What the Wage Act Ruling Means for Household Employers in Massachusetts

The Massachusetts Supreme Judicial Court (SJC) recently ruled for an employee who was terminated for cause and was seeking treble damages for the untimely payment of her final wages under the state’s wage act.

This decision should alert Massachusetts household employers to the importance of paying all earned wages – including unused vacation and PTO – on the day of termination.

Background

Beth Reuther was a custodian for the city of Metheun’s school department. At the time of her termination for cause, the city owed her $8,952.15 for accrued vacation time but did not pay her this amount until three weeks later.

Reuter’s lawyer demanded $23,872.40, which was a trebling of the late vacation pay, plus $5,986.10 for attorney’s fees, minus setoff for the late payment.

The city provided an “unconditional check” for $185.42, which represented a trebling of the twelve percent annual interest on Reuter’s vacation pay accrued during the three weeks between her termination and payment.

A ruling from about 20 years prior, which the city was following when it sent the check, limited damages to interest on the late payment of wages.

A Superior Court judge ruled in favor of the city and rejected the claim for treble damages saying that because Reuter received full payment of her vacation pay prior to her filing a lawsuit, she was only entitled to interest accrued during the three-week period between when she should have been paid and when she actually was paid.

The case goes to the SJC

Reuter won the SJC ruling in Reuter v. City of Metheun even though the city fixed its mistake and paid the wages due before the suit was filed.

The court said the employer was responsible for treble the amount on late-paid wages, not on the amount of interest from the delay.

This also means employers may not use a “post-complaint” late payment of unpaid wages as a defense for violating the wage act.

The Massachusetts Wage Act and household employment

What does this all have to do with household employment?

The Massachusetts Wage Act also applies to all employers including families with household help. This ruling emphasizes the importance of paying all final earned wages, including vacation and/or PTO, on time. In this case, unused vacation time needed to be paid on the day of termination as required by law.

The Wage Act requires employers to pay their workers “weekly or bi-weekly” within either six or seven days of the “termination of the pay period during which the wages were earned.” However, “any employee discharged from such employment shall be paid in full on the day of his discharge.”

This only applies if an employer terminated their worker not if the employee quits. An employee who resigns should “be paid in full on the following regular payday.”

Under the law, “wages” include “any holiday or vacation payments due to an employee under an oral or written agreement.” Any employee who is not paid on time and “prevails in such an action shall be awarded treble damages, as liquidated damages, for any lost wages and other benefits and shall also be awarded the costs of the litigation and reasonable attorneys’ fees.”

If a household employer fires their employee, they must be prepared to pay them in full on the date of termination or they will owe their worker treble damages on the unpaid wages, litigation costs, and attorneys’ fees. It does not matter if the delay was an honest mistake or proactively corrected.

It is no wonder why Massachusetts is considered to have one of the strictest wage payment laws in the country

Terminating an employee

When considering the termination of an employee, think about the timing of their final wages – including unused vacation and PTO – and give yourself enough time to comply with the law.

The SJC recognized that its interpretation of the Wage Act puts employers in “a difficult position when immediately terminating employees for misconduct” as “it may be unclear how much an employee must be paid on short notice.” But previous interpretations of the law “would essentially authorize, and even encourage, late payments right up to the filing of the complaint.”

If an employee needs to be fired immediately, they put your child’s safety at risk or you caught them stealing, for example, then you may want to consider suspending your worker for a short period of time – just tell them not to come to work – to give yourself time to prepare their final pay on their actual termination date.

The decision in the Reuter case could apply retroactively. That means a household employer who terminated a worker and was late in a final wage payment could be liable for treble damages. This would apply to involuntary terminations over the past three years – the limitation period for a wage claim.

4 key takeaways for household employers

This court ruling tells us that:

• Household employers have a clear responsibility under the Wage Act to pay a worker all wages due, including unused vacation time and PTO, on the day of their termination.
• Failing to do so, even for unintentional reasons or errors, will result in the family being held liable for treble the amount of the unpaid wages.
• Prior to terminating a household employee, a family must be prepared to pay their worker all wages owed on the day of termination.
• If an employee needs to be fired immediately for serious misconduct and you are unable to pay all wages due at that time, consider suspending the worker rather than a termination to give you time to comply with the law.

GTM can help

GTM Payroll offers its payroll and tax clients human resources consulting as an additional service. A PHR-certified HR advisor can help you understand your responsibilities under labor laws when hiring, employing, and terminating household workers. Call (800) 929-9213 for rates and to learn more.

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