Punishing and deterring the unknowing: mandatory treble damages under the Massachusetts Wage Act.

• Author: Provost, Rebekah D.

Imagine you own a small landscaping company in rural Massachusetts. All of your ten employees have been with the company for three years or more. The recent economic downturn has threatened your family business, and to stay afloat and keep your employees working, you need to cut costs. You have an idea--you will charge the employees a daily fee to use the trucks you have provided to them for use on the job--$10.00 a day seems fair, especially because these are your vehicles and you allow your employees to take the vehicles home at night and on the weekends. Unfortunately, you are unaware that this deduction is likely unlawful pursuant to the Massachusetts Wage Act, a state law that regulates the payment of wages to employees who perform work in Massachusetts. Three years later, one of your employees discovers that this practice is illegal and files a lawsuit against your company, claiming that the deduction was an "invalid setoff" against wages due to the employee. The employee convinces all of the other nine employees affected to join the lawsuit.

Before the 2008 legislative amendment, a Massachusetts judge-- within judicial discretion--would have likely awarded the employees single damages to compensate for the improper vehicle deductions that the law deems non-paid wages. After all, you did not know that you were violating the law. These people have worked for your company for a long time, and you genuinely did not intend to shortchange them. You would gladly restore to the employees what they were originally entitled. However, in light of the new 2008 statutory amendment, you now face mandatory treble damages (plus attorneys' fees and court costs), and could owe more than a quarter of a million dollars (10 employees x $50 per week x 52 weeks x 3 year statute of limitations x 3 for treble damages = $234,000). This will surely devastate your small business. Today, this is the reality that unsuspecting Massachusetts employers face in a weak economy.

1. MASSACHUSETTS--THE ONLY STATE WITH MANDATORY TREBLE DAMAGES

   The Massachusetts Wage Act is a state statute with teeth--employers who violate the various provisions of the state's wage and hour laws will be ordered to pay mandatory treble damages, court costs, interest, and attorneys' fees upon the judicial finding of a violation in a civil proceeding. (1) Moreover, senior corporate officers responsible for payroll can also be held personally liable under the Act. (2) Given the harsh penalties associated with the non-payment of wages in Massachusetts, employers who employ workers in the state should have a crystal clear understanding of the law. (3) Unfortunately, due to the complex nature of the statutory scheme, even employers with the brightest attorneys and the best intentions may inadvertently violate the Act. (4) The Wage Act is incredibly broad and complex, and the effect of several of its provisions are still evolving through common law. (5)

   The mandatory treble damages provision in Massachusetts is needlessly harsh on an employer acting in good faith, especially considering that no other state has such a sweeping damages provision. (6) Treble damage awards in the wage and hour context require employers to pay workers up to three times the amount of wages owed, but not paid, within the period covered under the statute of limitations. (7) Essentially punitive in nature, this type of provision punishes the employer violator and sets an example to deter other employers from committing wage and hour violations. (8) The business community regards Massachusetts as a rigid state with employment regulations that are restrictive and unfriendly to business growth and job creation. (9) One of the "symbols" of the state's hostility towards business is the Wage Act's mandatory treble damages provision. (10) Only nine other states allow for treble damages in wage claims and, unlike Massachusetts, no other state strictly mandates its imposition upon finding of a violation, regardless of the employer's intent. (11)

   On April 14, 2008, the legislature amended chapter 149, section 150 of the Massachusetts General Laws, entitled "An Act Further Regulating Employee Compensation," which made treble damages mandatory for violations of state wage and hour laws. (12) This "strict liability" imposition of treble damages has increased wage and hour lawsuits in the Commonwealth and creates noteworthy economic risk for employers. (13) The amendment was a legislative response to invalidate Wiedmann v. The Bradford Group, Inc., (14) in which the Massachusetts Supreme Judicial Court held that treble damage awards in the non-payment of wages context were discretionary for the trial court to decide. (15) In Wiedmann, the court stated that because treble damages are a punitive measure, they would only be appropriate when specifically authorized by statute and where conduct is "'outrageous, because of the defendant's evil motive or his reckless indifference to the rights of others.'" (16) Shortly after the Wiedmann decision, the legislature amended the statute to include the word "shall," which effectively removed judicial discretion and made treble damages mandatory in an effort to punish Massachusetts employers who violated the Wage Act, while deterring other employers from committing similar acts. (17) Although the objectives of statutory treble damages are laudable, the automatic imposition unfairly penalizes Massachusetts's employers who make a good faith wage violation. (18) Employees are entitled to be made whole, but not through a windfall at the employers' expense. (19) Wage disputes can involve legitimate differences of opinion between employers and employees regarding the payment of wages because wage and hour laws are complex, can hinge on factual circumstances, and are rarely the subject of judicial interpretation. (20)

   This Note advocates for the Massachusetts Legislature to amend chapter 149, section 150 of the Massachusetts General Laws. (21) The statute should be amended to allow employers to raise a good faith defense to an alleged Wage Act violation. (22) Part II of this Note recounts the history of chapter 149, section 150, specifically focusing on the treble damages provision. (23) Part III describes the legal landscape today and illustrates how the 2008 amendment has impacted litigation, employment, and the business climate in the Commonwealth. (24) Part IV analyzes how an employer's attorney could legally challenge the treble damages provision as unconstitutional, and barring any successful constitutional challenge, suggests alternative policy recommendations for future legislative amendments to chapter 149, section 150. (25) This Note concludes that the Massachusetts Legislature should amend chapter 149, section 150 to include an affirmative good faith defense to violations of the Wage Act. (26) The current damages provision is exceptionally unfair to those employers who make a good faith violation, thus creating a windfall for employees and plaintiffs' attorneys at the employers' and society's expense. (27)

2. EVENTS LEADING TO THE 2008 legislative amendment

   The Massachusetts Wage Act encompasses both chapter 149, section 148, covering the payment of wages to Massachusetts employees, and its companion enforcement statute, chapter 149, section 150, which requires employers to pay wages promptly, fully, and regularly. (28) The original purpose of the Wage Act was to limit the temporal interval between the completion of an employee's work and the payment of wages. (29) It was designed to cure the unreasonable detention of wages by unscrupulous employers and to prevent unwise employees from squandering their pay. (30) Initially, only the Attorney General and the Massachusetts Department of Labor and Industries had standing to bring enforcement actions under the Wage Act. (31) In 1993, the legislature amended the Wage Act to allow individual employees to bring civil actions directly against their employer. (32) The amendment also allowed for the recovery of interest, attorneys' fees, and treble damages. 33 Notably, the 1993 amendments were tacit as to what was required to trigger a treble damages award, such as the requisite state of mind. (34) Accordingly, common law and constitutional concepts guided the judiciary from 1993 until the 2008 legislative amendment. (35)

   In Goodrow v. Lane Bryant, Inc., (36) the Supreme Judicial Court discussed in dicta the language added by the 1993 amendments, which provided that a person "'may recover in a civil action three times the full amount of such overtime rate of compensation....'" (37) According to Justice Spina, two requirements must be met to award multiple damages under the overtime law. (38) First, the statute must expressly authorize such an award. (39) Second, the court must find the defendant willfully violated the law, or the defendant's conduct was "evil in motive" or showed a "reckless indifference" to others. (40) The court noted that "[m]ultiple damages such as the treble damages at issue here 'are essentially punitive in nature.'" (41) After Goodrow, it was generally believed that treble damages were to be imposed at the judge's discretion after a judgment entered against an employer for failure to pay wages. (42) However, because there was no violation of the Wage Act in Goodrow, the issue of damages was moot and the standard articulated by Justice Spina was mere dicta. (43)

   The Supreme Judicial Court clarified the Goodrow decision in Wiedmann, when it held that the Wage Act allows, but does not require, treble damage awards for violations of the Wage Act. (44) The court emphasized the permissive use of the word "may" in its holding. (45) Before Wiedmann, no reported decision in Massachusetts had affirmatively ruled that treble damages were discretionary under section 150. (46)

   In response to the court's seminal holding in Wiedmann, the plaintiffs' bar, unions, and worker's rights advocates lobbied...