The Massachusetts Supreme Judicial Court recently held that an employer could not make deductions from employees’ wages to recover the costs associated with ‘preventable accidents’ caused by employees. In this case, Camara v. Attorney General, the employer had a policy that gave employees, waste and recycling truck drivers, an option of either accepting disciplinary action or agreeing to a wage set-off to pay for damages they caused to company trucks or personal property of third parties. This option would only be presented to employees after an investigation by the company and a determination that the accident was preventable and that the employee was at fault. An employee who was found to be at fault and chose to pay for the damages would enter into a written set-off agreement. The average set-off under this policy was between fifteen and thirty dollars per week, and no employee’s wages ever fell below minimum wage as a result of these wage deductions.
The Court’s decision relied on an analysis of two provisions of the Massachusetts Wage Act. The first provision, on which the employer relied, permits a “valid set-off” against wages owed to employees. The second provision, which the Attorney General’s Office relied upon in sanctioning the company, states that no employer can exempt itself from paying wages through a “special contract with an employee.” The employer argued that the deductions from the drivers’ wages were a valid set-off because the employees voluntarily agreed to them in advance and that they conferred a benefit on the employees by avoiding discipline and repaying a debt that was due for damages they had caused.
The Attorney General argued, and the Massachusetts Supreme Court agreed, that this was not a valid set-off. The Court ruled that a valid set-off under the Wage Act occurs only when there is a “clear and established debt owed to the employer by the employee.” It held that no deduction from wages due to liability for damages caused by the employee could occur absent an independent, judicial determination of liability. The Court viewed the company’s investigation process insufficient to establish a “clear and established debt” and described the allegedly “voluntary” choice between disciplinary action and a wage set-off as being “unpalatable.” It also took issue with the lack of any internal appeal mechanism for challenging the company’s determination.
Finally, the Court seemed unimpressed by the fact that the employer retained virtually unfettered control over the investigation process and the assessment of fault. The Court was skeptical of the fact that a finding of employee fault gave rise to an election by the employee amongst two adverse consequences: the compulsory repayment of expenses or disciplinary measures. The Court identified the fact that ultimately the repayment of expenses was not a bona fide benefit to the employee – but, in reality served to benefit the employer.
The Court also found that the written agreements the company used were indeed prohibited “special contracts” because they contained “peculiar provisions that are not ordinarily found in contracts relating to the same subject matter.” These agreements were improper because they caused employees to receive lower pay based upon a policy that applied “only to certain employees and only in certain circumstances.”
The Camara decision is noteworthy because it provides further guidance on the Massachusetts Wage Act relative to an issue that has been largely undefined. Given the risk of both private actions and prosecution by the Attorney General, Massachusetts employers should take heed and carefully review their wage deduction policies.