The Superior Court recently held for the first time that severance payments are “wages” covered by the Massachusetts Wage Act.
In Juergens v. MicroGroup, Inc., Albert Juergens alleged that his employer, MicroGroup, Inc., promised to pay him six months’ salary in severance if he was ever terminated without cause. A few years later, MicroGroup informed Juergens that his position was being eliminated and laid him off without paying him any severance.
Juergens sued MicroGroup, alleging that the company violated the Wage Act by not paying him severance upon his termination. MicroGroup moved to dismiss the claim, relying on the Appeals Court’s decision in Prozinski v. Northeast Real Estate Services, LLC, 59 Mass. App. Ct. 599 (2003), which held that severance payments were not “wages” under the Wage Act. With little analysis other than pointing out that the Prozinski decision was issued before the SJC had “authorized a more expansive interpretation of the Wage Act,” the Court held that the definition of “wages” under the Wage Act should “not be limited to exclude severance pay” and denied MicroGroup’s motion to dismiss. While the Superior Court relied on Wiedmann v. The Bradford Group, Inc., 444 Mass 698 (2005), that decision does not address the issue of severance pay in any manner, and instead deals with the payment of commissions, which, unlike severance, are explicitly covered by the Wage Act pursuant to an oral employment contract.
While Massachusetts courts have long held that employees may assert contract claims against their former employers based on severance agreements, this is the first time a Massachusetts court has held that severance agreements are subject to the Wage Act.
Employers should be concerned about the Juergens decision because if other courts were to follow it, it would open up the full panoply of Wage Act remedies for an employer’s failure to pay severance, including treble damages and attorneys’ fees.