Claims for nonpayment of wages under the Massachusetts Wage Act are on the rise and the stakes are high. If an employee wins a Wage Act lawsuit, damages are automatically tripled and the court is required to award attorney’s fees. With that in mind, the recent ruling of the Supreme Judicial Court in Crocker v. Townsend Oil points out the need for careful drafting of severance agreements, settlement agreements and other documents which contain a release of claims by a current or former employee.

The case involved a dispute over employee classification and overtime pay. Crocker was a delivery truck driver who was classified as an independent contractor rather than an employee. After being terminated in 2007, he retained counsel to challenge the termination. The parties negotiated a settlement, the company paid him several thousand dollars, and Crocker signed a settlement agreement containing a general release including typical language, i.e “the employee forever releases, remises and discharges the company and its shareholders, directors, officers, employees and agents of and from any and all debts, demands, actions, causes of action, suits, accounts, covenants, contracts, agreements, damages, and any and all claims, demands, obligations and liabilities whatsoever of every name and nature, both in law and equity that the employee now has or ever had or may in the future have, arising out of or in connection with any events occurring on or prior to the date hereof.”

Despite signing the settlement agreement, in 2009 Crocker brought a claim alleging that he should have been classified as an employee and that he was owed overtime. The Superior Court judge denied the employer’s motion for summary judgment and ruled that the language of the Wage Act made the release unenforceable.

On appeal, the company argued that the broad language of the general release applied to all claims including a claim under the Wage Act. In response, Crocker argued that based on the language of the Wage Act, it is legally impossible to release such a claim no matter how broad the language.

The SJC rejected both arguments and chose a middle course. The court ruled that it is possible to release a Wage Act claim, but only if the release specifically states that it applies to claims under the Wage Act. Because the release used by Townsend did not contain this specific language, Crocker was allowed to proceed with his lawsuit.

The case demonstrates the importance of including clear and specific language in severance and settlement agreements with employees.

The Boston employment attorneys at Bartlett Hackett Feinberg P.C. represent both employers and employees with respect to overtime and minimum wage claims, as well as other a wide variety of other employment law issues. For more information, please contact Howard Brown at hmb@bostonbusinesslaw.com or at (617) 422-0200.

In recent months, a number of Boston area restaurants and other service businesses have become targets of overtime and minimum wage investigations conducted by the United States Department of Labor. According to a recent DOL news release, investigations by the Boston District Office of the DOL’s Wage and Hour Division have resulted in awards of almost $1.4 million in back wages due to nearly 500 restaurant employees. Over the past year, the same office has assessed nearly $300,000 in liquidated damages against Massachusetts restaurants.
Violations include payment of flat salaries to nonexempt employees for all hours worked without overtime pay, failing to combine hours worked at multiple locations for overtime purposes, paying incorrect overtime rates to tipped employees, making illegal deductions from employees’ wages and failing to keep accurate records of employees’ hours, as well as misclassification of restaurant workers as independent contractors.
The focus on restaurants is part of the DOL’s strategic enforcement initiative, under which the DOL is targeting specific industries where: (1) there are large concentrations of workers who are vulnerable to violations of the Fair Labor Standards Act (FLSA), the federal law governing overtime pay and minimum wages; (2) the workforce is particularly unlikely to step forward and file legal complaints; and (3) the DOL believes that enforcement will result in a lasting and systemic change in employer conduct.
This strategy, first outlined in a May 2010 report by Boston University Professor David Weil, “Improving Workplace Conditions Through Strategic Enforcement,” (http://www.dol.gov/whd/resources/strategicEnforcement.pdf) specifically targets the following economic sectors: restaurants; hotels and motels; residential construction; janitorial services; moving companies; landscaping; home health care; and retail.
Massachusetts restaurants may be particularly vulnerable due to employer confusion regarding overtime law coverage. Under the Massachusetts overtime statute (G.L. c.151, §1A), a number of businesses are excluded from coverage, including restaurants, hotels and motels. This state law exemption may have led employers in those industries to believe that they did not need to pay overtime.
However, the FLSA, the federal overtime law, applies to the vast majority of employers in the United States and has no exclusion for restaurants, hotels and motels. As is often the case when both federal and state laws regulate employment practices, Massachusetts employers comply with both statutes.
The cost of non-compliance can be high. DOL enforcement can result in significant back-pay awards, as well as liquidated damages which can be double the amount of back pay. The DOL may also assess civil money penalties which are payable to the government, in addition to requiring back wages and liquidated damages. In addition, employers may be targeted in individual or collective lawsuits brought by employees under the FLSA.
The Boston employment attorneys at Bartlett Hackett Feinberg P.C. represent both employers and employees with respect to overtime and minimum wage claims, as well as other a wide variety of other employment law issues. For more information, please contact Howard Brown at hmb@bostonbusinesslaw.com or at (617) 422-0200.