New England Biz Law Update
A U.S. District Court judge has found that an often-cited 2012 Supreme Judicial Court decision does not in fact require employers, as a matter of law, to expressly include the phrase “Massachusetts Wage Act” in a release.
The plaintiff employee in the case at issue had entered into a half-million-dollar severance agreement with defendant TD Bank. He argued that the Massachusetts SJC’s Crocker v. Townsend ruling established a hard-and-fast rule mandating that the Wage Act language be included in order for a G.L.c. 148, §149 release to be valid.
But Judge Timothy S. Hillman disagreed and held that Crocker instead requires a severance agreement to use “plainly worded and understandable” language putting an employee on notice that he is knowingly giving up the right to file a Wage Act claim.
“I find that Crocker does not require such a release to contain an explicit citation to the Wage Act, so long as the release makes it clear that an employee is waiving those rights to be paid any wages due under the Wage Act,” Hillman wrote. “The SJC could have included in Crocker a requirement that releases must cite to the ‘Wage Act’ in order to operate as an effective waiver of those claims.”
The eight-page decision is MacLean v. TD Bank, N.A.
‘Plainly worded and understandable’
Jeffrey A. Fritz of Fisher & Phillips in Boston represented TD Bank. He said contrary to arguments raised by a number of employees post-Crocker, the SJC never intended for there to be a blanket requirement that a release mention the Wage Act by name.
Until now, he added, no court had interpreted Crocker or offered up substantive guidance to practitioners as to its scope. As a result, many employees have wrongly assumed that the decision stands for the proposition that if a release fails to expressly identify the statute, it is unenforceable.
“The conventional wisdom from Crocker suggested that you needed to specially refer to the statute, but when you read the decision, it actually doesn’t say that,” Fritz said. “If the court meant that you have to put ‘Massachusetts Wage Act’ in capital letters, then what’s the purpose of having this ‘plainly worded and understandable to the average individual’ language included in Crocker?”
Had the employee’s attorney succeeded in convincing Hillman to adopt a bright-line test requiring inclusion of those words, countless releases would have been subjected to unwarranted scrutiny from courts, Fritz said.
Daniel W. Rice of Glynn, Landry & Rice in Braintree, Massachusetts, represents the employee. He could not be reached for comment prior to deadline.
Kurt B. Fliegauf of Conn, Kavanaugh, Rosenthal, Peisch & Ford, who represented the employer in Crocker, said he was not surprised the SJC ruling created confusion in the employment bar.
The Boston lawyer said the SJC was unclear if an employer must expressly identify Chapter 148 in an agreement. The best practice is to do so, he said.
“That’s why in in every one of these Wage Act cases I’ve had since Crocker I put it in,” he said. “It may be overkill, but I’ve started identifying any statute that could potentially affect an employee’s rights, because who am I to say what kind of claims are going to come out of the woodwork after the fact? So I’m trying to cover as many things as I possibly can.”
In addition to the Wage Act, Fliegauf now lists in severance agreements the state’s independent contactor law, the Overtime Compensation Act, statutes concerning minimum wage and the Fair Labor Standard Act.
“The whole point of the release is that you want to be done with [the employee],” he said. “If it lets you sleep better at night to put in language stating that you’re also waiving other claims that no one’s even thought of before, why not just throw it in?”
Release the dough
TD Bank hired plaintiff Douglas MacLean in 1999. The company informed him in October 2010 that it intended to lay him off in three months and that he would remain on the payroll until January 2011.
Although the plaintiff was advised by his employer to make himself available to the bank should it need his assistance, he was not required to report to work.
He said he was not permitted to use any paid time off, or PTO, during that period and that he complained to the senior vice president of human resources about not receiving certain payments to which he claimed he was entitled.
In February, the plaintiff signed a severance agreement in which the bank agreed to pay him $494,154.18 in exchange for a release of all claims “under federal, state or local laws, regulations or ordinances relating to the payment of wages, bonuses, incentives and other compensation to employees.”
Similar language appeared in other parts of the agreement.
On March 12, the bank paid the plaintiff $494,154.18, less applicable taxes and withholdings.
Notwithstanding the release, the plaintiff filed suit alleging the bank violated the Wage Act by failing to pay him for an additional 23 days of PTO he had accrued in 2010.
The bank moved to dismiss, arguing in part that the release barred the filing of the complaint.
Unwitting waiver
In allowing the motion to dismiss, Hillman said the legislative purpose behind the Wage Act was to provide strong statutory protection to employees and their right to wages.
However, he said, courts have recognized that if Wage Act claims could not be waived, parties would be unable to settle many employment claims, even if that was their intention.
It was for that reason that the SJC concluded that a settlement or contract termination agreement would be enforceable if such an agreement made the parties’ wishes known in “unmistakable terms,” Hillman said.
But, he said, the release in Crocker was insufficient because it contained no direct or indirect mention of any claims the employee may have had to wages or other compensation.
“As the SJC noted, the goal is to ensure an employee does not unwittingly waive those rights; therefore an explicit recitation of those rights that the employee is waiving suffices,” Hillman wrote. “The Release in this case contained plainly worded and understandable references to the rights Plaintiff was giving up under the Wage Act by signing the Release.”
