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Treble damages limited to interest in Wage Act suit

cookeAn employer that failed to pay an employee for all accrued wages and unused vacation time on the date of his termination, but paid everything in full before the employee filed a Wage Act lawsuit, was liable for treble damages only on foregone interest suffered as a result of the delay, a Superior Court judge has ruled.

Under the Wage Act, G.L.c. 149, §150, a terminated employee must be paid in full on the date of his termination or the employer must pay treble damages, attorneys’ fees and costs. The Wage Act also states that the payment of wages after the employee has brought a complaint under the statute cannot serve as a defense for the employer.

The employee — who had filed a complaint letter with the Attorney General’s Office before receiving payment in full — argued that the damages provision in the Wage Act entitled him to treble damages on the entire amount not immediately paid upon termination.

But Judge Thomas Drechsler disagreed.

Relying on Dobin v. CIOview Corp., a 2003 Superior Court decision by Judge Ralph D. Gants, now chief justice of the Supreme Judicial Court, Drechsler found that the provision barring post-complaint payment as a defense means that an employer must pay treble damages on wages and benefits that are unpaid at the time a civil action is filed.

“’The corollary to this interpretation is that an employer is not required to pay treble the lost wages and benefits if the wage and benefit payments were tardy but made before suit was brought,’” wrote Drechsler, quoting Dobin.

Meanwhile, the judge found that filing a complaint with the attorney general does not constitute a “bringing of the complaint” within the meaning of the Wage Act.

The eight-page decision is Littlefield v. Adcole Corporation, et al., Lawyers Weekly No. 12-067-15. The full text of the ruling can be ordered by clicking here.

‘The lay of the land’

Carole C. Cooke of Todd & Weld in Boston, who represented the employer, said the decision will be particularly helpful to smaller employers who are not well versed on the Wage Act, terminate someone, and — instead of giving the employee a check on the final day — pay the person during the regular payroll cycle.

“On the face of the statute, there’s been a violation, but what are the damages?” Cooke said. “There’s nothing from the Massachusetts Appeals Court or the SJC, but having another Superior Court case out there to go along with Dobin and [the U.S. District Court’s decision earlier this year in Clermont v. Monster Worldwide, Inc.] will be helpful for practitioners to understand the lay of the land.”

Evan M. Fray-Witzer, a management-side employment lawyer in Boston, said that even with Drechsler’s mitigation of damages in the case, it still provides a cautionary tale of what can go wrong when an employer does not make payment in full on the date of a worker’s termination.

“Even here, the employee was awarded his attorneys’ fees and, had he been slightly faster to file in court, he would have recovered treble damages on all of the wages owed, even though the delay in payment was just by a couple of weeks,” he said. “It’s why we tell employers all the time, ‘Just cut the check.’”

Fray-Witzer said the holding in Littlefield makes that advice even more prudent since the decision will encourage “rushing the courthouse doors” by plaintiffs’ attorneys the moment an employee is terminated if an employer fails to pay everything that is due on the date of termination.

Plaintiff’s counsel David J. Gallagher of Regnante, Sterio & Osborne in Boston could not be reached for comment prior to deadline. But Alan D. Meyerson of Boston, who represents employees in Wage Act claims, said Littlefield gives both the plaintiffs’ and defense bar predictability as to the consequences of their actions pre-suit.

At the same time, he said he would love to see this particular issue taken up on appeal, especially since the security deposit statute provides for multiple damages to tenants when a landlord fails to return a security deposit in a timely manner. That is based on the entire amount payable, presumably even if the landlord pays in full before the tenant files a lawsuit.

“The law should be consistent and harmonious across the board — whether you’re talking about … wages or security deposits,” he said. “I’ve always wanted to argue that, but this case will be another nail in the coffin, and I do feel it is probably a correct statement of the law.”

Late payment

On Aug. 27, 2014, plaintiff Kenneth E. Littlefield, director of human resources for the defendant, Adcole Corp., learned he was to be terminated on a date to be determined. In October, the company informed him that his last day would be Nov. 12, 2014.

At the time, Littlefield had accrued 522 hours of unused vacation time, for which he was to be paid upon termination per company policy.

The company also owed him wages from Nov. 2 through Nov. 15. In total, Adcole allegedly owed Littlefield about $33,600 as of his termination date.

Rather than providing an immediate check for that amount, the company apparently put the amounts through normal payroll processing, which resulted in the issuance of two separate checks for wages received by Littlefield, one eight days after his firing and a check for unused vacation time received two weeks late.

On Nov. 18, 2014, while Adcole was in the middle of processing the payments, Littlefield registered a complaint with the Attorney General’s Office alleging a Wage Act violation based on the defendant’s apparent failure to fully compensate him with all monies owed on the date of his termination. He received a right-to-sue letter three days later.

Five weeks later, Littlefield sued Adcole in Superior Court seeking treble damages and attorneys’ fees under the Wage Act.

Multiple damages

Drechsler rejected Littlefield’s argument that he was entitled to treble damages on the entire amount that was unpaid as of his termination date.

The judge noted that Gants faced a nearly identical issue in Dobin. In that case, the plaintiff was fired by her employer and was given a series of checks that constituted payment in full of the wages it owed her, but it backdated the checks two days after her termination date. That resulted in a situation in which, as in Littlefield, an employee was paid late but before the filing of a complaint.

As Gants pointed out in Dobin, “When wages and benefits are tardy but paid before the complaint was brought, the loss of wages and other benefits is simply the interest foregone from the delay in payment, which would be trebled under the Act.”

Under such an interpretation, tardy pre-complaint payment does not technically constitute a defense to the Wage Act violation, but mitigates the amount of damages, Gants said in his 2003 decision.

“As the only existing authority on the issue in the Commonwealth — while not controlling — Dobin is instructive and indeed persuasive,” Drechsler said. “The minor factual distinctions between this case and Dobin do not change the court’s opinion on the issue.”

Drechsler also pointed to Clermont, decided in April by a U.S. District Court judge who characterized tardy wages paid before the bringing of a complaint as not being lost wages within the meaning of the Wage Act.

Littlefield also failed to persuade the judge that the complaint he filed with the attorney general constituted a “bringing of the complaint” within the meaning of the Wage Act.

“This court finds that the ‘bringing of the complaint’ refers to the commencement of a civil action,” Drechsler said. “Moreover, both Dobin and Clermont reference the fact that the defendants in those cases paid the full amount due prior to receiving notice of the filing of the complaint. This implies a need for notice to be provided to the defendants, which is not achieved by simply filing a complaint form with the Attorney General without notice to the defendants.”

Accordingly, the judge concluded, Littlefield was entitled to reasonable attorneys’ fees, litigation costs and foregone interest as a result of the payment delay.

 

Littlefield v. Adcole Corporation, et al.

THE ISSUE: Was an employer that failed to pay a fired employee for all accrued wages and unused vacation time on the date of his termination, but paid everything in full before the employee filed a lawsuit under the Wage Act, required to pay treble damages on the entire amount owed as of the termination date?

DECISION: No (Superior Court)

LAWYERS: David J. Gallagher of Regnante, Sterio & Osborne, Boston (plaintiff); Carole C. Cooke of Todd & Weld, Boston (defense)

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