MANDATORY TREBLE DAMAGES FOR WAGE VIOLATIONS

On July 13, 2008, a Massachusetts law will become effective which requires that courts automatically treble damages in cases when an employer violates any of Massachusetts’ wage and hour laws. This law will apply to all wage-related violations, including the payment of commissions, minimum wage, overtime, vacation and holiday pay. The law, which was enacted on April 14, 2008 without the signature of Governor Deval L. Patrick, removes discretion from the court in these cases, by allowing employees to recover for triple damages for lost payment regardless of whether the employer made a mistake, misunderstood the law, or did not intend to underpay its employees.

POTENTIAL FOR NEW WAGE AND HOUR LAWSUITS

The new law has had a controversial reception. Many employers and defense lawyers view it as sending a strong anti-business message from the legislature, discouraging employers from opening shop in this state. Critics of the law have noted that it is out of touch with the realities of running a business, particularly in the area of wage and hour laws which are fraught with ambiguity that can easily lead to inadvertent violations. Many believe the law will likely spurn hundreds of new wage and hour suits.

Before its passage, Governor Deval Patrick attempted to provide revisions, which were ultimately rejected by the legislature. Governor Patrick had suggested that judges have some discretion over the penalty, as treble damages can be unfairly punitive and tie the court’s hands in cases of employers who act in good faith. He noted that the effect of the law is hardly fair when wage and hour issues are oftentimes complex and uncertain. However, some advocates of the law say that it will level the playing field for employers by ensuring that no employer obtains an advantage over competitors by violating the law.

Previously, Massachusetts courts had rejected arguments that treble damages for wage violations were mandatory under Massachusetts law. In the case of Wiedmann v. The Bradford Group, 444 Mass. 698 (2005), when an employee brought a claim against her employer for untimely payment of commissions, the Court held that the language of the relevant wage statute did not require treble damages. Citing favorably to the earlier case of Goodrow v. Lane Bryant, Inc., 432 Mass. 165 (2000), the Court cited language from that opinion that “treble damages are punitive in nature, allowed only where authorized by statute, and appropriate where conduct is “outrageous, because of the defendant’s evil motive or his reckless indifference to the rights of others.” It held that a judge may award damages when they are warranted. The new Massachusetts law eviscerates these cases.

EMPLOYERS SHOULD REVIEW THEIR WAGE POLICIES

The recent law passed by the Massachusetts legislature overturns the holding in Wiedmann by requiring treble damages in any case in which an employer violates Massachusetts wage law. Because of the severe nature of the new law, employers should carefully review their wage policies, including their classifications of employees as “exempt” from federal and state wage laws, as well as their commission and vacation policies. Employers should also review their designations of independent contractors and consultants under Massachusetts law, as these groups are included within the ambit of the law as well.