In its 2003 decision in Prozinski v. Northeast Real Estate Services, LLC, the Appeals Court held that severance payments are not wages within the definition of the Wage Act. 59 Mass. App. Ct. 599, 605 (2005). In reaching its holding, the court observed that “[a]lthough the statute expressly refers to holiday pay, vacation pay, and definitely determined commissions, it does not refer to ‘severance pay’ or similar terms.” Id. at 603. No subsequent appellate decision in Massachusetts has held otherwise. But in denying an employer’s motion to dismiss in Juergens v. Microgroup, Inc. earlier this year, the Worcester Superior Court concluded that Prozinski may no longer be good law.
The former employee, Juergens, alleged that MicroGroup’s failure to pay him severance upon termination violated the Wage Act. In its motion to dismiss, MicroGroup relied on Prozinski for the rule that severance payments do not constitute wages under the Act. Rejecting MicroGroup’s argument and holding that “a more expansive definition of ‘wages’ is appropriate and it should not be limited to exclude severance pay,” the Superior Court refused to dismiss the plaintiff’s Wage Act claim. The Superior Court reasoned that Prozinski relied on Commonwealth v. Savage, 31 Mass. App. Ct. 714 (1991), an Appeals Court case that it read as having been overruled by the Supreme Judicial Court’s decision in Wiedmann v. Bradford Group, Inc., 444 Mass. 698 (2005).
The Superior Court’s reasoning in this regard is not necessarily correct. The court in Prozinski did cite Savage for the propositions that the Wage Act is construed narrowly and that the statute’s overarching purpose is to ensure that employees are paid weekly. Id. at 603, citing Savage, 31 Mass. App. Ct. at 714, 716. But it does not appear that in Wiedmann the Supreme Judicial Court intended to overrule Savage in its entirety. Rather, and more narrowly, it simply held that the Appeals Court in Savage incorrectly inferred from the title of the Wage Act — “the weekly wage law” — that it applied only to commissions insofar as those commissions were paid on a weekly basis. 444 Mass. at 703-04. Instead, the SJC held, the Wage Act applies more broadly to commissions, and does not require that they be paid weekly. Id. at 704. A subsequent Appeals Court decision agrees with this reading of Wiedmann’s treatment of Savage. Okerman v. VA Software Corp., 69 Mass. App. Ct. 771, 779 (2007).
Moreover, nowhere in Wiedmann does the SJC refer to the Appeals Court’s decision in Prozinski or otherwise discuss severance pay. And a later SJC case, Weems v. Citigroup Inc., cited Prozinski for the proposition — without disapproval — that the Wage Act does not cover severance pay. 453 Mass. 147, 151 (2009).
The SJC’s discussion of Savage in Wiedmann can, quite simply, be read as limited to the earlier case’s treatment of commissions. Its limiting of Savage in this regard does not logically mean that Prozinski’s holding as to severance payments was called into question. Indeed, the Appeals Court in Okerman cited with apparent approval Prozinski’s holding that the Wage Act does not apply to severance pay. Id. at 779.
The Superior Court’s decision in Juergens is not binding precedent. But it may be an invitation for the state’s appellate courts to revisit Prozinski’s holding that the Wage Act does not apply to severance pay. Given that the Act provides not only a private right of action for aggrieved employees, but also an award of treble damages and attorneys’ fees to successful plaintiffs, employers should be mindful that severance pay’s immunity from the Wage Act’s mandates has been called into question.
For more information on this alert, please contact any of the lawyers listed below:
Boston
John Adkins, john.adkins@bingham.com, 617.951.8551
Jenny Cooper, jenny.cooper@bingham.com, 617.951.8473
Louis Rodriques, Co-chair, Labor and Employment Group, lou.rodriques@bingham.com, 617.951.8340
Los Angeles/Orange County
Jacqueline Cookerly Aguilera, jackie.aguilera@bingham.com, 213.229.8439
Debra Fischer, debra.fischer@bingham.com, 213.680.6418
San Francisco
James Severson, james.severson@bingham.com, 415.393.2242
New York
Douglas Schwarz, douglas.schwarz@bingham.com, 212.705.7437
Tokyo
Mie Fujimoto, mie.fujimoto@bingham.com, 81.3.6721.3138
This article was originally published by Bingham McCutchen LLP.