On April 4, 2022, in Reuter v. City of Methuen, the Massachusetts Supreme Judicial Court (SJC) held that employers are strictly liable for treble damages for making late wage payments, even when an employee has not yet filed suit asserting a wage claim. In so holding, the SJC rejected an often-cited trial court decision, Dobin v. CIOview Corp., which employers had long relied upon to correct pre-suit late wage payments by paying unpaid amounts in full, with trebled interest.

Background

Plaintiff Beth Reuter was discharged for misconduct by her employer, the City of Methuen. At the time of her employment termination, Reuter had accrued $8,952.15 of unused vacation time. When the city terminated her employment, it failed to pay Reuter her accrued vacation time; instead, it paid her the full amount approximately three weeks later. The city also paid Reuter an additional $185.42, which represented the trebled interest for the three weeks between the employment termination and when the city paid the accrued vacation time.

The Court’s Analysis

Despite the city’s pre-suit payment of both Reuter’s unpaid, accrued vacation time and trebled interest, the SJC held that the “late payments constitute clear violations of the statute.” Quoting the Massachusetts Wage Act, the SJC explained that under section 148 of the statute “any employee discharged from employment … shall be paid in full on the day of his discharge.” The court reasoned that delays in issuing an employee’s final paycheck “may have severe consequences for employees” and that the Wage Act “does not tolerate or in any way condone delay.” The SJC rejected the notion that an employer could avoid liability for treble damages by paying the wages owed plus trebled interest on the unpaid amount at a later date. To that end, the SJC explained that “employers rather than employees should bear the cost of such delay and mistakes, honest or not.”

The SJC found that the three-week interest that the city paid Reuter was insufficient. An interest award, according to the court, “is in addition to an award to the claimant, and does not provide the primary source of recovery.”

The SJC declined to adopt an oft-cited decision to the contrary, Dobin v. CIOview Corp., a 2003 trial court decision that stood for the notion that interest is an appropriate remedy for late wage payments. The SJC rejected Dobin, recognizing that limiting damages on late payments to interest would have the unintended effect of authorizing late payments “right up to the filing of a complaint.”

The SJC remanded the case to the trial court to determine whether the city should be liable for some or all of Reuter’s attorney’s fees for unsuccessfully attempting to certify a class action.

Key Takeaways

Under the Reuter decision, an employer is required to immediately pay an employee—on the same day of discharge in the case of an involuntary termination—all wages, including accrued, unused vacation time. According to the SJC, if an employer does not timely pay these wages, or corrects nonpayment at a later date, the employer will be liable for automatic treble damages and interest on the unpaid amount.