Severance pay claim under Mass. Wage Act is denied

A fired employee cannot sue for severance pay under the Massachusetts Wage Act, a Superior Court judge has ruled.

The decision creates a split within the state’s Superior Court, and adds to the growing confusion over the scope of the Wage Act’s protections.

In Farrell v. Farrell Sports Concepts et al., Judge Garry V. Inge held in a three-page ruling that a terminated employee, who alleged his former employer reneged on its obligation to make severance payments, could not file suit under G.L.c. 149, §148.

Until there is a clear appellate resolution of the split, litigation will continue to arise over this issue, employment lawyers say.

The Wage Act is attractive to plaintiffs because it allows fired employees to sue for treble damages and attorney fees.

Did the law change?

In 2003, the Massachusetts Appeals Court ruled that while the Wage Act expressly includes items such as holiday and vacation pay, it doesn’t mention severance pay, and so severance pay isn’t included. That case was Prozinski v. Northeast Real Estate Services, LLC.

But in 2005, the Massachusetts Supreme Judicial Court issued Wiedmann v. Bradford Group, Inc., which said that commissions could be included within the law’s protections, and arguably broadened the understanding of what constitutes “wages” under the Act.

Last year, state Superior Court Judge Dennis J. Curran ruled in Juergens v. MicroGroup, Inc. that the SJC had in effect overruled Prozinski, and that severance pay could now be included under the Act’s provisions.

Joseph M. Connors Jr. of Waltham, Mass., who represented the plaintiff in Juergens, said his case never went up on appeal because it settled after mediation with in January. The lack of appellate case law resolving the question means that similar disputes will continue to arise, he said.

After Juergens, U.S. District Court Judge Denise J. Casper in Boston disagreed with the ruling and held that Prozinski was still good law. But this new case is the first time another Superior Court judge in Massachusetts has weighed in, and the result creates a direct split of authority.

An ‘outlier’?

Management-side lawyers are quick to suggest that Prozinski is still valid and that the new case shows that Juergens was an aberration.

“You’ve got one outlier, which is Judge Curran’s opinion, and then you’ve got the federal case and now you have [Inge’s] decision,” said Justin F. Keith of Greenberg Traurig in Boston, who represented the company in Farrell. “What that says to me is that the courts who are looking at this are rejecting attempts to rely on Juergens because Prozinski, notwithstanding the confusion that may be out there now, is still good law.”

Keith said Curran’s ruling last year caused many employees to bring severance claims under the Act.

“I would hope that a decision like [Farrell] would stop the trend we’ve seen over the past few months, but unfortunately, until the Appeals Court or SJC holds otherwise, plaintiffs are going to continue to try to bring these cases under the Wage Act,” Keith said.

Leonard E. Milligan III of Boston, who along with John R. Bita III represented the employee in Farrell, countered that there is now a genuine disagreement among employment practitioners and judges.

“Some people view the Wage Act as a broad protection of employee rights and are willing to read it a little more liberally,” he said. “Others view it as something that’s already too generous to employees and tend to be pretty restrictive in their interpretation.”

Bita said his client was contemplating an appeal but had not made a final decision.

The Milligan Coughlin lawyer said he advocated the same reasoning that Curran used in Juergens. “Wiedmann [the SJC decision] broadened the scope of what constituted a commission under the Wage Act,” he said. “Curran basically ran with that and said there seems to be a trend where the appellate courts are expanding what payments they would consider wages, and that was the spirit of what we were alleging in our complaint.”

Connors believes the Juergens decision was correct. “The opponents will always go back to the argument that that the statute doesn’t provide severance pay in the definition of items covered under wages, but my response is that it also doesn’t define wages,” he said. “You can find cases out there that define wages as all-encompassing and some that don’t, so until a definition is provided by the courts or the Legislature, people are going to be able to continue making the argument that anything paid to an employee for his employment is a wage.”

But John F. Adkins of Bingham McCutchen in Boston said plaintiffs’ lawyers have been reading far too much into Juergens.

“My take on Judge Curran’s decision is that what he did was basically exercise his prerogative as a trial judge to invite the appellate courts to take a second look at the law,” he said. “Despite how some were interpreting it, it really wasn’t much more than that.”

Adkins said Curran found that the severance pay in that case should be covered under the Wage Act, but he did not hold that judges were required to make such a finding as a matter of law.

“Now you have a chink, a small chink, in the law that suggests that severance pay is covered, and I can certainly see why plaintiffs’ lawyers are using whatever they can to push the envelope,” he said. “But beauty is in the eye of the beholder, and just because you’ve got one trial judge who says that in his opinion it should be covered doesn’t change the fact that the law clearly states that it isn’t.”

Payday

In May 2006, plaintiff Daniel Farrell entered into an agreement with the defendant company, Farrell Sports Concepts, to be its CEO. Under the terms of the deal, the company agreed to pay the plaintiff a $60,000 annual salary.

If the plaintiff were terminated without cause, the agreement stated that he would receive his salary bi-weekly for the next nine months.

The company’s board of directors notified the plaintiff in September 2009 that he was being removed from his position “without cause.” He received his final paycheck that same day. Following his termination, the company refused his demand for severance pay.

The plaintiff responded in 2011 with a two-count complaint, which accused the company of breach of contract and a violation of the Massachusetts Wage Act.

The company moved to dismiss on the grounds that the plaintiff had not stated a claim for which relief could be granted.

In granting the dismissal, Inge rejected the reasoning in Juergens, and wrote that Prozinski was controlling in that it was the only Massachusetts appellate decision on the specific issue of severance pay coverage under the Wage Act.