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Home / News / Pre-judgment interest OK’d in Wage Act suit

Pre-judgment interest OK’d in Wage Act suit

But only on lost pay, not on treble damages

The defendant employer performs sewer, drain, plumbing and related services for municipalities across southern New England.

The defendant employer performs sewer, drain, plumbing and related services for municipalities across southern New England.

Employees who brought a successful class action against their employer for violation of the Wage Act are entitled to statutory pre-judgment interest on their lost pay and benefits, the Massachusetts Supreme Judicial Court has found.

The SJC also decided, however, that the plaintiff employees are not entitled to pre-judgment interest on the mandatory treble damages that the Wage Act, G.Lc. 149, §150, required the defendant employer to pay.

The employer argued that when the Legislature amended the Wage Act in 2008 to make treble damages mandatory as “liquidated damages” rather than discretionary for instances of outrageous behavior, it intended that pre-judgment interest be included within the scope of liquidated damages

The SJC disagreed.

“Where [G.L.c. 231, §6H] provides for the award of prejudgment interest whenever compensatory damages are awarded, an interpretation of §150, as amended, that would preclude the payment of prejudgment interest on the award of lost wages and benefits under the Wage Act would be an implied repeal of §6H with respect to Wage Act awards,” Chief Justice Ralph D. Gants wrote for the court.

“Under our ‘long standing rule of statutory interpretation,’ the implied repeal of a statute by a subsequent statute has ‘never been favored by our law,’” Gants continued, quoting the SJC’s 1977 decision in Commonwealth v. Hayes.

The 18-page decision is George, et al. v. National Water Main Cleaning Company, et al.

Giving clarity

Plaintiffs’ counsel Jonathon D. Friedmann of Boston said the decision answers an unsettled question of law.

“Now employers and employees have clarity as to their obligations for interest under the Wage Act,” he said.

Friedmann’s partner and co-counsel in the case, Adam J. Shafran, said the ruling could promote faster settlement of Wage Act claims.

“Employers knowing that they have to pay pre-judgment interest may impact their decision as to how long they want to actually defend a case before settling,” Shafran said.

Richard L. Alfred of Boston, who represented the defendant employer, could not be reached for comment prior to deadline. But John Pagliaro of the New England Legal Foundation, which submitted an amicus brief in the case, described the decision as “second-guessing” the Legislature’s choice of a liquidation formula.

“The result will be to make the statute even more onerous for employers and to upset the balance of interests established by the Legislature,” he said.

Jack Merrill Jr., an employment lawyer in Needham, Massachusetts, said pre-judgment interest at a statutory rate of 12 percent per year can add up in Wage Act cases.

“I had a recent case where that generated more than $100,000 in interest,” he said. “It’s certainly something for employers to pay attention to. With the SJC at least taking the penalty part out [of the interest calculus], employers are helped out a little bit, but it’s definitely significant in larger cases.”

That’s why Merrill, who represents both employees and employers, said he counsels employers in wage cases to seriously consider the risks involved and give employees the benefit of the doubt.

Kathy Jo Cook of Boston, who co-authored an amicus brief in the case on behalf of the Massachusetts Academy of Trial Attorneys, said the employer’s position — that mandatory treble damages under the amended Wage Act take the place of pre-judgment interest — defied common sense.

“Before treble damages were mandatory, if the judge found the employer’s conduct to be outrageous, you’d get treble damages and interest on the single damages portion of the award,” she said. “So it makes no sense that they would now impose treble damages on an employer and say, ‘Oh, by the way, now that we’ve made them mandatory, you no longer have to pay interest at all.’ It would have been worse on an employer prior to [the amendment] than afterwards, and that doesn’t seem to have been their intent.”

Elizabeth Ryan, a Boston lawyer who represents plaintiffs in Wage Act cases, said the decision is simply a matter of fairness.

“The longer it takes to recover unpaid wages, or the longer the employer delays in paying them, the greater the loss to the employee,” she said. “The SJC’s decision … recognizes that employees should be compensated for the lost-time value of their earnings and made whole as to their lost wages and benefits, just like other litigants who have the right to pre-judgment interest on damages.”

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“Now employers and employees have clarity as to their obligations for interest under the Wage Act.”

— plaintiffs’ counsel Jonathon D. Friedmann

Unpaid wages

On Dec. 7, 2009, plaintiffs Robert George and Michael Curvin filed a class action in U.S. District Court against their former employer, defendant National Water Main Cleaning Co., which performs sewer, drain, plumbing and related services for municipalities across southern New England. The suit alleged Wage Act violations.

According to the plaintiffs, the employer illegally classified all workers on municipal contracts as “laborers” regardless of their duties; failed to compute overtime pay by using the formula required under the law; did not compensate workers for travel time; and wrongly deducted contributions it made to employee pension plans.

In December 2014, after five years of litigation, the parties reached a settlement agreement that resolved all issues except for the plaintiffs’ claim for pre-judgment interest.

As part of the settlement, the parties agreed that the issue would be resolved based on the 1st U.S. Circuit Court of Appeals’ decision in a pending case. The 1st Circuit did not rule on the issue, certifying questions to the SJC instead, but the case settled before the SJC rendered a decision and the 1st Circuit withdrew the questions.

Accordingly, the U.S. District Court in George certified the question to the SJC as to whether statutory interest pursuant to G.L.c. 231, §6B or §6C is available under Massachusetts law when liquidated damages — in other words, treble damages — are awarded pursuant to the Wage Act.

Pre-judgment interest

The SJC declined to answer whether pre-judgment interest is available pursuant to Sections 6B or 6C, which apply to personal injury and contract damages respectively. Instead the court determined that §6H, which provides for pre-judgment interest in any action in which damages are awarded and interest is not otherwise provided by law, is the more relevant section for Wage Act claims.

The court found that pre-judgment interest for damages stemming from Wage Act violations is indeed available under §6H.

The SJC rejected the employer’s argument that when the Legislature made treble damages mandatory in Wage Act cases, it intended for pre-judgment interest to be subsumed in those “liquidated damages.”

That interpretation would imply a repeal of §6H as applied to Wage Act claims, and the SJC has long disfavored the notion of a newly enacted statute impliedly repealing an existing statute, Gants stated.

“Where two statutes appear to be in conflict, we do not mechanically determine ‘that the more “recent” or more “specific” statute … trumps the other,’” Gants said, quoting the SJC’s 2005 ruling in Commonwealth v. Harris.

Additionally, Gants pointed out, nothing in the legislative history behind the 2008 amendment to the Wage Act suggests that the Legislature intended to deprive an employee of pre-judgment interest on lost wages and benefits when it characterized what had previously been punitive damages as liquidated damages.

“To do so would mean that an employee who was deprived of wages and benefits because of the outrageous conduct of his or her employer would receive the same treble damages under the amended §150 as he or she would have obtained before the amendment … but would obtain a lesser judgment because of the preclusion of prejudgment interest,” Gants observed.

Accordingly, he said, court concluded that “[p]rejudgment interest is still to be added to the amount of lost wages and benefits, and is still not to be added to the trebled portion of the judgment that previously had been punitive damages and is now characterized as liquidated damages.”

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