In Boesel v. Swaptree, Inc., the Massachusetts Superior Court (Court) held that a mandatory Annual Bonus was contingent on continued employment, and therefore was not a "wage" under the Massachusetts Wage Act, M.G.L. ch. 148, § 148 (Wage Act).

The plaintiff, Gregory Boesel, was Swaptree's founder and former CEO. According to the complaint, in March 2010 Boesel resigned as CEO and entered into a separate employment agreement where he accepted the position of President, while continuing to be a board member and stockholder. Under the employment agreement, Boesel received a base salary and was eligible to receive a mandatory Annual Bonus of $25,000 per year and a discretionary bonus of up to $100,000 based on achievement of performance goals. Both bonuses were payable "at the same time as such bonuses for the CEO are payable." The CEO's bonuses were payable after the calendar year ended.

Swaptree did not pay Boesel an Annual Bonus in 2011 or a discretionary bonus for 2010. Boesel demanded payment of the bonuses. After an unsatisfactory response from the company, Boesel filed a complaint against Swaptree and five individual defendants (all directors/executives of Swaptree) with the Attorney General's office, and then filed suit in the Court. Boesel's complaint also included other claims, such as failure to pay earned vacation, breach of fiduciary duty and intentional interference with contractual relations. While Boesel was in the process of filing the suit, Swaptree paid him his 2010 Annual Bonus in December 2011 and paid his 2011 Annual Bonus in March 2012. Boesel proceeded with his claims, alleging that the payment of the bonuses was untimely under the Wage Act.

Boesel's claims against Swaptree were dismissed due to an arbitration agreement. Boesel continued with his claims against the individual defendants and moved for summary judgment on the Wage Act claim. The individual defendants cross-moved for summary judgment.

The Court examined the employment agreement and found it to be clear and unambiguous. The Court noted that Boesel's salary and Annual Bonus were defined in separate paragraphs and contained different terms with respect to when the amounts were "payable." The Annual Bonus was payable only on a single date after the calendar year ended, and the Court determined that the word "Annual" meant that payment of the bonus was contingent on Boesel being employed for a full calendar year. The Court concluded that the Annual Bonus was not a "wage" because payment was attached to a contingency (continued employment). The Court cited to earlier decisions from the Supreme Judicial Court and U.S. Court of Appeals for the First Circuit that held that payments attached to a contingency are not "wages" under the Wage Act.

While this case is helpful to employers seeking avoid to avoid Wage Act claims (and mandatory treble damages and attorneys' fees), employers should review employment agreements to ensure bonuses (or other payments) that are contingent and/or discretionary are unambiguously described as such.

Table of Cases

Meshna, et al. v. Scrivanos, et al., SJC-11618.

C.R.T.R., Inc. v. Lao, et al., No. 2011-962 (Mass. Super. Ct. Dec. 30, 2013)

Angiuoni v. Town of Billerica, et al., No. 11-11661-NMG (D. Mass. Feb. 5, 2014)

Travers v. Flight Servs. & Sys., Inc., No. 13-1438 (1st Cir. Dec. 12, 2013)

Boesel v. Swaptree, Inc., et al., No. 11-04537 (Mass. Super. Ct. December 23, 2013)