Massachusetts Employers to Face Significant Increase in Damages in Wage and Hour Cases

On April 14, 2008, a new law was enacted in Massachusetts mandating courts to award treble damages to plaintiffs who are successful in wage and hour cases.  By way of comparison, under the federal Fair Labor Standards Act, damages are, at most, doubled.  The new law also continues to mandate the award of attorneys’ fees to successful plaintiffs in wage and hour cases.  The new legislation takes effect on July 13, 2008. 

The Genesis of the New Legislation

Massachusetts law currently permits but does not mandate the award of treble damages in wage and hour cases.  In cases decided under different wage and hour laws in 2000 and 2005, the Supreme Judicial Court held that determining whether treble damages should be awarded in such cases should be left to the discretion of trial court judges.  In one of those cases, the Supreme Judicial Court ruled that treble damages should only be awarded where the employer’s conduct was “outrageous, because of [its] evil motive or [its] reckless indifference to the rights of others.” 

The new law is a reaction to those rulings.  The Massachusetts Legislature initially submitted a mandatory treble damages bill to Governor Patrick for signature in February, but he returned the bill without signature, recommending an exception for employers who could show that they acted in good faith.  The Legislature rejected the proposed amendments.  Governor Patrick allowed the bill to become law without signature on April 14, 2008, declining to veto it.  As a result, treble damages are mandatory even for employers who acted in good faith or made inadvertent errors. 

The Effect of the New Legislation

The new legislation revises the language in various wage and hour laws to mandate the award of treble damages and attorneys’ fees to plaintiffs who are successful in such cases.  The new language in such laws provides, in relevant part, that an employee who prevails in a wage and hour case, “shall be awarded triple damages, as liquidated damages, for any loss of wages and other benefits.” 

The wage and hour laws affected include those concerning:

• Payment of wages, including commissions and vacation pay
• Overtime pay for nonexempt employees
• Minimum wages
• Improper deductions
• Misclassification of employees as independent contractors
• Tip pool sharing
• Retaliation for overtime or wage complaints

Thus, for example, when an employer misclassifies an employee, even inadvertently, as exempt from the state overtime law, or when an employer uses an incorrect method for calculating overtime pay due under state law, the employee will be statutorily entitled to three times the owed overtime, for the period of up to three years, as well as the attorneys’ fees incurred by the employee in pursuing the claim. 

Given the increase in money damages available in successful wage and hour claims, it is expected that Massachusetts employers will see an increase in such claims.  Employers should consider conducting a careful review of their pay practices to ensure compliance with the wage and hour laws and consider addressing as soon as possible areas of possible risk. 

For more information regarding wage and hour compliance, please refer to the following our previous Labor & Employment Alerts:

• Recent Opinions Clarify Law Regarding New Massachusetts Independent Contractor Classifications (March 30, 2005).
• U.S. Department of Labor Issues New Fair Labor Standards Act Regulations Modifying Overtime and Minimum Wage Exemption Standards (May 10, 2004).

To assist employers with their compliance efforts and further address the implications of the new legislation, the Goodwin Procter LLP Labor and Employment Practice Group will hold a seminar for clients on Wage and Hour Laws Applicable to Massachusetts Employers:  Compliance and Litigation.  The seminar will be held on Thursday, June 5, 2008 at 8:00 a.m. at the Goodwin Procter Conference Center and on Wednesday, June 11, 2008 at 8:00 a.m. at the Westin Hotel in Waltham.  Invitations will be issued shortly.  Interested clients may also contact Elizabeth Harvey at eharvey@goodwinlaw.com or at (617) 570-8173 for further information.