In Fraelick v. PerkettPR, Inc. the Massachusetts Court of Appeals reversed the dismissal of a plaintiff's claims that her former employer violated the anti-retaliation provisions of the Wage Act (M.G.L. c. 149, § 148A) when it fired her after she complained about its failure to reimburse her for business expenses she incurred while working for the employer.
According to the complaint filed by Heather Fraelick, in June 2007 PerkettPR (PPR) hired her as a fulltime senior account executive. PPR was a virtual PR firm, and required the plaintiff to work from home and pay for a variety of business-related overhead costs out of her own pocket before being reimbursed by PPR. The plaintiff's offer letter promised a base salary and the benefit of the company's "paid expenses program." Paid expenses included telephone, computer, office supplies, and business travel. The plaintiff alleged that the expense program was a component of her agreed-to compensation package.
According to the plaintiff, in December 2009 PPR failed to reimburse her for expenses incurred in the course of her employment. The plaintiff raised this issue with PPR's President who, according to the plaintiff, acknowledged the debt owed and promised payment. As of December 31, 2010, PPR had not reimbursed the plaintiff for any of the business expenses she incurred in 2010. The plaintiff continued to complain to the President in 2011, and on February 3, 2011 she refused to travel on behalf of PPR until she received reimbursement. Two days later, PPR reimbursed plaintiff's business expenses and terminated her employment. PPR cited the plaintiff's unwillingness to incur expenses as a reason for her termination.
The plaintiff sued PPR, claiming that it violated the Wage Act for failure to pay wages and also that its termination of her employment violated of the Wage Act's anti-retaliation provisions. The trial court granted PPR's motion to dismiss the complaint, concluding that "business expenses are not covered under the Wage Act" and that the plaintiff's allegations failed to meet applicable pleading standards. The plaintiff appealed the dismissal of certain claims, including the Wage Act retaliation claim. She did not appeal the dismissal of her claim that the unreimbursed business expenses were wages under the Wage Act.
The Appeals Court reversed the dismissal of the claims on appeal. While noting that the violation of a standard expense reimbursement arrangement would not typically constitute a violation of the Wage Act, the Court focused on the fact that the Wage Act prohibits an employer from exempting itself from timely and complete payment of wages by "special contracts…or by any other means." It cited to the Supreme Judicial Court's previous decisions in Awuah v. Coverall North America, Inc. (2011) and Camara v. Attorney General (2011) in which it held that improper charge backs (Awuah) and deductions for accidents (Camara) violated the Wage Act because they improperly reduced the wages owed to employees. According to the Court, the plaintiff's complaint fairly alleged that PPR implemented a practice which "required the [plaintiff], under penalty of discharge, to advance, indefinitely, expense for the employer's benefit. Viewed in light of Camara and Awuah…this was a sufficient allegation of 'reasonable belief'" that the unreimbursed expenses fell within the scope of wages covered by the Wage Act.
Although the issue of whether the unreimbursed expenses constituted "wages" under the Wage Act was not directly before the Court, its finding that the alleged reimbursement policy at issue fell short of the Wage Act's requirement that wages be paid both timely and in full suggests that, in the right circumstances, failure to reimburse expenses could constitute a failure to pay wages under the Wage Act.