Massachusetts Payment of Wages Law—G.L. c. 149, §§ 148-150.

             A Plaintiff’s Perspective

©         ELIZABETH A. RODGERS, ESQ.

LINDA EVANS, ESQ.

Rodgers, Powers & Schwartz LLP, Boston

 

The Massachusetts Payment of Wages Statute has recently received deserved attention of all employment law practitioners. Employers compensate employees through many mechanisms, from weekly to monthly pay, bonuses, incentives, commissions, stock options, vacation pay and dismissal or severance pay.  In the face of a down-turned economy, employees who have been promised, but not paid, different forms of remuneration turn to counsel to advise them on payment of sums due. Since the passage of the private right of action in 1993, with treble damages and attorneys fees, (c. 149, § 150), and the introduction of criminal penalties for non-payment of wages, (G.L.c.  149, § 27C), (see Enforcement, below), there has been a burst of litigation seeking to enforce payment of wages, in turn giving rise to efforts to limit and narrow employers’ exposure. 

 

Plaintiffs now routinely seek broad inclusive coverage of all forms of wages as within the scope of the act, triple damages and attorneys fees.  Recent cases have defined wages broadly, and have applied  Non-Payment of Wages Act to non-traditional wages and to highly paid professional executive and administrative employees. The courts increasingly reject efforts to exclude payment of contingent pay, or to exclude higher paid employees from the scope of the act.  Kohli v. RES Engineering, Inc., 2000 Mass. Super. LEXIS 463. Excluding irregular commissions has been described as reducing the Act to a sham, which the Legislature never intended. Lohhnes v. Darwin Partners,  Inc., 15 Mass. L. Rptr. No. 7 at 158 (Sept 30, 2002).  The federal court, interpreting Massachusetts law, has twice rejected a challenge to individual liability of corporate officers. Barthel v. One Community, Inc. et al., 2002 U.S. Dist. LEXIS 23773 U.S. D. Mass. (2000) and several decisions have held it was reversible error not to award treble damages.  Gibbs v. Archie (2002 Mass. App. Div. 205; 2002 Mass. App. Div. LEXIS 82,  November 21, 2002, (Brennan, J).  The article below summarizes employers covered, employees covered, wages covered and enforcement.


 

Employers Covered

 

The Massachusetts Payment of Wages statute provides, generally, “Every person having employees in his service” shall pay, within specified time frames, “such employee wages earned by him”. § 148.  It broadly regulates payment of wages by both private and public employers, as described in the charts below.  Employers include every “person,” which includes every corporation, and the statute specifically includes the commonwealth, counties, cities and towns.  The term “employer” has no separate definitional section and is not limited with respect to number of employees, annual gross business, or the production of goods and services, except that the Wage Payment Act clearly deems an individual in both private and public sectors as an employer if the individual has responsibility for the payment of wages. (See Table I, below). Nahigian v. Leonard , 2002 U.S. Dist. LEXIS 22815, (U.S.D.C. Mass. 2002) (Lasker, J), and Barthel v. One Community, Inc. et al., 2002 U.S. Dist. LEXIS 23773 (U.S. D.C. Mass. 2000)

 

Employees covered

 

The statute uses broad, inclusive language while treating certain classes of employers and employees differently, as to who is covered, when the wages are due, and what exclusions apply.  Plaintiffs rely upon the language and purpose of the statute.  The statute explicitly covers almost all employees, from casual employees to executive, administrative, and professional employees. For the Commonwealth, the act is limited to mechanics, workers and laborers, and employees of its charitable and penal institutions, except that public hospital workers must generally request to be paid weekly to be covered.


 

Table One

(Bold language refers to sections discussed in the text)

Italics indicates language also relevant to type of wages covered)

G.L. c. 149 § 148:  Covered Employers & Employees

Type of Employer

Covered employees

"Every person having employees in his service"

  • Such employees in the employer's service

·        Employees in a  bona fide executive, administrative, or professional capacity”,

·        Salaried employees “whose remuneration is on a weekly, bi-weekly, semi-monthly, monthly or annual basis, (even though deductions or increases may be made in a particular pay period)”

·         Employees of corporations,

·         Public employees,

·         Agricultural employees, or

·         Railroad employees

The Commonwealth, its Departments, Officers, Boards, and Commissions

“Every mechanic, worker and laborer employed by it”  and every employee of its penal or charitable institutions, but see exclusion, below, re: hospitals.

County or City

“Every employee engaged in its business”

Town

“Each employee engaged in its business”

The President and Treasurer of a corporation, and any officers or agents having the management of such corporation shall be deemed to be the employers of the employees of the corporation

“Employees of the corporation”

Every Public Officer whose duty it is to pay money, approve, audit, or verify payrolls or perform any other official act relative to payment of any public employees.

“Public Employees”

Exclusions:

 

Hospitals supported by Commonwealth, Cities or Towns, or giving free treatment, or acting as a public charity

Not covered unless the employee requests to be paid weekly

Cooperative Associations

Not covered as to shareholders who are employees

Individual Public Officers

Excluded if prevented from performing the duties with respect to payment of wages through no fault of the Officer

 

 

Table Two

 

Wage Payment Due Dates

Wage Trigger

Date Due

 

 

If worked 5-6 day week

Within 6 days of termination of the pay period.

If worked 7 days a week

Within 7 days of termination of the pay period.

If worked <5 days (casual employee)

Within 7 days of termination of the pay period.

Employee "leaving his(her)employment"

On next regular pay day

Employee "discharge
d" from employment

In full on day of his discharge

Employee in Boston

As soon as laws regarding payrolls are certified.

Covered Commonwealth Employee

As above, unless written request in writing

Railroad and Parlor Car employee

As above, unless after hearing, less frequently than weekly.

Vacation Pay

As above, constitute wages see AG Advisory 99/1

Bona Fide Executive Administrative or Professional employees

May be paid weekly, bi-weekly, or semi monthly, or voluntarily monthly;

Agricultural Employees

Monthly

All employees

May be made prior  to the time required above

Salaried employees

Remuneration is on a weekly, bi weekly, semi monthly, monthly or annual basis even though deductions or increases may be made in a particular pay period; Advance wages, together with any wages already earned and due, may be paid weekly, bi-weekly or semi-monthly

 

Railroad and Parlor Car employee

Must be furnished with a statement of daily wages.

Commissions

As above, when the amount of such commissions less allowable or authorized deductions, has been definitely determined and has become due and payable to such employee

 

Note that the Act includes all employees, and “bona fide executive, administrative, and professional employees” and salaried employees § 148; Lohhnes, at 158.  Kohli v. RES Engineering, Inc., 2000 Mass. Super. LEXIS 463, *5-6.  .  .  . The Kohli court further concluded that it does not necessarily follow that a person cannot be both an “employer” (e.g., a controller overseeing the payroll of employees) and an “employee,” for purposes of § 148, where, for example, the president fails to pay a corporate officer’s or manager’s salary. Id., at *9-10.

 

Even though executive, administrative, and professional employees are expressly referenced in the Act and have been covered for decades, the first attack of the opposition is usually a revisiting of the issue of what employees are covered by the Act.

 

In an action brought by a former vice president for unpaid salary, a Superior Court Judge held that executive and professional employees, no matter how highly paid, were protected by the Act. Kohli v. RES Engineering, Inc., 2000 Mass. Super. LEXIS 463, *6.  (even controller or other managers overseeing payment of wages who are not paid by the president may be covered by the act). The Court found “The Wage Act contains no such exclusion.  Had the Legislature intended the Wage Act to apply only to low-wage employees, it surely would have explicitly so stated.” Id.  “The Wage Act is meant to protect employees from the dictates and whims of shrewd employers.” Id., at *7-8.   Courts have been unwilling to remove certain employees from the protection of the Wage Act. Id. Similarly, the court recently held in Lohnes v. Darwin Partners, Inc., 15 Mass L. Rptr No. 7, 157, 158 (October 1, 2002), “ the Legislature did not limit its scope based on the amount of wages or commissions earned and due, and no such limit reasonably may be implied.” Barthel v. One Community, Inc. et al., 2002 U.S. Dist. LEXIS 23773 U.S. D. Mass. (2000) (Act expressly includes commissions; issue of due and payable sufficiently raised by pleadings to survive motion to dismiss).

 

American Mutual Liability Insurance Co. v. Commissioner of Labor and Industries, 340 Mass. 144 (1959), which has been cited as authority for restricting wage act claims to weekly workers only, in fact affirms that executive, administrative, or professional employees, were covered by the statute and may be paid bi-weekly or semi-monthly.  There the parties specifically excluded consideration of such higher level employees. The Supreme Judicial Court held that an employer may not arbitrarily pay non-executive, non- administrative or nmon-professional employees  every other week, but must pay each such employee the wages earned by him within a week.  That case did not discuss or analyze what constituted wages which had to be paid.  

 

In Commonwealth v. Savage, 31 Mass. App. Ct. 714 (1991), the Appeals Court, excluded coverage for independent contractors who were real estate brokers with relative independence and who, under the common law “control test”,  were not directed by the firm. Id., at 717.  However, in 1990, the Legislature had passed G.L. c. 149 § 148B, creating a presumption of employment.  Massachusetts’ statutory wage presumption has been in place since 1990, signaling the state’s public policy against misclassification of workers as independent contractors.” Hunter, Contingent Workers and Independent Contractors in Massachusetts, 2001 Boston B.J. 8 (November/December 2001).  G.L. c. 148 §149 provides:

 

Individuals performing any service,” except as excluded by the chapter, “shall be deemed to be employees under this section unless it is shown that  (1) “the individual has been and will continue to be free from control and direction in connection with the performance of such service under his contract; and (2) such service is performed either outside the usual course of the business for which the service is performed  or is performed outside of all places of business of the enterprise; and (3) such individual is customarily engaged in an independently established occupation, profession or business of the same nature as that involved in the service performed.” (emphasis added).

 

This is described as a “presumption of employment,” by the Mass. Attorney General Advisory 98/2, on the Amendments to the Wage Enforcement Laws (November 2, 1998), Attorney General’s Fair Labor and Business Practices Division.  This standard is a far stricter standard than the “right to control test” found in common law cited in Savage.   “In contrast, under the amended wage statute, minor elements of control would create the presumption of employee status.” Hunter, Id., at 20-21.  [but see. Molloy v. Massachusetts Mortgage Corporation 1998 Mass. App.Div. 3, (1998) (imposing a burden on the plaintiff to prove that he or she is an employee)].

 

Moreover, Section 148 also provides that neither a document signed by the employee stating that the employee is an independent contractor, nor the treatment of wages for income tax purposes, can be used to determine whether the employee is within the Act. Thus the issuance of a 1099, or a signed independent contract is not sufficient to exclude payments from the coverage of the act.  

 

Plaintiff will therefore argue that virtually any individual providing services for another, and subject to any control by the other, will be covered, and that any compensation, remuneration, or wage must be paid within seven days of the period in which it is earned, whether he or she is paid weekly, bi-weekly, semi-monthly, or monthly, and whether or not the amount is regular or periodic.

 

Wages Covered

           

            As noted in Bold in Tables I and II above, G.L. c. 149 §148 explicitly refers to many forms of “remuneration” and does not explicitly exclude any form of compensation.  The Act refers to  wages”,  daily wages”, salaried workers whose  Remuneration is on a weekly, bi weekly, semi monthly, monthly or annual basis even though deductions or increases may be made in a particular pay period,” “vacation pay” and “commissions.”. In the flurry of recent litigation, employers have challenged what constitutes covered remuneration, wages and salaries.  The term “wages” is not defined in G.L. c. 149 § 148, nor in regulations, nor in the definitional section of the parent statute, which regulates Labor and Industries generally. Particular attention is being paid to compensation which increases in particular pay periods, but is not paid in every pay period.

 

 The meaning of the term in § 148 should be interpreted broadly, because the purpose of the Act is to avoid the dictates and whims of shrewd employers to remove certain employees from protection of the Act.  See Kohli v. RES Engineering, Inc., 2000 Mass. Super. LEXIS 463, *7-8 (2000).  The statute was intended and designed to protect wage earners from the long term detention of wages by unscrupulous employers…” American Mutual Liability Insurance Co. v. Commissioner of Labor and Industries, 340 Mass. 144, 147 (1959).

 

In Jancey v. School Committee of Everett, 421 Mass. 482, 490-493, 658 N. E. 2d 162 (1995), 36 years after American Mutual and 4 years after Savage, the Supreme Judicial Court broadly defined “wages,” as used in G.L. c. 149 § 105D, requiring payment of equal wages on the basis of gender.  Having found  no definitional section of wages in the parent statute, G.L. c. 149, the court held that the term “wages” was not limited to periodic monetary payment, but rather incorporated fringe benefits and other types of remuneration, quoting Black’s Law Dictionary for its common and broad definition of  “wage”:

 

“Every form of remuneration payable for a given period to an individual for personal services, including salaries, commissions, vacation pay, dismissal wages, tips, and other similar advantage received from the individual’s employer or directly with respect to work for him…Term should be broadly defined and includes not only periodic monetary earnings but all compensation for services rendered without regard to manner in which such compensation is computed”. (emphasis added). Jancey, Id.

 

There is no apparent statutory justification to require equal pay to include all remuneration, but not to include all remuneration in the requirement that it be paid.  Moreover, the broad definition of wages in Jancey, Id. is uses the same varied and broad language as that referring to wages in the Non-Payment of Wages statute. G.L. c. 149  § 148 . 

 

The use of the broad terms “remuneration,” includes both periodic pay (bi-weekly, semi-monthly, monthly, or salaries computed on an annual basis), also recognizes that such salaried employees’ remuneration may be covered “even though deductions or increases may be made in a particular pay period.”)  In light of this mandatory inclusion of fluctuations in pay as protected pay, any increase in pay in any period due to bonuses, incentive pay, severance pay or stock options, in any “particular pay  period” would be covered within the broad purpose of the act to require prompt payment of promised “remuneration”, broadly defined. Any requirement of periodic pay must fail. Similarly any conclusion that the act only refers to Weekly Wages is flatly inconsistent with the language of the Act and  Jancey’s  definition of wages.

 

Two earlier court decisions do not control. There is clear recognition in American Mutual, that the Act included protection for bi-weekly or monthly payments, and did  cover the wages for salaried employees. Id. at 145.  The restrictive decision of the Appeals Court  in Savage, excluding commission pay which is not “weekly wages” or periodic and regular,  is not persuasive after the broad definition of wages was adopted by the SJC, in Jancey, in 1995. Jancey, 421 Mass. at 490-493. Under Jancey, the broad statutory language definition of the term “wages” includes commissions and  should be broadly defined and includes not only periodic monetary earnings but all compensation for services rendered without regard to manner in which such compensation is computed”. Id. 

 

Jancey undermines, if not completely contradicts the conclusion of  the Appeals Court in Commonwealth v. Savage, 31 Mass. App. Ct. 714 (1991), inferring a legislative purpose from the title of the act, “Weekly Payment of Wages,” in the nineteenth century, and the legislative history of  of the Act to weekly wages, to limit the Act’s coverage “to employees who would ordinarily be paid on a weekly basis …and for whom commissions constitute a significant part of weekly income.”

 

Some lower courts have incorrectly relied upon American Mutual  or Savage to deny coverage to (a) irregular commissions, Doherty v. American Medical Response of Massachusetts, Inc., 1997 Mass. Super. LEXIS 79 (1997); (b) voluntary and contingent commissions, Computa v. Blue Cross/Blue Shield of Massachusetts, Inc., 113 F. Supp. 2d 164, 167 (D. Mass. 2000); and (c) an irregular draw in a professional partnership, Dennis v. Jaeger, Smith & Stetler, P.C., 2000 Mass. Super. LEXIS 114, *2-3 (2000). See also , Commonwealth v. Savage, 31 Mass. App. Ct. 714 (1991).

 

Rejecting one such argument, Judge Gants recently wrote,

 

“Even if the appellate courts were to persist in making this inference, Lohnes alleges that she was paid bi-weekly (which is specifically approved in the statute as an appropriate time period to pay employees, including retail salespeople), and that her commissions constituted a significant part of her bi-weekly income. Therefore, even under this narrow interpretation, dismissal would be inappropriate”. Lohhnes v. Darwin Partners,  Inc., 15 Mass L. Rpt No. 7 at 158 (Sept 30, 2002).

 

No Massachusetts appellate court has yet addressed whether the definition of “wages” set forth in Jancey applies to c. 149, § 148. Scott v. Granada Computer Services Inc., 1996 Mass. Super. Lexis 552 (1996) (relying on Jancey  and holding that non-payment of relocation pay, gross tax pay, bonuses, and vacation pay stated a cause of action under  G.L. c. 149, § 148).  See Brown v. Nortel Networks, Inc., 2002 Mass. Super. LEXIS 159, *4 (2002) (stating that the issue of stock options as a wage is an emerging issue to be assayed in the light of facts and denying motion to dismiss).  

 

Commissions under the act must be paid when it has been “definitely determined” and had “become due and payable to such employee” and, therefore, under the language of the Act, “commissions so determined and due such employee shall be subject to the provisions of one hundred and fifty.” §148, at ¶3. Lohhnes v. Darwin Partners,  Inc., 15 Mass L. Rpt No. 7 at 159 (Sept 30, 2002). The Act  does not refer to nor discuss commissions within the context of weekly or periodic pay ¶3 §148.  Commissions are to be paid when definitely determined and due and payable to such employee,  Id., at ¶3, rather than the “within six/seven days” language for other types of pay.   The employee is then explicitly given the protection of the enforcement statute, § 150;  § 148, at ¶3.  There are no references, limitations or exclusions restricting commissions to weekly or regular pay, nor any exclusion of irregular commissions, although there are references to periodic pay in ¶1 and although other exclusions are expressly set out in ¶4. In addition, the legislature did not link wages and commissions. The Legislature anticipated payment in advance of wages earned being paid “together with” wages already earned, (in ¶1), and yet there is no requirement that commissions be paid “together with” regular weekly pay.

 

Commissions are by their nature episodic, based upon contingencies, and irregular.  They often dwarf any base pay.  The broad language in the Act protects substantial and irregular payments, whether in commissions, (or in salaries of professional, administrative and executive employees).  Judge Gants rejected the suggestion in Savage that commissions fall outside the scope of G.L. c. 149 §148 because they were triggered by contingencies:

 

“All commissions are based on contingencies, such as the completion of a sale. If commissions were not protected by G.L. c. 149 §148 because they became payable only when something happened, then the Legislature would be engaged in a sham to have amended the statute to include commissions, because all (or virtually all), commissions would fall outside the protection of the statute. The Legislature intended no sham. It required simply that the commissions be “definitely determined” meaning that the contingency must already have occurred and the amount due be capable of being precisely ascertained.” Lohhnes v. Darwin Partners,  Inc., 15 Mass. L. Rptr. No. 7 at 158 (Sept 30, 2002).

 

It appears contrary to the language of the Act, as well as the common meaning of the word “commission,” to deny payment if the “commission is of a “substantial and irregular nature,” as was done in Savage, at 716, or to deny coverage to wages based on contingencies.  Similarly to seek to evade payment by giving commissions different names, such as incentive pay or contingent bonuses, would evade the purpose of the act if such pay were excluded. 

 

In 1990, the Legislature was expanding and supporting the broad coverage of § 148, (§148B, above),  not limiting it. In 1993, the Legislature  gave employees the right to sue their employers directly and encouraged them to do so by providing triple damages and attorneys fees. G.L. c. 149 §150, Enforcement, below). Nothing in these amendments eliminated the coverage of executive, administrative, and professional employees, who were known by 1993 to often have complex remuneration.  Although the Legislature developed clear exclusions when it chose to do so (e.g., exempting certain hospitals, shareholders, and in certain circumstances, individual officers from coverage), there is no exclusion for contingent, irregular, performance-based bonuses, or quarterly-paid commissions. The language of the Act, the controlling precedent of the Supreme Judicial Court and the legislative enhancements of the  late 20th Century all support a broad, but carefully delineated coverage of wage claims by any person giving service to another.

 

Enforcement

 

In 1993, the legislature enacted G.L. c . 149, §150, which offers an employee the right to initiate a private civil action against an employer for violation of the Wage Act after 90 days have elapsed after the filing of a complaint with the Attorney General, or sooner if the Attorney General assents in writing. There is a complaint form issued by the Attorney General, and a letter for permission to file a civil suit is readily granted.  The complaint must be filed within three years of the violation.  If an employee prevails in the lawsuit, the plaintiff may seek “injunctive relief, any damages incurred, including treble damages for any loss of wages and other benefits,” and attorneys fees.  Some courts hold treble damages to be mandatory. Bollen v. Camp Kingsmont, 2000 Mass. App. Div. 56 (2000) (court’s assessment of single damages on plaintiff’s uncontested complaint for unpaid wages was error). Gibbs v. Archie (2002 Mass. App. Div. 205; 2002 Mass. App. Div. LEXIS 82,  November 21, 2002, (Brennan, J).  (same). Both Bollen and Gibbs reaffirmed the reasoning that:

Both the language of the statute and its underlying Legislative intent indicate that an award of treble damages is mandatory upon any finding of a failure to have paid wages in violation of section 148. If, in enacting this provision, the Legislature had intended an award of treble damages to be discretionary with a trial judge, it would have utilized language similar to that of other statutory provisions in which multiple damage awards are unquestionably discretionary ... as the Legislature was capable of clearly articulating a discretionary punitive damage provision but chose not to do so, it intended the treble damage provision of section 150 to be mandatory, not discretionary. Graciela Chiappetta v. James J. Lyons, Jr., 1999 Mass. App. Div. 276.

 

The Payment of Wage Act was amended in 1998 to increase the powers of the Commonwealth’s enforcement and to create new civil and criminal fines. See ch. 149, §27C.  The penalties for willful and intentional violations are more stringent than those for unintentional violations. Commonwealth v. Armand, 411 Mass. 167, 170 (1991) (willful conduct is defined as intentional as opposed to accidental).  An employer may receive a civil fine of up to $7,500 for a first, unintentional offense and $25,000 for any subsequent offense.  Civil fines for an intentional failure to pay wages may reach $15,000 for a first offense and $25,000 for any subsequent offense. AG Advisory 98/2.

 

Criminal penalties for an unintentional violation may include a fine of up to $10,000 and six months in jail for a first offense and a fine of up to $25,000 and one year in jail for any additional offense.  An intentional failure to pay may result in a $25,000 fine for a first offense and a $50,000 fine for a subsequent offense. Reference to such fines is expected in any demand letter. Wage payments have historically been viewed as separate offenses in each pay check under Fair Labor Standards Act, although no Massachusetts Appellate court has ruled on the issue.

 

The Anti-Retaliation provision found in c. 149, § 148A, has been amended to impose civil and criminal penalties where an employer retaliates against an employee for making a wage-related complaint or cooperating in a wage enforcement investigation.  Violation of the provision may result in a $50,000 fine or six months in jail as a fine. See G.L. c. 149, § 27C.

 

A violating employer may be debarred from state contracts for a period determined by whether the failure to pay wages was a first offense and whether it was intentional.  In addition to applying to the Wage Payment Act, penalties under c. 149, § 27C, may be imposed for violations of the Prevailing Wage Act, c. 149, §§26-27H; and the Minimum Wage Law, c. 151, §§ 1A, 1B, and 19. 

 

 Hot topics will continue to percolate to the higher Appellate Courts, including whether and when commissions are due, whether they are determined, whether Jancey, decided in the context of equal pay, will apply in the context of non-payment of wages, and whether increases in the form of stock options, severance pay, bonuses and other forms of executive pay are must be paid in the period in which they become due, or be subject to triple damages of the Non-payment of wages statute.  Plaintiffs will be able to supplement some wage claims with contract claims, breach of the covenant of good faith and fair dealing and or promissory estoppel, depending on the nature of the claim. But the bread and butter of the Non-Payment of Wages statute, with its threat of triple damages, frequently becomes the best argument for prompt payment of the promised compensation.