Employers are Liable for Triple damages and Attorney’s fees for failure to pay accrued vacation pay at time of firing.

May 6, 2022

The Massachusetts Supreme Judicial Court recently held in the case of Reutuer v. City of Methuen, that if an employer terminates an employee, failure to pay the employee their accrued but unused vacation time on the last day of employment is a violation of the Massachusetts Wage Act for which the employer is liable for triple damages and attorney’s fees.

Under the Massachusetts Wage Act, employers have always been required to pay terminated employees their accrued vacation time in the same manner that employers must deliver to the terminated employee their last paycheck through their final day on the employee’s last day. Still, the Reutuer decision is noteworthy for strict demand for immediate payment.. Under this decision, a Massachusetts Court is required to award a Plaintiff triple damages for the full amount of late wages if their employer fails to provide them at the time of termination, regardless if wages were paid with interest at a later date.

Under the Wage Act, an involuntarily separated employee is due all their wages at the time of the separation. Employees who voluntarily separate from the company must be paid no later than the next payroll date. Wages in the Act are expressly stated to include accrued but unused vacation time due under any oral or written policy. There are no exceptions.

The Plaintiff in Reutuer was a custodian at the Methuen School Department and was terminated from her job when she was convicted for larceny. On the day of the Plaintiff’s termination, the city did not pay her accrued vacation time. The city did pay the accrued vacation time within three weeks after the separation, with interest. Until this decision, Massachusetts Courts held that the remedy was interest payments on the amount owed so long as there was no active lawsuit from the employee alleging a violation of the Wage Act.

The Plaintiff brought suit against her employer alleging Wage Act violations. The Supreme Judicial Court transferred the case on its own motion and found that the Wage Act requires strict compliance and employers are strictly liable for not fully compensating a separated employee for all outstanding wages on the day of separation. Furthermore, the Court held that the city was liable for triple damages of the full amount of the late wages, including interest, and had to pay the Plaintiff’s legal fees.

Under this decision, employers face substantial liability if proper wage payments are not made to an involuntarily separated employee on the date of termination. Even if an employee is terminated on the spot for serious misconduct, employers must be prepared to pay that employee in full at the time of separation.

There are practical challenges to the Court’s new holding which arise for employers in this modern era of remote workforces and direct deposit payrolls. Under the Reutuer decision, there are no exceptions for these scenarios. In light of this decision, we anticipate an increase in the amount of Wage Act claims that will be brought against Employers by involuntarily terminated employees.

Accordingly, when an employer involuntarily terminates one of their employees, they should be prepared to fully compensate them for all outstanding wages due, including accrued vacation time.

In the event that an employee engages in conduct that would typically result in their termination on the spot, they should instead be suspended for a short period of time to allow the Employer to formally terminate them on a date where they can be presented with the full amount of wages which they are owed. Employers who use a third-party payroll provider should contact the provider to learn how soon a check with the required funds could be prepared.

The full decision may be viewed here: https://www.mass.gov/files/documents/2022/04/04/y13121.pdf

By: Michael P. Doherty, Esq; Gabriel W. Bell, Esq.; Nicholas A. Rossini, Esq.

This blog is for informational purposes only. It should not be considered legal advice. All those who read this blog should seek the advice of a professional before taking action based upon any information provided herein.