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February 9, 2018

Legal Update
Gwen Nolan King, Kate R. Cook

SJC: Unused sick time is not a “wage” under Massachusetts Wage Act

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The Massachusetts Supreme Judicial Court (“SJC”) has ruled that an employer’s payment of an employee’s accrued unused sick time is not a “wage” under the Wage Act, G. L. c. 149, §§ 148, 150.

Under the Massachusetts Earned Sick Time Law, employers are not required to pay out unused earned sick time upon an employee’s separation from employment.  G. L. c. 149, § 148C (d)(7). Nonetheless, some employers have policies that reward employees for good attendance and provide for the payment of such accrued time at separation. Such was the case in Tze-Kit Mui vs. Massachusetts Port Authority, SJC-122296 (January 29, 2018).

In Tze-Kit Mui, Massport had a policy that departing employees would be paid a certain percentage of their accrued unused sick time upon separation as long as the employee had been employed for at least two years and was not terminated for cause. Mui, a longtime Massport employee, applied for retirement a week after Massport suspended him and began disciplinary proceedings. While the grievance process was still pending, Massport then terminated Mui for cause and, in accordance with its policy, took the position that Mui was not eligible to receive any unused sick time. Ultimately an arbitrator ruled that Massport could not terminate Mui because he had already retired. Massport then paid Mui his unused sick time – over a year after his effective retirement date because of the length of time it took to complete the grievance proceedings.

Mui sued claiming that Massport failed to pay out the unused sick time within the time mandated for payment of “wages” under the Wage Act. If he succeeded in his claim that the unused sick time payout was a “wage,” then Massport would be strictly liable and subject to treble damages and attorneys’ fees.

In rejecting Mui’s claim, the SJC first noted that, while the statute explicitly references “holiday or vacation payments due an employee under an oral or written contract” as “wages,” it does not mention sick pay. Although the SJC acknowledged that this did not end its inquiry, it emphasized that it previously declined to expand the meaning of “wages” to types of compensation not expressly referenced in the statute. The SJC also reasoned that Massport’s policy to pay out a percentage of unused sick time is essentially a “contingent bonus” for separating employees who have not used all their sick time and have not been terminated for cause. The SJC noted that the only contingent compensation expressly recognized in the Wage Act is commissions, and that it had not previously construed wages to encompass any other type of contingent compensation.

In addition, the SJC observed that the question of whether Mui was entitled to sick pay was not resolved until the grievance process was completed – long after the deadline for the payment of wages under the Act. Moreover, timely payment could not have been made in any event because the retirement board determined the effective retirement date retroactively, also after payment would have been due. Thus, to construe the statute as requiring the payment of sick time would have put Massport in an “impossible position” and would be inconsistent with “commonsense” statutory interpretation. Accordingly, the SJC ruled for Massport and held that unused sick time pay is not covered by the Wage Act.

Takeaway for Employers

The SJC’s ruling that a payout for unused sick time is not a “wage” under the Wage Act should come as a welcome clarification for employers with policies offering payouts for unused sick time.  However, while employers with such policies are not exposed to Wage Act liability, they could still be subject to contract claims for the payment of unused sick time and should consult counsel accordingly.

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