An Opportunity for Review: What Are ‘Wages’ Under the Massachusetts Wage Act?

In a rare positive decision for employers in Massachusetts, one of the Commonwealth’s district appellate courts held that a retention bonus is not a wage under the Massachusetts “Wage Act” (G.L. c. 149, § 148). Massachusetts’ unforgiving Wage Act imposes strict liability upon employers for late payment of wages — whether the payment is a day late or months late — with penalties equal to treble damages plus attorneys’ fees for each violation of the Act. In a decade of Wage Act rulings that has been particularly harsh toward employers, the decision from Nunez is a reassuring limitation on its scope and an opportunity to review what is, or is not, considered a “wage” under Massachusetts law.

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In Nunez v. Syncsort Inc., et al. (No. 23-ADCV-63NO), the plaintiff, Carlos Nunez, claimed that his former employer’s failure to pay him a retention bonus in a timely manner violated the Wage Act. During his employment, Nunez and his employer executed a retention bonus agreement whereby the employer promised to pay Nunez a $15,000 retention bonus in two separate installments, contingent upon Nunez’s continued employment and good standing, through and by the designated retention dates. The employer paid the first installment as agreed, but subsequently laid off Nunez, with the termination effective on the date he was scheduled to receive his second installment, February 18, 2021. Because the employer did not pay the second installment on his termination date, Nunez filed a complaint alleging a violation of the Wage Act on February 25, 2021. The next day, the employer paid the second installment, but the parties disagreed whether the retention bonus was a “wage” under the Wage Act and subject to its strictures.

To resolve the dispute, which had been decided in favor of the employer upon summary judgment, the Appellate Division of the District Court Department for the Northern District turned to the language of the Wage Act and comparable Massachusetts cases. It held that the retention bonus was not “wages” because the Wage Act does not cover any types of contingent compensation except “commissions that are definitely determined and due and payable to the employee.”[1] A retention bonus is contingent compensation, but it is not commission earned.

Massachusetts has traditionally been viewed as an “employee-friendly” state, but the past decade or so has been especially harsh for employers. Decisions by the highest court have affirmed the Wage Act’s penalties for late wages without exception (Reuter v. City of Methuen, SJC-13121 (Apr. 4, 2022)), required separate pay for overtime even when an employee’s cumulative pay exceeds the necessary amount (Sullivan v. Sleepy’s LLC, SJC-12542 (Feb. 4, 2019)), and required a specific release of the Wage Act for a general release of wages to be effective (Crocker v. Townsend Oil Co., SSJC-11059 (Dec. 17, 2012)).

The term “wages” is not defined by the Wage Act, but to qualify as “wages,” the amounts in question must be “earned” and “acquired by labor, service or performance.”[2] The Nunez court’s discussion serves as a reminder of what is and is not considered a wage under the Wage Act:

  • The Wage Act does not cover any types of contingent compensation except “commissions that are definitely determined and due and payable to the employee.”
  • The Wage Act does not cover retention bonuses.
  • The Wage Act does not cover discretionary bonuses.
  • The Wage Act does not cover contributions to deferred compensation plans.
  • The Wage Act does not typically cover severance pay.
  • The Wage Act covers salary and hourly wages earned by labor, service, or performance.
  • The Wage Act covers vacation pay.
  • The Wage Act covers holiday pay.
  • The Wage Act covers “commissions that are definitely determined and due and payable to the employee.”

While the Nunez decision provides some positive guidance for employers, it is important to note that just because a bonus is not wages does not mean it is not due and payable to the employee. An employer may avoid risking treble damages for late payment, but the bonus itself may still be due. An employee unlawfully deprived of severance, bonus, or other compensation may bring a breach of contract to seek recourse for that which is due.

Employers should also consider whether a bonus is a commission by another name. Non-discretionary bonuses tied to performance may be considered commission, which is a wage when definitely determined and due and payable, subject to trebling for late payment under the Wage Act.

When faced with an employee termination involving questionable bonuses, commissions, or severance, ArentFox Schiff’s legal team is here to help. If you would like more information or need assistance, please contact a member of our Labor, Employment & OSHA team or the AFS professional who handles your matters.

[1] Plaintiff has since filed a notice of appeal to the Appeals Court of Massachusetts, on September 18.

[2] Birnbach v. Antenna Software, Inc., No. CIV. 14-11651-FDS, 2014 WL 2945869, at *2 (D. Mass. June 26, 2014) (quoting Massachusetts State Police Commissioned Officers Ass’n v. Com., 462 Mass. 219, 226, 967 N.E.2d 626 (2012) (quoting Awuah v. Coverall N. Am., Inc., 460 Mass. 484, 492, 952 N.E.2d 890 (2011))).

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