Legal Updates

Massachusetts Wage Act Does Not Preclude Common-Law Claims For Unpaid Wages

In recent months, state and federal courts in Massachusetts have confirmed that the Massachusetts Wage Act (the “Wage Act”) is not the sole remedy for employees seeking to recover unpaid wages.  Rather, employees may also bring common-law claims for unpaid wages.

While the Wage Act will continue to be the primary vehicle for Massachusetts employees who seek unpaid wages, these recent court holdings may prove significant in certain types of cases.  For instance, because some common-law claims entail longer statutes of limitations than claims brought under the Wage Act, plaintiffs whose wage claims would be time-barred under the Wage Act may instead be able to assert common-law claims.  Further, some employees with timely Wage Act claims may be able to raise common-law claims as well and thereby extend the time period as to which they can be awarded unpaid wages.

SJC’s Lipsitt v. Plaud Decision

In a decision last summer, Lipsitt v. Plaud, the Massachusetts Supreme Judicial Court (“SJC”) affirmed the principle that the Wage Act does not preempt common-law claims by plaintiffs seeking unpaid wages.

In Lipsitt, the plaintiff was employed by the defendant from 2004 until 2007 and, throughout that time period, allegedly was not paid the salary due him under his written employment agreement.  After initially filing a complaint under the Wage Act with the Attorney General, the plaintiff filed suit in court in 2010.  Due to the passage of time, the plaintiff’s wage claims were largely untimely under the Wage Act’s three-year statute of limitations.  Accordingly, in addition to asserting claims under the Wage Act, the plaintiff raised various common-law claims in his complaint, including claims for breach of contract and quantum meruit (also known as “quasi-contract”), each of which is subject to a six-year statute of limitations.

The defendant moved to dismiss the plaintiff’s common-law claims, arguing that the Wage Act preempted common-law claims seeking unpaid wages.  The trial court agreed and dismissed those claims, and the plaintiff appealed this ruling to the state Appeals Court.  The SJC then took the case on its own motion and eventually reversed the trial court’s decision, holding that the Wage Act does not preclude common-law causes of action for unpaid wages.

In its decision, the SJC noted that a statutory remedy generally will be found to preempt similar common-law causes of action only where (i) the statute expressly provides for such preemption, or (ii) “the [statute] creates a new right or duty that . . . does not exist at common law.”  The court found that neither of these criteria applied in the case of the Wage Act.  In particular, as to the latter, the SJC emphasized that “the right of an employee to sue for breach of contract or on a quasi-contract theory arising from the nonpayment of wages is so longstanding and fundamental that it requires no citation.”  The SJC also noted that while the Wage Act was first enacted in 1886, a private right of action under the statute was not created until 1993, and that during the interim, an employee’s right to seek recovery of unpaid wages through common-law claims was well established.

Cormier v. Landrey’s:  U.S. District Court Weighs In

More recently, in a case brought in Massachusetts federal court, U.S. District Court Judge Nathaniel Gorton issued a ruling that sheds further light on the scope of this principle.  In Cormier v. Landrey’s, Inc., the court followed Lipsitt but noted that the holding does not extend to common-law claims seeking remedies created only by statute.

The Cormier lawsuit was brought by a group of restaurant wait staff employees.  Among other claims, the plaintiffs contended that their employer had made improper meal deductions from their paychecks.  In connection with that allegation, the plaintiffs asserted a claim under the Wage Act, as well as a common-law claim for unjust enrichment.  Additionally, the plaintiffs claimed that their employer had improperly pooled tips among wait staff and non-wait staff employees, and that that alleged practice both violated the Massachusetts Tips Act (the “Tips Act”) and constituted a breach of an implied contract.  The employer moved to dismiss both of the plaintiffs’ common-law claims.

As to the first of these claims, the court decided, on the basis of the Lipsitt holding, that the plaintiffs’ unjust-enrichment claim should stand, because the plaintiffs would have had a cause of action for improper wage deductions even absent the Wage Act.  As Judge Gorton noted, “plaintiffs’ unjust enrichment claim with respect to the allegedly improper deductions is a simple matter of longstanding tort law.”

By contrast, applying Lipsitt, Judge Gorton found that the plaintiffs could cite no basis outside of the Tips Act for claiming that their employer’s alleged tip-pooling practices were unlawful.  Accordingly, the court dismissed the plaintiffs’ claim for breach of an implied contract based on that allegation.

Implications Of Decisions

In light of the Lipsitt and Cormier decisions, plaintiffs in Massachusetts are likely to continue to assert common-law claims for unpaid wages in certain circumstances.  In particular, plaintiffs who claim to have been denied wages owed to them over a period of time longer than the Wage Act’s three-year limitations period may assert both Wage Act claims and common-law claims, in order to maximize the time period over which they can be awarded unpaid wages.

Another scenario in which common-law wage claims may sometimes be pursued is when such claims fall entirely outside the Wage Act’s three-year statute of limitations.  In such circumstances, the six-year limitations period applicable to contract and quasi-contract claims may permit such common-law claims to be brought.  Of course, as a practical matter, this may not be economically viable for a plaintiff.  While the Wage Act provides for mandatory treble damages, attorneys’ fees, and costs, those remedies do not apply to common-law wage claims.  Nor can a plaintiff extend the Wage Act’s three-year statute of limitations by raising common-law claims that are subject to longer limitations periods.  Thus, once attorneys’ fees and other litigation expenses are factored in, seeking unpaid wages solely through common-law claims may not make economic sense unless the amount of wages at issue is substantial.

Recommendations For Employers

In light of these court decisions, we recommend that Massachusetts employers:

• In consultation with experienced employment counsel, carefully review their practices with regard to maintaining payroll records.  Because, under Lipsitt and Cormier, employees seeking unpaid wages may assert common-law claims that are governed by limitations periods longer than the Wage Act’s three-year statute of limitations, employers that fail to maintain payroll records for a sufficient period of time may find it difficult to defend such claims;
• Audit – again, in consultation with counsel – their payroll practices generally and implement any revisions required to comply with the wage laws; and
• Continue to monitor further developments in this area of the law.

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Please feel free to contact us if you have any questions regarding the Lipsitt and Cormier decisions or any other wage-and-hour issues.