By Erica E. Flores

Massachusetts is a tough place to be an employer. Employee protections are some of the strongest in the nation, the Commonwealth's minimum wage is tied with Rhode Island for the sixth highest, and wage and hour laws are enforced with dreaded mandatory triple damages.

But every now and then, Massachusetts employers catch a break—and the latest break is a pretty big one. In a recent decision, a federal judge ruled that employers that violate the Massachusetts Wage Act's wage payment requirements can avoid liability for everything other than interest simply by correcting the mistake before the employee files suit.

Direct deposit creates a Monster of a problem

Massachusetts-based Monster Worldwide owns and operates the well-known job search engine Monster.com. On April 3, 2014, Monster fired senior director Marc Clermont. The same day, Monster arranged to electronically transfer $26,401.50—the full amount of all wages owed—from its bank account to Clermont's account. However, because of bank policy, he did not have access to the funds until the next day.

Clearly, Clermont was angry and wanted to cause trouble for his former employer. He decided to try to capitalize on the Wage Act's requirement that a terminated employee be paid in full on the day of his discharge, hoping a court would award him triple damages, the mandatory remedy for violations of the statute.

Clermont filed suit against Monster in Massachusetts state court, and his case was later transferred to federal court. He pointed out that his final wages were not available until the day after he was terminated and claimed nearly $80,000 (three times his final paycheck) in damages plus attorneys' fees and costs. He also sought to represent a class of former Monster employees who had received their final wages through direct deposit and, according to him, a day late.

A day late but not a dollar short

Monster asked the trial court to dismiss Clermont's case before trial. The employer argued that the electronic transfer did not violate the Wage Act because it was initiated the day Clermont was terminated. That meant he could actually access the funds faster than if the company had cut him a check, which can take a couple of days to clear.

The trial court disagreed and concluded that payment is not complete until the employee has "some control" over the funds. The judge compared Monster's actions to a situation in which an employer gives a terminated employee a postdated check or puts cash in an envelope to be mailed overnight. According to the court, the employee is not "paid in full on the day of his discharge" in either situation, and neither was Clermont.

Although the court concluded that Monster had violated the Wage Act, it ruled that the company did not have to pay Clermont three times his final wages. The court rejected Clermont's narrow interpretation of the Act's damages provision. The court determined that an employer paying an employee all wages owed before he files suit is a valid defense to a Wage Act claim, regardless of whether payment is received later than required by the statute or whether the lawsuit is filed by the employee or the attorney general.

According to the court, the statute does not require an employer to pay three times the lost wages if payment is made before the employee files suit. In those circumstances, the only loss suffered by the employee is interest on the funds because of the delay in payment. The interest must be tripled, but Clermont had specifically disclaimed any right to recover interest for the one-day delay in receiving his final wages. Accordingly, he could not recover interest for the violation.

Takeaways

The Clermont case is a refreshing—if rare—example of the valuable role common sense can play when it comes to the law. Regardless of the statutory language and legal precedent, the fact was that Clermont was a highly compensated former executive who wanted a six-figure windfall (his final paycheck, tripled, plus attorneys' fees and costs) merely because he had to wait one day to access his very large final paycheck.

Common sense says the Massachusetts Legislature did not intend for the Wage Act to be so draconian, and the court's decision confirmed the legislature's intent.

If Clermont had been a more sympathetic employee—for example, a low-income worker living paycheck to paycheck who suffered real harm from the one-day delay—perhaps the case would have turned out differently. But as it stands, Clermont's greed did Massachusetts employers a big favor.

So do yourself a favor by using common sense. If you make a mistake regarding an employee's wages, fix it right away. At a minimum, talk through the situation with your employment counsel. Doing so just might avoid the burden and expense of a lawsuit, not to mention triple damages.

If your company pays employees' final wages via direct deposit, consider cutting a check or getting written permission to use direct deposit at the time of termination. You never know when an employee will try to pull the same trick Clermont did and claim damages.

Erica E. Flores is an associate at the firm of Skoler, Abbott & Presser, P.C and an editor of Massachusetts Employment Law Letter. She can be reached at 413-737-4753 or eflores@skoler-abbott.com.