Massachusetts Wage Act Reminder

We would like to take this opportunity to remind you about some of the less known idiosyncrasies of the Massachusetts Wage Act (the “Wage Act”), which have been a source of increasing litigation in recent years. The Wage Act is designed to ensure employees are paid timely and fairly; however, more and more we are seeing clients threatened with litigation over what was previously considered minor administrative errors. Therefore, compliance with the strict requirements of the law is crucial for avoiding costly disputes.

6-Day Payment Requirement: Under the Massachusetts Wage Act, employers are required to pay employees within 6 days after the end of each pay period. This applies regardless of how frequently an employee is paid. For example, if the pay period ends on a Friday, employees must receive their wages by the following Thursday at the latest. Failure to meet this timeline can result in large penalties under the Wage Act, including treble damages, interest on unpaid wages, and payment of the employee’s attorney’s fees.

Frequency of Pay Cycles:

• Nonexempt Employees: Under the Wage Act, nonexempt employees (those eligible for overtime) must be paid at least weekly or bi-weekly. This ensures that nonexempt employees are compensated frequently enough to account for hourly work and overtime pay. Accordingly, employers should note that semi-monthly payroll is not legal for nonexempt employees under the Wage Act.

• Exempt Employees: Exempt employees (those not eligible for overtime, typically salaried employees in managerial, professional, or administrative roles) may be paid on a weekly, bi-weekly, or semimonthly basis. Employers may only pay Massachusetts employees on a monthly basis if “such employee elects at [their] own option to be paid monthly.” The flexibility in pay cycle frequency allows employers to tailor payment schedules for their exempt workforce. However, even exempt employees must be paid within the 6-day period after the end of each pay cycle.

Recent Litigation and Compliance Risks: There has been an uptick in litigation in Massachusetts over Wage Act violations, which often involve technical violations, such as disputes regarding pay dates, pay frequency, deductions, commissions, and wage calculations. As a result, employers are facing an increasing risk of litigation for even minor compliance and timing issues. Something as minor as processing a payroll late or having final pay paid out the day after a termination via direct deposit can result in claims for treble damages. Employers should take care to avoid the legal and financial consequences that can result from these violations.

Practical Considerations:

• The Wage Act can lead to unexpected and sometimes complex issues, especially in terms of wage payment frequency and overtime calculations. Employers are strongly encouraged to review their pay practices, consult legal advisors regularly, and make adjustments as necessary to avoid potential disputes or legal action.

• Employers should review their payroll practices regularly to ensure they comply with the 6-day payment requirement and the permissible pay cycle frequency for both nonexempt and exempt employees. • If terminating an employee, consider delaying the effective date of the termination, to allow for payment to be made on the last day of employment.

• As always, regularly audit classifications of positions to ensure you are properly classifying exempt and nonexempt employees given the additional risk under the Wage Act related to pay frequency.

Please do not hesitate to contact us with any questions or concerns regarding compliance with the Wage Act. We’re here to help you navigate these complexities.

To discuss any concerns you may have about your payroll practices, please contact:

• Alicia Ward (award@hrwlawyers.com / 617-348-4357);

• Samantha Halem (shalem@hrwlawyers.com / 781-235-4878);

• Catherine Reuben (creuben@hrwlawyers.com / 617-348-4316); or

• Any member of the HRW Team.

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