Massachusetts Supreme Judicial Court Rules Unused Sick Pay Not Covered by Wage Act

Massachusetts's highest court ruled on January 29, 2018, that the Massachusetts Wage Act does not apply to accrued, unused sick time owed to a former employee. As a result, employees cannot maintain Wage Act claims against their employers based on the failure to pay employees for unused sick time under the Massachusetts Earned Sick Time Law.

Under the Massachusetts Wage Act, employers must pay terminated employees in full for all "wages" earned by the employees. The definition of "wages" under the Act includes "any holiday or vacation payments due an employee under an oral or written agreement." G.L. c. 149, § 148. For employees who resign, the payment of wages is to be made by the next regular pay day. For employees who are discharged (with or without cause), the payment is due the day any such employee is discharged. Successful Wage Act plaintiffs are entitled to recover treble damages and attorneys' fees in addition to any unpaid wages. As a result, the ruling in Mui v. Massachusetts Port Authority is significant because it narrows employers' potential liability to employees under the Massachusetts Earned Sick Time law.

By way of background, under the sick time policy of the Massachusetts Port Authority (Massport), rather than requiring employees to forfeit any accrued, unused sick time when they separate from the agency, Massport pays departing employees a certain percentage of that sick time. That compensation is payable under two conditions: the employee must have worked at Massport for at least two years, and the employee must not have been terminated for cause.

The plaintiff in Mui, a former Massport employee, did not receive such a payment for over a year after his retirement date due to an ongoing grievance procedure. He sued, claiming that the failure to pay him for his accrued, unused sick time (totaling over $45,000) violated the Wage Act, exposing Massport to treble damages and attorneys' fees. After the superior court ruled in the employee's favor, Massport appealed, and the Massachusetts Supreme Judicial Court (SJC) transferred the case on its own initiative from the appeals court.

The SJC determined sick pay does not constitute "wages" governed by the Wage Act. Noting that the act neither expressly includes nor excludes sick time from the definition of "wage," the court analyzed how comparable benefits are treated under the act. The SJC distinguished vacation time, which is covered by the Wage Act, from sick time, which can only be used for a particular purpose (i.e., illness). Put another way, sick time is contingent upon certain circumstances occurring, while vacation time is not contingent. As a result, the SJC concluded sick time is analogous to bonus payments contingent on certain events, a type of compensation the SJC has previously found outside the definition of wages under the act.

While the Massachusetts Earned Sick Time Law, enacted in 2015, does not require employers to pay accrued, unused sick time, the Mui decision is important for those employers who have nevertheless agreed to pay employees for that time upon termination. Specifically, the decision clarifies that accrued and unused sick time falls outside the dictates of the Massachusetts Wage Act and the risk of treble damages and attorneys' fees. An employee, however, could still bring a contract claim seeking to recover payment for unpaid sick time.

The decision is also a good reminder of the express requirements for the payment on termination of wages and any commissions due and payable as well as the potential consequences for violations of the Wage Act. Given the complexity of these issues, employers should consult with employment counsel when considering changes to their policies or when dealing with specific wage and hour issues.