Accrued sick pay not wages in Massachusetts; no treble damages for late payment
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Thursday, February 1, 2018

Accrued sick pay not wages in Massachusetts; no treble damages for late payment

By Joy P. Waltemath, J.D.

Payment for accrued and unused sick time does not count as “wages” under the state’s Wage Act, the Massachusetts Supreme Judicial Court ruled in a case involving a longtime Massachusetts Port Authority employee who was disciplined; he then retired; the Authority then discharged him for cause; and then, over a year later, an arbitrator overturned his discharge. Only at that point did the employer under its policy pay over his accrued, unused sick pay, which the employee contended was wages and had been due “on the following regular payday” after his retirement date, thus entitling him to treble damages. Not so, said the high court, seeing no reason to conclude that the Legislature intended to include sick pay as “wages” under the Wage Act and vacating the lower court’s judgment for the employee (Mui v. Massachusetts Port Authority, January 29, 2018, Budd, K.).

You can’t fire him if he’s retired. One week after the Authority (Massport) initiated disciplinary proceedings against its longtime employee, in connection with very serious charges against him (arson and attempted murder) for his actions during a suicide attempt, the employee applied for retirement. Massport set his retirement date retroactively, even though the disciplinary proceedings had not been resolved. Then Massport discharged him for cause (the employee eventually pleaded no contest to lesser charges of destruction of property over $250 and threat to commit a crime). Following grievance proceedings, that discharge was subsequently overturned, the arbitrator reasoning that it was not possible to discharge an employee who had already retired.

Pay triple if you pay late. Under Massport’s sick pay policy, eligible employees receive payment for a percentage of the value of their accrued, unused sick time when they leave, but employees who are discharged for cause are not eligible for that payment. The employer contended that because it initiated disciplinary proceedings against the employee before his application for retirement and then terminated him, he was not entitled to any sick pay. After the arbitrator ruled that Massport could not discharge him for cause because he had already retired, the employer paid the value of his accrued sick time—almost $47K. This didn’t happen until more than a year after the employee’s retirement date, and so he sued for treble damages under the Wage Act, claiming that this sick pay was wages due and had to be paid on the “following regular payday” under G.L. c.149, Sec. 148. Agreeing, the trial judge granted the employee’s motion for judgment on the pleadings.

Is sick pay wages? Whether the Wage Act encompasses sick pay was the issue, as the Act does not define “wages” per se, nor does it mention sick pay. It does say that wages “shall include any holiday or vacation payments due an employee under an oral or written agreement.” Using “include” does not necessarily signal that things not specifically enumerated are excluded, the court reasoned, but ordinarily courts will not add language to a statute where the Legislature itself has not done so. And here, the state supreme court found no reason to conclude that the Legislature intended to include sick pay as “wages” under the Wage Act.

Not like vacation time. The court compared sick time to vacation time, but noted that unlike vacation time, which can be used for time away from work for any reason, sick time is to be used only to cover illness under G.L. c.149, Sec. 148C (a) (defining sick time). Usage of sick time is conditional; thus, employees are not typically compensated for accrued, unused sick time, which commonly may be lost if not used. “Because accrued, unused sick time is not compensable under a ‘use it or lose it’ sick time policy, such time clearly is not a wage under the act,” concluded the court.

More like a bonus. However, under Massport’s sick time policy, employees did not forfeit accrued, unused sick time when they separated from the employer but were paid a certain percentage of that sick time if the employee had worked at least two years and had not been terminated for cause. In that sense, the court found Massport’s sick time policy was like “a contingent bonus” for having fulfilled those conditions. The only other contingent compensation recognized by the Wage Act was commissions, which was expressly defined. Citing its decision in Weems v. Citigroup, Inc. (2009), which held that bonuses were not wages under the Act because they were contingent upon employment with the company at the time the options vested, the court found the present issue analogous. The sick pay at issue here was only available to departing Massport employees meeting certain criteria.

Avoid absurd results. As a practical matter, including sick pay as wages here would put the employer in the impossible position of being unable to comply with the Wage Act, since the employee retired while disciplinary proceedings were pending that ultimately resulted in his discharge. Whether the employer owed any sick pay at all was disputed at the time the employee separated from employment and was not resolved until over a year after the Wage Act deadline had passed. Construing sick time payment as wages in this case would be an absurd result, said the court, something it would not do as a matter of statutory construction. Instead, it vacated the lower court’s judgment and remanded the case.

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