The Massachusetts Supreme Judicial Court recently addressed a significant issue to Massachusetts employers—whether general releases can bar employees from bringing Wage Act claims against their employers. Crocker v. Townsend Oil Co. Inc., No. SJC-11059 (December 17, 2012).

Charles Edward Crocker and Joseph Barrasso worked as delivery truck drivers for Townsend Oil Company, a home heating delivery business. The drivers claimed that they were misclassified as independent contractors by Townsend Oil and thus were owed compensation (including overtime). According to Townsend Oil, both truck drivers had signed general releases that would bar their claims under the Wage Act. A superior court judge granted summary judgment in favor of Townsend Oil, but a second judge vacated that decision on the basis that Wage Act claims cannot be waived with a general release.

The Massachusetts Supreme Judicial Court  noted that public policy favors both the Wage Act—whose purpose is to protect “employees and their right to wages”—and the enforceability of general releases. With these interests in mind, the court held that for an employee to release claims under the Massachusetts Wage Act, the release must be plainly worded in “clear and unmistakable” terms, “understandable to the average individual,” and must specifically refer to the rights and claims provided by the Wage Act.

Effect on Massachusetts Employers

In light of Crocker v. Townsend Oil, general releases that are often used in separation agreements are no longer sufficient to waive an employee’s Wage Act claims. Accordingly, employers should review their severance and separation agreements to ensure that the language in the release is clear and plainly worded, understandable to the average person, and explicitly refers to the Wage Act.

Failure to adhere to these requirements can be very costly—as an employer found liable for violating the Wage Act is subject to treble (triple) damages, attorneys’ fees, and costs.