New England Biz Law Update
If you are an in-house counsel for a company that has employees (if you don’t, feel free to skip this article and instead use the time to prepare your resume) then you need to make sure you know about the Massachusetts Wage Act, M.G.L. c.149, ��. More specifically, at least in my case, you need to make sure you keep in touch with someone smarter than you that concentrates in employment law.
I found that person in Valerie Samuels, a partner at the Boston law firm of Posternak Blankstein & Lund. The co-chair of Posternak’s employment group, Valerie represents employers in all types of employment matters, including discrimination, sexual harassment, wrongful termination, reductions in force, wage and hour, breach of contract and covenants not-to-compete.
She has lots of experience litigating these types of cases, so she understands the importance of staying out of court (read, “spending a lot of money”) if at all possible. Here is what I learned from her.
The Wage Act requires employers to pay wages to their employees promptly. So far, so good. If you don’t, your unhappy or even ex-employees may file a complaint with the Attorney General’s Office and, failing that, Chapter 149 permits a private right of action in court.
This sounds reasonable. After all, who (I know, your boss excluded) could argue with the idea that an employee should be paid wages soon after they are earned?
Here’s the problem. The Wage Act, which granted has a noble purpose, also has the potential to bludgeon employers, corporate officers and managers with the possibility of treble damages and personal liability for corporate officers and managers.
Here’s the good news. On July 21, the Supreme Judicial Court in Wiedmann v. The Bradford Group, Inc. came to the rescue of employers by limiting the applicability of the both the treble damages provision and the personal liability of corporate officers and managers.
Weidmann was employed as a recruiter for The Bradford Group on a commission basis. She resigned from the company and, thereafter a dispute arose whether she was due any commissions. Her former employer was unable to produce relevant documents, which in turn lead the trial court to grant Weidman summary judgment.
The trial court awarded Wiedmann treble damages on her unpaid commissions and held three company managers personally liable.
Pay Me Now, or Pay Me More Later
Here is the background. The Wage Act contains two provisions that have put the scare into more than one company and its officers and managers.
The first states that an employee “may … institute and prosecute in his own name … a civil action for injunctive relief and any damages incurred, including treble damages for any loss of wages and any other benefits. An employee so aggrieved and who prevails in such an action shall be entitled to an award of the costs of litigation and reasonable attorneys’ fees.”
Over the years a number of trial court cases held that treble damages was mandatory rather than within the court’s discretion. But in Wiedmann, the SJC rejected that line of reasoning, saying the use of the word “may” in the Wage Act is permissive, rather than mandatory. (Wasn’t this first year law school statutory interpretation stuff? Why did it take years and the SJC to say that “may” doesn’t mean you have to?)
The court held that the plain language of the statute does not require a judge to award treble damages. Even better, at least from the employer’s perspective, is that the SJC said that treble damages, which are punitive in nature, should be allowed only when authorized by statute, and are appropriate only where conduct is “outrageous, because of the defendant’s evil motive or his reckless indifference to the rights of others.”
What, They Can Sue Me Too?
As mentioned above, the Wage Act also provides for individual liability. It states that “[t]he president and treasurer of a corporation and any officers or agents having the management of such corporation shall be deemed to be the employers … within the meaning of this section. Whoever violates this section shall be punished ….”
While there is no doubt that individuals may be held liable under the plain language of the statute, the scope of this individual liability provision has been hotly debated over the years.
In Wiedmann, the plaintiff sued three individuals: Thomas Earl Harvey, the defendant’s president, treasurer, clerk and owner; Michael J. O’Mara, the office manager who actually ran the company; and Bruce Higginbotham, who was a group leader and general manager of the company.
While the defendants did not dispute that Harvey and O’Mara were “employers” within the meaning of the Wage Act, they did dispute Higginbotham’s role. Higginbotham, who had admitted that he was the general manager and, in fact, managed the office, argued that he was not an officer of the corporate defendant within the Act.
The SJC agreed with Higginbotham. The court focused on whether Higginbotham had “the management of such corporation” and interpreted this to mean that a manager is “someone who controls, directs and participates to a substantial degree in formulating and determining policy of a corporation.”
The SJC found that while Higginbotham had a management role, and indeed that the plaintiff reported to him, there was insufficient evidence to show that Higginbotham directed and participated to a substantial degree in formulating the company’s policy. In other words, “merely holding a managerial position over some branch, division or office of a corporation does not, by itself, mean that the manager has the ‘management’ of the ‘corporation’ as a whole.”
Common Sense Advice
What does Wiedmann mean for in-house counsel and the companies for which we work? First, although the threat of automatic treble damages has been alleviated by the SJC, the best practice is to make sure that employees are paid promptly and correctly. Employers who are dirt bags, or who even appear to be dirt bags, may still get socked for treble damages under the Wage Act.
Second, your middle and lower level managers can probably breathe a little easier knowing that they are unlikely to face individual liability unless they participate to a substantial degree in formulating the company’s policy.
Third, keep in mind that the best way to stay out of trouble in the employment law arena is to treat employees fairly and consistently. Your company should have a written policy that encourages employees to voice any questions they may have about wage payment issues, among others, and you should move quickly to thoroughly investigate the situation when an issue does arise.
Gabriel Miller is general counsel of Captivate Network, a Gannett company. Captivate Network (www.captivatenetwork.com) is a national news and entertainment network that broadcasts programming and advertising to over 1.6 million business professionals each work day via wireless flat panel televisions in the elevators of premier office towers across North America.
He gratefully acknowledges the help of Valerie Samuels, a partner at the Boston law firm of Posternak Blankstein & Lund (www.pbl.com). Valerie counsels in all types of employment matters, and is also an experienced mediator and a certified trainer in discrimination and diversity issues. Valerie can be reached at [email protected].
