On January 29, 2018, in Tze-Kit Mui v. Massachusetts Port Auth., No. SJC-12296 (Mass. Jan. 29, 2018), the highest court in Massachusetts ruled that accrued, but unused, sick leave does not constitute “wages” under the state’s Wage Act. In so holding, the Court vacated the decision of the lower court that required an employer to pay a departing employee for his unused sick leave.
In this case, the employee filed for retirement one week after the Massachusetts Port Authority initiated disciplinary proceedings against him for violations of company policy. The Port Authority then terminated the employee for cause following the disciplinary investigation. The employee challenged the termination in arbitration. The arbitrator reversed the termination and concluded that the employee’s retirement preempted the employer’s ability to terminate him. Subsequently, a dispute arose as to whether the employee was entitled to be paid for his unused sick leave. The Port Authority’s policy was to compensate departing employees for a portion of their unused sick leave unless they were terminated for cause.
The Wage Act does not define the term “wages.” Whether accrued sick leave constitutes “wages” under the Act is significant because the Act requires employers to pay departing employees all wages, in full, on the next pay day following their departure, or else they are subject to treble damages and paying the employee’s attorney’s fees. In other words, the Port Authority could have owed the employee three times his unused sick leave if it was determined that that leave amounted to “wages” under the statute.
In interpreting the meaning of the Wage Act, the Court considered the language of the statute. The Wage Act nowhere mentions sick pay, although it does provide that wages include vacation leave payments pursuant to an employer’s agreement (a/k/a policies). Unlike vacation time, which can be used for any reason, the Court noted that sick leave is often “use it or lose it” because it can only be used for specific reasons. Because sick leave is considered lost if it is not used, and because it is not mentioned in the Wage Act, the Court refused to consider sick leave a “wage” under the law.
This ruling comes as sick leave has come to the forefront of labor and employment headlines in other parts of the country, including Maryland, where earlier this month we reported on the new paid minimum sick leave law set to go into effect in mid-February 2018. The sick leave law in Maryland, like many other state sick leave laws, specifically states that employers are not required to pay departing employees for accrued, but unused, sick leave. The Port Authority case serves as a reminder for companies to revisit their policies and applicable state laws with regard to paying departing employees for unused leave.