Massachusetts Wage and Hour Laws

Why the Wage and Hour Laws Matter to You
It is a basic promise of employment- that you will be paid the wages you earn.  But more often than you might think, employers do not pay wages on time, do not always meet minimum wage requirements, do not pay earned commissions, or take unauthorized deductions from employees' paychecks.  Whether an innocent mistake or intentional wage theft, violation of the federal and Massachusetts wage and hour laws is a serious problem, and can result in serious exposure for the employer.
  • If an employer violates the Massachusetts Wage Act, the law requires that they pay the employee three times the damages that the employee proves.  That means a $1,000 mistake in failing to pay for a week's vacation could become a $3,000 liability.
  • The law also requires that the employer reimburse the employee for legal fees and costs if the employee wins.  That could mean in the example above that you could end up paying more than the amount owed to the employee in damages to cover their attorneys' fees, on top of paying your own attorney to defend the case.
It is easier than you might imagine to violate the Massachusetts Wage Act, even if you think you are paying everyone appropriately.  A violation could happen if you classify someone as an independent contractor who should be an employee, if you wait to pay commissions after they are earned under your commission policy, if you take deductions from paychecks that seem perfectly logical but are not authorized under law, or if you fail to provide sick time under the Earned Sick Time Law.

Timely Payment of Wages
​The Massachusetts Wage Act requires that all employees be paid within six days of the end of the payroll period, in order to be timely under the Wage Act.  Most employees have to be paid weekly or bi-weekly, though there is are limited categories of employees who may be paid monthly if they agree.  This time period varies from state to state, and this requirement is often overlooked by out of state businesses with Massachusetts employees,

Where people get into trouble: most employers have a regular payroll schedule in place, either weekly, bi-weekly, or twice a month.  All of these comply with the Massachusetts Wage Act.  Sometimes, however, the schedule is set up to pay employees outside of the six day period required- for example, a bi-weekly pay schedule that pays employees seven or more days after the last payroll period.  This can also create issues for commission-based employees, if the schedule for payment of commissions calls for payment at the end of the month or end of a quarter.

Some examples of cases we have handled involving late payment of wages:
  • A company whose policy called for payment of commissions quarterly was inadvertently holding back earned commission payments beyond the time allowed under the Wage Act.
  • An out of state company had a payroll system set up that paid employees 8 days after the close of the pay period, meaning every pay period it violated the 6 day requirement under the Wage Act.
  • Key start up employees agreed to defer part of their compensation, which resulted in a significant liability for the company.
Payment of Wages, Commissions and Unused Vacation on Termination
If an employee is fired, he or she must be paid on that same day for all amounts earned prior to the termination (including any commissions earned prior to termination), as well as for any vacation time the employee has accrued but not used.  If the employee resigns voluntarily, these amounts must all be paid in the next scheduled payroll.  We have seen many employers make mistakes with the final paycheck, and turn an otherwise completely lawful termination into a lawsuit.

Where people get into trouble:  
  • Withholding a final paycheck while an employee considers a severance agreement: you do not need to provide severance, but you do need to provide the final paycheck whether or not the employee agrees to a severance package.  If, for example, you have given someone 21 days to consider a severance agreement, you should still pay out the money earned and vacation time immediately upon termination.
  • Vacation pay:  you are not required to offer vacation benefits in the first place, but if you do, your employees must be paid their unused accrued vacation at termination.  If you have not made it clear in your vacation policy that unused vacation does not roll over from year to year, you could have employees, especially long-term employees, claiming entitlement to a lot of time that has accrued over the years.  
  • Commissions: you may have a policy that states employees are not eligible for commissions after they are no longer employed, but if they have earned commissions before termination you may still have to pay those out as part of their final wages.
Deductions from Wages
With some very limited exceptions (i.e., withholding for taxes or health or other benefit premiums, deductions pursuant to an order of garnishment, and other similar deductions) it is unlawful for an employer to deduct money from an employee's paycheck.  Even if the employee legitimately owes your business money for something, you need to be very careful about taking it out of a paycheck, because an unlawful deduction may also be a Wage Act violation, with the attendant triple damages and liability for attorneys' fees.  Generally speaking, any time you are considering taking any deductions beyond the standard tax and insurance deductions, you should consult an employment lawyer.

Where people get into trouble:
  • Deducting amounts owed to the company from a loan to an employee without clear documentation.
  • Deducting amounts for damages caused to company property by an employee without a proper adjudication of liability.
  • Deducting amounts to cover costs that should be born by the employer.
Payment of Commissions- Are Sales Commissions Covered by the Wage Act?
Yes, if they are earned by the employee as a result of his or her contribution to revenue.  For example, a sales person who is paid a percentage of each sale is receiving a commission.  Incentive payments that are triggered by performance evaluations or overall profitability are bonuses, not commissions, and not subject to the Wage Act.  It does not matter whether it is called a commission or a bonus- what matters is whether it functions as a commission.  If it does, those amounts owed are "wages" that are subject to the Massachusetts Wage Act.

The Wage Act (the Massachusetts wage and hour law) applies to sales commissions as soon as they are earned. When a commission is earned can vary according to the company's policy- for example, the policy can provide that a commission is earned when a customer signs a contract, when an invoice is sent to a new customer, or when the company is paid.  If there is no commission policy that says otherwise, the law will consider the commission earned when the customer signs off on the sale, even if payment from the customer is scheduled to occur later.

Where people get into trouble:
  • Not paying commissions that were earned or due and payable before termination but not payable until after termination.
  • Delaying payment of sales commissions per company policy that makes them due and payable beyond the time period for payment of wages under the Wage Act.
  • Retaining or sharing commissions with another employee outside of what the company commissions policy states.
Overtime Pay
More detail on this subject is available on our overtime page, but here is the basic idea:  Any employee who is not exempt from federal and Massachusetts overtime law must be paid at 1.5 times their regular rate of pay for any hours worked in a single work week over 40. Overtime is calculated on a per work week basis, not based on the payroll period.  Who is exempt from overtime? Only employees who (i) are paid on a salary basis; and (ii) perform "non-exempt duties."  Both of these tests are more complex than many people realize, and it is worth consulting an employment lawyer if you are in doubt.  Anyone who does not meet these tests is entitled to overtime pay.  Learn more about how these exemptions are applied.

Where people get into trouble:
  • Assuming that all salaried employees are exempt from overtime, and only paying overtime to hourly employees.
  • Counting hours across the pay period instead of by the work week.
  • Failing to include covered travel time in the calculation of weekly hours for employees entitled to overtime pay.
  • Paying only the regular rate of pay for all hours even if they exceed forty in a work week.
Overtime pay is covered by a separate Massachusetts overtime law, as well as by the federal Fair Labor Standards Act ("FLSA"), but the ramifications for violating the overtime laws are similar as those for violating the Wage Act: multiple damages (three times under Massachusetts law and two times under federal law) and payment of the employee's legal fees.
Testimonials
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The Massachusetts Earned Sick Time Law
Under the Massachusetts Earned Sick Time Law,  all employees earn 1 hour of sick time for every 30 hours worked, up to 40 hours per year. The time begins to accrue immediately, but an employer can limit its use until 90 days after the start of employment.  It’s not just sick time: time under this law can also be used for attending routine medical appointments or taking a child or immediate family member to medical appointments.  Unlike vacation, earned sick time does not have to be paid out to the employee at termination.  The law also prohibits retaliation against an employee for using any of the time accrued under this law.​​

Where people get into trouble:
  • Restaurants and fast food companies who are used to paying workers only for shifts worked not paying for eligible sick time when a worker calls out sick.
  • Reducing an employee's shifts if they have used sick time for eligible purposes.
  • Failing to accrue time properly for part time and intermittent employees.
  • Taking action against an employee who uses sick time for a child's medical appointments or to stay home with a sick child.
​Because this part of the Wage Act is relatively new, there are not a lot of court cases interpreting its terms.  However, because it is a part of the Wage Act, employers should assume that violation of its provisions may carry the same triple damages and attorneys' fees penalties that are applied to non payment of wages. 
How to Handle Internal Complaints About Wage and Hour Issues
If you have an employee who has made a complaint about not being paid, questioned their classification as either a nonexempt employee or an independent contractor, or told you they think they should be paid time and a half for overtime, you need to be careful and thoughtful in your response.  First, it is a good idea to consult with a lawyer to make sure you do not have any potential liability in this situation.  This is not a hard call to make, and an experienced employment lawyer should be able to tell pretty quickly if you have anything to worry about.

Second, if you find there is something not quite compliant about your payroll practices (remember it is not hard to run afoul of the wage and hour laws even with the best intentions), you will need some guidance on how to respond, not only to the employee who made the complaint, but also to other employees who may be in a similar situation.  It is important to handle this not only in a way that treats everyone fairly, but also protects your business from unnecessary exposure.

​Finally, you should know that even if you have not done anything wrong, if you take any action against that employee because they made the complaint, you may just be making the problem worse.  Both federal and Massachusetts law prohibit retaliation against employees for seeking to exercise their rights under the Wage Act or the FLSA.   
How slnlaw can help
We can help you navigate these issues and get clarity on your rights and obligations as an employer or an employee.  You can use the button below to schedule a call back from a member of our team, give us a call at  413-667-2322, or fill out our web form  to let us know a little more about your situation.