On January 25, 2011, in Camara v. Attorney General, the Massachusetts Supreme Judicial Court (SJC) affirmed a decision by the Division of Administrative Law Appeals (DALA), upholding a citation by the Attorney General’s Office against Michael Camara and his company, ABC Disposal, Inc. (ABC), for making illegal deductions from employees’ wages in violation of Massachusetts General Laws ch. 149, § 148 (the Massachusetts Wage Act). In reaching this decision, the SJC validated the Attorney General’s strict interpretation of the Commonwealth’s Wage Act and made it more difficult for employers to deduct costs attributable to an employee’s fault or negligence, even where the employee has authorized the deduction.

At the center of this case was a company policy under which ABC required any worker who it found was at fault for an accident involving a company truck either to accept disciplinary action or agree to set off the damages against his or her wages. At no time did the company allow a driver’s pay to fall below minimum wage.

Concluding that the Wage Act prohibits wage deductions associated with an employer’s unilateral determination of an employee’s fault and damages, the Attorney General’s Office found that ABC’s policy violated the Wage Act, cited ABC and Camara, individually, for an intentional violation, and ordered them to pay restitution. The Attorney General interpreted the Wage Act as generally prohibiting an employer from deducting, or withholding payment of, any earned wages, even where the employer has obtained an employee’s assent by “special contract.” In the Attorney General’s view, regardless of an employee’s agreement, there can be no deduction of wages unless the employer can demonstrate the existence of a valid attachment, assignment, or “set-off” as described in Massachusetts General Laws ch. 149, § 150—a condition that the ABC set-off policy did not meet according to the Attorney General.

ABC and Camara appealed. The SJC reiterated its interpretation of the term “valid set-off” as referring to circumstances where there exists “a clear and established debt owed to the employer by the employee.” The SJC further held that ABC’s policy of making a unilateral assessment of fault and the amount of damages, with no role for an independent decision-maker and apparently not even an opportunity for an employee to challenge the result within the company, did not amount to “a clear and established debt owed to the employer by the employee.” The SJC found the option afforded ABC’s employees to choose “voluntarily” to accept either wage deductions or discipline to be unacceptable.

The SJC’s decision in Camara highlights the risk employers face when they make deductions from wages, even with their employees’ written consent. Given this narrow definition of a “valid set-off,” employers should seek legal counsel before withholding employees’ pay.