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June 27, 2017

Legal Update
Kenneth N. Thayer

Employees who win cases under the Massachusetts Wage Act are entitled to prejudgment interest on lost wages and benefits, but not on mandatory additional awards

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The Massachusetts Supreme Judicial Court has ruled that employees who prevail in lawsuits brought under the Massachusetts Wage Act are entitled to prejudgment interest on the amount of actual lost wages and benefits awarded as damages, but are not entitled to prejudgment interest on additional amounts awarded as mandatory statutory damages. The decision, George v. Nat’l Water Main Cleaning Co., clarifies that the legislature’s 2008 amendment to the Wage Act, under which violators must automatically pay three times the amount of actual unpaid wages and benefits as “liquidated damages,” was not intended to change plaintiffs’ entitlement to prejudgment interest.

The case involved a class action brought in federal court by current and former employees of National Water Main Cleaning Company, alleging various violations of the Wage Act. The parties reached a settlement, and sought the federal court’s approval. But the judge found herself unable to decide an issue left unresolved by the settlement—the proper method for computing prejudgment interest—and certified the question to the SJC. The question arose because under the prior version of the Wage Act, multiple damages were discretionary and awarded only when the employer’s conduct was deemed outrageous. And a prevailing plaintiff was entitled to prejudgment interest on the actual-damages portion of an award, but not on any additional amount, which was viewed as punitive in nature. The Act was amended in 2008 to make mandatory an award of three times the prevailing employees’ actual lost wages—the additional award now referred to in the statute as “liquidated damages.”

National Water Main Cleaning argued that in making this amendment and using the term “liquidated damages,” the legislature intended to do away entirely with the issue of prejudgment interest. The United States Supreme Court had so interpreted a similar change to the federal Fair Labor Standards Act (FLSA).

But the SJC rejected this argument, explaining that unlike federal law, Massachusetts mandates by statute that prejudgment interest be generally awarded on compensatory-damages awards. Because the amended Wage Act does not expressly say that “liquidated damages” is meant to take the place of prejudgment interest, following the federal approach would require ignoring the state prejudgment-interest statute. Thus, the SJC held that as before the amendment, prevailing employees are entitled to prejudgment interest on the actual amount of unpaid lost wages awarded, but not on the punitive award now referred to liquidated damages.

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