For the first time in a Massachusetts reported decision, Worcester Superior Court Judge, Dennis J. Curran, included severance pay in the definition of “wages” for purposes of the Massachusetts Payment of Wages Act (“the Act”). In Juergens v. MicroGroup, Inc., an employee sought to enforce a severance agreement, successfully arguing that his severance pay qualified as “wages,” which would entitle him to triple damages and reasonable attorney’s fees under the Act. The employer filed a motion to dismiss Juergens’ claim, and relied upon a 2003 Appeals Court decision, Prozinski v. Northeast Real Estate Services, LLC, 59 Mass. App. Ct. 599 (2003), which held that severance payments were not “wages” under the Act. Judge Curran denied the employer’s motion to dismiss Juergens’ claim, adopting an expanded meaning of “wages” under the Act.
Judge Curran found that Prozinski was not controlling because it was overruled by a 2005 Supreme Judicial Court decision, Wiedmann v. Bradford Group, Inc.,444 Mass. 698, 831 NE 2d 304 (2005). In Weidmann, the Supreme Judicial Court held that an employee’s commissions were “wages” under the Act because they were due, owing, and definitely determined. Judge Curran opined that Weidmann commanded a broader interpretation of the meaning of the word “wages” under the Act. Juergens is the first time that a court in Massachusetts has ruled that severance pay constitutes “wages” under the Act.
Interestingly, while most severance arrangements are negotiated at or near the conclusion of the employment relationship, Juergens negotiated for a severance payment at the beginning of his employment relationship. Thus, Juergens and his employer agreed from the inception of his employment that in the event Juergens was ever terminated (other than for cause), he would be paid a severance.
Judge Curran did not specifically state that his decision was based upon the fact that Juergens may have relied on the offer of severance pay in reaching an agreement to accept the job, although that fact is sure to predominate the analysis. It is telling that the employer agreed from the beginning of the employment relationship that Juergens would receive a severance payment if he was terminated. Could this relatively narrow fact pattern explain Judge Curran’s decision? Or, might this be a trend that higher courts will follow in expanding the definition of “wages” under the Act?
The significance of the Juergens decision is that, if upheld on appeal, an employer’s failure to timely remit severance payments which are considered “wages,” would give rise to powerful damages and legal remedies. Under the Act, a prevailing employee can recover three times the actual wages improperly withheld, costs of collection, and reimbursement of his or her reasonable attorney’s fees. Thus, if the Juergens decision is upheld, employers would face significant liability for violations of the Act relative to severance payments. Prior to the Juergens decision, employees seeking to enforce a breach of a severance agreement would be limited to recovery of their severance payments alone (and potentially attorney’s fees and costs in the unlikely event that the severance agreement provided for these remedies).
We will need to wait and see if the appeals courts affirm Judge Curran’s decision in Juergens, or if the higher courts revert to Prozinski, and exclude severance payments from the definition of “wages” under the Act.