Wage Act Violations: Even More Expensive After Supreme Judicial Court Rules That Prejudgment Interest Can be Awarded in Addition to Triple Damages and Attorneys Fees
Although many Employment Practices Liability Insurance (EPLI) Policies do not cover wage claims, the number of wage claims under state and federal wage-hour laws, including class actions, have rapidly risen over the past several years. Recently, on a question referred from the federal court to the Massachusetts Supreme Judicial Court (SJC), the SJC made state wage act violations even more expensive for employers. On June 26, 2017, the SJC held that, in addition to mandatory triple damages, prejudgment interest must be added to the amount of lost wages and other benefits awarded under the Massachusetts Wage Act. (George v. National Water Main Cleaning Co., No. SJC-12191 (MA, June 26, 2017)). The Court clarified, however, that such prejudgment interest shall not be added to the treble damages part of the award.
The case arose out of a class action filed in the Federal District Court for the District of Massachusetts. The District Court Judge approved a class settlement agreement that resolved all issues except whether interest was available under Massachusetts law when treble damages are awarded under the Wage Act. The question was certified to the SJC as a question of state law. Under the federal Fair Labor Standards Act (FLSA), the United States Supreme Court has held that Congress’ intent in providing liquidated damages under the FLSA was “meant to preclude recovery of interest on minimum wages and liquidated damages.” (Brooklyn Sav. Bank v. O’Neill, 324 U.S. 697 (1945)). After Massachusetts law was amended in 2008 to mandate triple damages in wage cases, the SJC had not addressed whether Massachusetts would be in accord with the FLSA regarding the award of interest on damages in wage claims. In George v. National Water Main Cleaning Co, the SJC determined that the Massachusetts legislature did not share the same legislative intent as Congress. The SJC found that, unlike the federal FLSA, Massachusetts law (M.G.L. c. 231, § 6H) mandates the payment of prejudgment interest where “not otherwise provided by law,” which the SJC determined “reflects the Legislature’s intent that prejudgment interest always be added to an award of compensatory damages.”
Before the Wage Act was amended to provide for mandatory treble damages, an aggrieved employee who prevailed on a Wage Act claim was entitled to prejudgment interest on an award of lost wages and benefits. (George citing DeSantis v. Commonwealth Energy Systems, 68 Mass.App.Ct. 759 (2007)). The Court reasoned that nothing in the legislative history of the 2008 amendment to the Wage Act suggests the Legislature intended to deprive a prevailing aggrieved employee of prejudgment interest. The Court reasoned that “prejudgment interest is awarded to compensate a plaintiff for the depreciation of the eventual recovery arising from the often substantial delay between the commencement of the action and the judgment.” Thus, “prejudgment interest is still to be added to the amount of lost wages and benefits, and is not to be added to the trebled portion of the judgment that previously had been punitive damages and is now characterized as liquidated damages.”
The George decision is important for employers because it reinforces the draconian damages which an employer faces for violation of the Wage Act. As the George case reiterates, not only will an employer be subject to mandatory treble damages, but also liable for prejudgment interest on the improperly paid wages as well as the payment of the attorney’s fees of the plaintiff employee. Employers must ensure that wages are paid accurately and timely under both state and federal law. Because EPLI generally may not cover damages for wage violations and many policies also do not cover the costs of defense for such claims, employers are well advised to audit their wage practices to assure compliance with state and federal wage laws.
If you have questions regarding payment of wages, worker misclassification, overtime or need other assistance relating to wage matters, feel free to contact any member of our firm.
