Massachusetts High Court Rules That Sick Pay Does Not Constitute Wages Under State Law

On January 29, 2018, the Massachusetts Supreme Judicial Court held that sick pay does not constitute wages under the Massachusetts Payment of Wages Law, M.G.L. c. 149, § 148. As a result, employers are not liable under the Payment of Wages Law if they choose not to pay out accrued, unused sick pay to employees upon termination of employment.

Background

The case of Tze-Kit v. Massachusetts Port Authority arose out of a fairly unusual sick leave policy. In this case, the employer's sick leave policy provided that, upon termination of employment, eligible employees receive payment for a percentage of the value of their accrued, unused sick time. Under the policy, the percentage would vary depending on the employee's tenure, i.e., employees who were employed for a longer period of time, or who remained employed until retirement or death, received a greater percentage of their unused sick time. The policy further provided for no payment of accrued, unused sick pay to employees discharged for cause.

Here, the employer initiated disciplinary proceedings against the plaintiff. One week later, the plaintiff applied for retirement. The employer ultimately terminated the plaintiff's employment for cause. As a result, the employer did not pay the plaintiff for his accrued, unused sick time based on its application of the policy.

An arbitrator, however, overturned the employer's termination decision, finding that the employee retired before he was terminated. In light of that decision, the employer paid the plaintiff the full value of his accrued, unused sick leave (amounting to $46,755.41). Because of the lengthy grievance and arbitration proceedings, however, the employer did not make this payment until over a year after the plaintiff's last day of employment.

Plaintiff then sued under the Payment of Wages Law because the employer had not paid him within the time frame required by the statute for final wage payments. After the trial court ruled for the plaintiff, his former employer appealed.

The Court's Decision

Under the Payment of Wages Law, employees who resign must be paid in full on the next regular pay day. In contrast, employees who are discharged must be paid in full on the day of discharge. These obligations apply only to "wages." Thus, the key question on appeal was whether accrued, unused sick leave constituted "wages" under the Payment of Wages Law.

The Supreme Judicial Court began its analysis by noting that the Payment of Wages Law...

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