An employee’s retention bonus, which he earned by remaining in good standing through a certain date, does not constitute a “wage” under the Wage Act, a panel of the Massachusetts District Court’s Appellate Division has found, answering a question that no previous state court had explicitly addressed.

The state Wage Act, G.L.c. 149, §148, expressly includes in its definition of wages agreed-upon holiday and vacation pay that have accrued, as well as “commissions that are definitely determined and due and payable to the employee,” the panel noted at the outset of its decision in Nunez v. Syncsort Incorporated, et al.

While there were no appellate decisions addressing retention bonuses directly, the panel reasoned that the status under the Wage Act of the categories of compensation “most akin” to retention bonuses had been addressed by the Supreme Judicial Court in two earlier cases: the 2009 case Weems v. Citigroup and the 2018 case Mui v. Massachusetts Port Auth.

In Weems, the SJC was asked whether a “bonus program” constituted wages. Per the terms of the deferred compensation program at issue, the monetary award was discretionary, so the court held that it did not constitute wages.

In Mui, the court was faced with the issue of whether unused sick time fell within the Wage Act. The sick time in question had not been accrued under a policy that was “use it or lose it.” Rather, it provided for departing employees to be paid a certain percentage of their accrued sick time if they had been employed for at least two years and had not been terminated for cause. The court thus viewed it as essentially a contingent bonus.

Aside from due and payable commissions, “[w]e have not broadly construed the term ‘wages’ for the purposes of the act to encompass any other type of contingent compensation,” the SJC said in Mui.

Unlike in Mui, there was no dispute in the latest case about whether the plaintiff was in good standing. The Appellate Division panel acknowledged that Mui “may have opened the door a crack” to construing a retention bonus a “wage” under the Wage Act in the absence of a dispute about the employee’s standing.

“That said, we cannot ignore the long line of case law where our appellate courts — including the Court in Mui — have narrowly construed the term ‘wages’ under the act,” Judge Jennifer A. Stark wrote for the panel. “Nor can we disregard the Court’s acknowledgment in Mui that it has never broadly construed the Wage Act to include any types of contingent compensation other than ‘commissions that are definitely determined and due and payable to the employee.’”

The panel thus ruled that the retention bonus did not fall within the plain language of the Wage Act.

Day late, $7,500 short

In May 2020, plaintiff Carlos Nunez was hired as senior director of finance by defendant Syncsort, which does business under the name Precisely.

Four months later, Precisely and Nunez executed a retention bonus agreement whereby Nunez would be eligible to receive a $15,000 bonus, split equally into two installments paid on Nov. 18, 2020, and Feb. 18, 2021.

To collect the bonuses, Nunez only needed to remain employed by Precisely at his regular work schedule and remain in good standing through those dates. Nunez would also get to keep the retention bonus if Precisely terminated his employment without cause.

After he received the first installment without incident, Precisely informed Nunez in January 2021 that it would be terminating his employment due to a reduction in workforce, which it then did on Feb. 18, 2021.

Until his termination, Nunez remained in good standing with his employer, and his work schedule was not reduced. Yet Precisely did not pay the second installment of the retention bonus on the date of Nunez’s termination.

A week later, Nunez filed a complaint alleging, among other causes of action, that the failure to pay him the second retention bonus installment violated the Wage Act. The next day, Precisely paid Nunez the second installment of the retention bonus.

Based on those agreed-upon facts, the parties submitted cross-motions for summary judgment based on a single legal issue: whether the retention bonus constituted a “wage” under the Wage Act, potentially exposing Precisely to treble damages and an award of the plaintiff’s attorneys’ fees.

After both motions were denied by the trial court, the parties filed a joint motion for reconsideration. Concord District Court Judge Catherine K. Byrne denied the plaintiff’s motion and allowed the defendants’ motion, ruling that the retention bonus was not a “wage” for purposes of the Wage Act.

Nunez then appealed to the Appellate Division, which found in favor of the employer.