Can the Massachusetts Wage Act Be More Employee Friendly?? YES!

The Massachusetts Wage Act (“MWA”) is the Massachusetts law that, among other things, requires employers to pay employees for all hours worked, pay overtime for hours worked over 40 to most employees, and to pay vacation time. The Massachusetts Wage Act also stands nearly alone among state wage-and-hour laws and the Fair Labor Standards Act (“FLSA”) in terms of how forcefully it protects employees.

Some state laws, and the Fair Labor Standards Act, don’t automatically multiply the amount of damages for unpaid wage/overtime claims. In Massachusetts, if you violate the Wage Act by failing to pay wages / overtime, damages are mandatorily multiplied. Some states hardly multiply the damages at all (“I’m looking at you Pennsylvania). Massachusetts mandatorily triples unpaid wage damages. Some states have short statutes of limitations claims for wage violations. Massachusetts has a mandatory three years statute of limitations for wage and hour claims. Some states provide employers with a ‘good faith’ defense to a wage violation. No such defense exists in Massachusetts. In short: the Massachusetts Wage Act is very employee friendly. Or, to look at it another way, the MWA is a statute designed to discourage employers from doing anything goofy with peoples’ wages.

Prior to February 19, 2019, it was unclear exactly how one pro-employee component of the Massachusetts Wage Act functioned. That component is the requirement that an employer pay an employee’s attorneys’ fees if that employee is a “prevailing party” in a claim for unpaid wages and/or unpaid overtime under the Massachusetts Wage Act. Prior to February 2019, employers argued (consistent with prevailing wisdom) that it would have to pay attorneys’ fees as part of a resolution (settlement) only if a court approved that private settlement. Under that analysis, employers who settled a wage claim “before trial” refused to consider any payment of attorneys’ fees as part of that settlement. On February 19, 2019, the Supreme Judicial Court issued an opinion that turned this on its head.

Belky Ferman, Veronica Guillen, and Peter Triantos worked at a dry cleaning business. They filed a suit in November 2014 claiming that their employer failed to pay them approximately $28,000 in overtime and wages in violation of the Massachusetts Wage Act. These three employees filed a wage complaint with the Attorney General’s office, received a right to sue letter, and eventually filed a wage complaint in court, claiming they were owed treble damages, costs, and attorneys’ fees.

Following an almost two-year period after the filing of the complaint, which included the entry and lifting of default judgments, discovery, and pre-trial motions, the case was scheduled for trial in November 2016. Several weeks prior to trial, the parties mediated the case and agreed to settle for $20,000, but reserved the issue of plaintiffs’ entitlement to attorneys’ fees for resolution by the court.

Plaintiffs filed a motion for attorneys’ fees, seeking $40,000 in fees and $1,000 in costs. Defendant opposed the motion. The judge concluded that the plaintiffs were entitled to attorneys’ fees because the settlement amount, which amounted to approximately seventy percent of the initial demand, resulted “in a practical benefit as a result of their attorneys’ efforts.” This, according to the court, made the plaintiffs “prevailing parties” for purpose of an award of attorneys’ fees and costs. The trial court ordered defendant to pay a reduced amount of attorneys’ fees. Defendant appealed.

The Supreme Judicial Court adopted the lower court’s reasoning and, in doing so, embraced the “catalyst test” as the test to use to determine if a party is a “prevailing party” for the purpose of determining whether he or she is entitled to attorneys’ fees in claims brought under the Massachusetts Wage Act. The Court did so because (1) fee-shifting provisions act as powerful disincentives against unlawful conduct and (2) fee-shifting provisions provide an incentive for attorneys to provide representation in cases that they otherwise would not. The catalyst test, according to the court, promoted those purposes far more effectively than the ‘judicial imprimatur’ approach. Importantly, according to the court, the catalyst test prevents an employer from escaping liability for attorneys’ fees by an “eleventh hour” settlement of a meritorious case.

Going forward, Massachusetts employers should be mindful of the catalyst test when evaluating whether to settle a claim brought under the Massachusetts Wage Act as, going forward, employers will be less likely to be able to avoid paying fees by settling close to trial.