(Written by John Duke of Seyfarth Shaw’s Wage & Hour Litigation Practice Group)
A Massachusetts Superior Court recently held for the first time that severance payment are “wages” covered by the Massachusetts Wage Act, Mass. Gen. Laws ch. 149, §§ 148 et seq. In Juergens v. MicroGroup Inc., Albert Juergens alleged that his employer, MicroGroup, promised to pay him six months salary in severance if he was terminated without cause. A couple of years later, MicroGroup informed Juergens that his position was being eliminated and laid him off without paying the promised severance.
Juergens sued MicroGroup alleging that MicroGroup violated the Wage Act by not paying him severance upon his termination. MicroGroup moved to dismiss the claim, relying on the Massachusetts Appeals Court’s decision in Prozinski v. Northeast Real Estate Services, LLC, which held that severance payments were not “wages” under the Wage Act. With little analysis other than pointing out that the Prozinski decision had issued before the Supreme Judicial Court 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 the motion to dismiss.
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.