Why it matters

Accrued, unused sick time does not count as “wages” under state law, Massachusetts’ highest court has determined in a matter of first impression. A longtime Massachusetts Port Authority (MPA) worker, Tze-Kit Mui was in the process of being discharged for cause when he retired instead. Pursuant to MPA policy, Mui was paid a percentage of his accrued, unused sick time; but because of a delay due to the disciplinary proceedings against him, it wasn’t paid in accordance with the timelines of the state’s Wage Act. He sued, seeking treble damages. Before the Supreme Judicial Court, the issue was whether the state law encompassed sick pay. The statute does not define “wages,” nor does it mention sick pay, the court said, declining to broaden the scope of the law to include sick time. The unanimous court added that construing sick pay as wages in the instant case would lead to an absurd result, as Mui was in the process of being discharged for cause when he retired.

Detailed discussion

In 2013, the Massachusetts Port Authority (MPA) initiated disciplinary proceedings against Tze-Kit Mui, a longtime employee, in connection with charges of arson and multiple counts of attempted murder as a result of actions he took during a suicide attempt.

Mui responded by applying for retirement. Despite the fact that disciplinary proceedings had not been resolved, the employees’ retirement system set Mui’s retirement date retroactively. The MPA later discharged Mui for cause, although the termination was overturned pursuant to a grievance procedure.

According to the MPA’s sick pay policy, eligible employees receive payment for a percentage of the value of their accrued, unused sick time upon separation from the agency. Employees who are discharged for cause are not eligible for sick pay.

Once the arbitrator reversed Mui’s termination (finding that it was not possible to discharge an employee who had already retired), the MPA paid the value of Mui’s accrued sick time pursuant to its policy, a total of $46,755.41. However, because of the grievance proceedings, the payment was made more than one year after Mui’s effective retirement date.

Mui then sued the MPA, claiming that the agency violated the state’s Wage Act by failing to compensate him for his accrued, unused sick time within the time frame mandated by the statute. A trial court judge agreed and granted the plaintiff’s motion for judgment on the pleadings.

The employer appealed, and the state’s highest court transferred the case on its own initiative. In a unanimous opinion, the Supreme Judicial Court (SJC) reversed.

Intended “to protect employees and their right to wages,” the Wage Act does not define “wages” but it does include any holiday or vacation payments due an employee, the court noted. The statute does not mention sick pay. While the absence of an explicit reference to sick pay in the statute did not end the inquiry, the court was reluctant to add language to a statute where the legislature has not done so.

“Further, we have previously declined to expand the meaning of ‘wages’ under the act to other types of compensation not expressly mentioned in the statute,” the SJC wrote, such as discretionary bonuses, severance pay and tax-exempt deferred compensation. “Upon review, we discern no reason to conclude that the Legislature intended to include sick pay as ‘wages’ under the Wage Act.”

Although sick time is similar to vacation time in that it often accrues as an employee works for an employer, it can be used only when the employee or a family member is ill.

“Thus, because its usage is conditional, i.e., employees do not have an absolute right to spend down their sick time, employees are not typically compensated for accrued, unused sick time,” the court explained. “And although an employee may use accrued sick time under appropriate conditions, such time may be considered ‘lost’ if not used. Such ‘use it or lose it’ sick time policies are common. Because accrued, unused sick time is not compensable under a ‘use it or lose it’ sick time policy, such time clearly is not a wage under the act.”

The MPA’s policy of paying a certain percentage of that sick time is essentially a contingent bonus paid to separating employees for not having used all of their accrued sick time and not engaging in conduct warranting termination for cause, the SJC said, declining to broadly construe the term “wages” to encompass such a contingent form of compensation.

Under the circumstances of the case, reaching a contrary conclusion would be an absurd result, the court added. The question of whether the agency owed Mui any sick pay at all was in dispute at the time of his separation, and the issue was not resolved until well after the Wage Act deadline had passed.

The SJC reversed and remanded the case for the trial court to enter judgment on the pleadings for the employer.

To read the opinion in Mui v. Massachusetts Port Authority, click here.