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Massachusetts: Damages for Late Payment of Wages

On April 4, 2022, in Reuter v. City of Methuen, the Massachusetts Supreme Judicial Court expanded an employer’s liability for the late payment of wages under the Massachusetts Wage Act (MWA) which requires employers to promptly pay employee wages, and that employers that pay late are subject to a penalty of up to three times the amount of unpaid wages.

When Reuter was discharged from her employment, the city of Methuen owed her almost $9,000 in unused vacation time. The MWA requires employers to pay employees “in full on the day of [their] discharge” and prescribes that “wages” include unused vacation time. The city paid these wages a few weeks later, but the parties disagreed upon the appropriate penalty for the delay.

The city claimed the MWA allows for a penalty of treble (three times) the annual interest accrued on unpaid wages. Reuter argued state law required three times the amount of unpaid wages.

The court found that, under the MWA, treble damages were designed to protect workers from the consequences of unpaid wages. In addition, the court rejected the city’s practice to avoid liability by simply paying the wages and accrued interest on the unpaid wages at a later time.

Next Steps for Employers

This court decision holds employers liable if they do not promptly and fully pay employee wages upon termination, regardless of the reason for the delay and asserts that penalties for this can be significant, up to three times the amount of wages paid late. Employers should take note of this decision and ensure that their payroll practices and offboarding processes account for accrued but unused vacation time and that any amounts owed are included in the employee’s final pay in accordance with the state’s wage timing payment requirements.

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