State Wage Act applies to worker’s severance

In the wake of a landmark Massachusetts Supreme Judicial Court ruling in 2005, an employee’s severance pay must be included under the state’s Wage Act, a state Superior Court judge has found.

The defendant employer argued that the state statute, G.L.c.149, §148, applies only to “earned” wages and that the Massachusetts Appeals Court’s 2003 Prozinski v. Northeast Real Estate Services decision expressly declined to include severance benefits.

But Judge Dennis J. Curran disagreed.

Ruling in an issue of first impression, Curran held that the SJC’s 2005 Wiedmann v. Bradford Group, Inc. decision, which found that an employee’s commission was subject to the statute, overrode earlier precedent.

“Following Wiedmann, a more expansive definition of ‘wages’ is appropriate and it should not be limited to exclude severance pay,” Curran said. “Therefore, [the company’s] motion to dismiss … relying on Prozinski must be denied.”

The four-page decision is Juergens v. MicroGroup, Inc.

‘Significant pronouncement’

The defendant employer’s lawyer, Todd S. Rosenfield of Nealon & Rosenfield in Westborough, Mass., said given that no judge in the state has ever held that severance is an earned wage under the statute, he is considering an interlocutory appeal.

“The court is making a pretty significant pronouncement here, which would subject my client to triple damages,” he said. “While the statute doesn’t give a precise definition and can be interpreted broadly, the fact of the matter is that severance isn’t earned. And because it isn’t earned, our position is that it’s not a wage.”

Several judges, including the Massachusetts Superior Court Business Litigation Session’s Judith Fabricant and Ralph D. Gants, have ruled the opposite of Curran, Rosenfield said.

In the 2010 Doucot v. IDS Scheer, Inc., et al. case, U.S. Magistrate Judge Marianne B. Bowler also held that severance was not included, he said.

“One of the troubling aspects of this case is that you now have a real inconsistency in the law,” Rosenfield said. “Those other judges have looked at the same issue and ruled very clearly that severance doesn’t apply.”

But Kevin S. Sullivan of Chelmsford, Mass., who represented the plaintiff in Wiedmann, said Curran’s decision is consistent with the intent of the SJC’s 2005 holding.

“I have no doubt that a commission should be included under the Wage Act, because it is clearly earned income,” said Sullivan, who was not involved in MicroGroup. “As the SJC said, the statute is really very broad as far as what is included.”

Joseph M. Connors Jr. of Waltham, Mass., counsel to the plaintiff in MicroGroup, said his client’s position was eliminated as part of an economic layoff. Because he was not terminated for poor performance, he was entitled to his severance, Connors said.

Although Connors conceded that the precise definition of wage is not spelled out in the statute, judges have looked to a variety of factors, including Black’s Law Dictionary, when deciding what payments are covered. And there is nothing in the statute that says whether severance should be included, he said.

“While the defendant relied on Prozinski and a 1991 Appeals Court decision, the Wiedmann case overruled those by holding that a more expansive definition was appropriate,” he said. “The judge held that because the Legislature didn’t specifically exclude certain terms from wages, he was not going to do so either.”

Lay off

In July 2008, plaintiff Albert Juergens was approached by a recruiter for the defendant MicroGroup about coming to work for the company.

A few months later, the company’s chief executive officer made Juergens an oral offer of employment. Juergens counter-offered that his employment agreement should include severance pay upon termination.

Although the company’s written offer did not include the severance, the CEO sent a follow-up e-mail to Juergens agreeing to pay him severance equal to six months’ salary upon termination not for cause.

Juergens began working for the company in October 2008.

That December and the following May, the company began to lay off personnel.

In February 2010, the company informed Juergens his position was being eliminated. He was not paid any severance.

On June 4, Massachusetts Attorney General Martha Coakley’s office authorized Juergens to file suit under the Wage Act.

After a judge in the BLS declined to accept the case, the matter was eventually transferred to Worcester Superior Court.

Trump card

In holding that the Wage Act applies to severance pay, Curran said the statute requires all employers in Massachusetts to promptly remit their employees’ wages, including severance.

The judge said Prozinski expressly held that the Wage Act was to be construed by judges in a narrow manner, a ruling that would seemingly warrant a holding in favor of the employer.

Prozinski, he said, relied on the Appeals Court’s oft-cited 1991 Commonwealth v. Savage case.

But those decisions were trumped by Wiedmann, which Curran said authorized a more expansive interpretation of the statute.