet to be addressed in detail. Nonetheless, the increase in Wage Act claims will surely result in additional appellate court decisions that will hopefully bring some clarity to these issues.