Waiving Wage Act Claims

A recent case as resulted in an important update to the Wage Act, concerning statute of limitations and what is a valid release. The Townsend Oil Company, Inc., barely a stone throw away from my office, was in court over a Wage Act dispute involving two important legal doctrines for employers and employees:  independent contractors v. employees and the resulting liability for misclassifying workers and Wage Act releases in settlements as occurred here. The Court did not deal with releasing future claims as in an employment contract, something it said was far more problematic.

The plaintiffs, Crocker and Barrasso, were hired as independent contractors over a decade ago, delivering oil for the company, working full time.  By contract, as independent contractors, they had the company logo on their trucks, and only delivered for the Company, having signed a non-compete agreement as well.

In 2007, both contractors were let go, and signed termination agreements with general claims releases, apparently not knowing that they were technically misclassified employees, and were entitled to Wage Act protections. This is the claim anyway. The Superior Court judge reported the issue of the applicable statute of limitations doctrine and the validity of the waiver language for  our Supreme Judicial Court to review. 

First, the Court  held that the continuing violation doctrine that allows discrimination claims sometimes to extend well beyond the statute of limitations (300 days in MA) when events string together in a connected series does not apply. Under the Wage Act with each pay check a discrete act, the 3 year statute of limitations is it.  The Plaintiffs could only go back that far from date of filing in Court.

Second, due to the language of the Wage Act  the “special contracts” language was upheld in that the general release language used by Townsend does not include giving up the rights to Wage Act protections. “No person shall by a special contract with an employee or by any other means exempt himself from this section or from section one hundred and fifty […]”

Due to the Wage Act language, the conclusion was that the plaintiff could recover damages, and Wage Act rights can ONLY be waived in a release, provided there is language specifically stating that the rights  under the Wages Act are being released, and that the release is voluntary and knowing. The Court concluded that the “release must be plainly worded and understandable to the average individual, and it must specifically refer to the rights and claims under the Wage Act that the employee is waiving.”  See  Crocker v. Townsend Oil Company, Inc., 464 Mass. 1 (2012).

This case adds clarity and a dilemma in advising businesses. When I advise employers,  considering a release  for severance pay, we usually have competing considerations. With the specific ADEA release language for those over 40, employers weigh the mandatory language about advice to seek legal counsel and alerting employees about their rights.  The risk of suit, potential damages, etc. are factors  in deciding whether to make and the amount of any offer of  severance pay. Now, businesses should get advice about possible wage act claims that can come in many flavors. We must discuss the risk of informing the employee of possible Wage Act claims, going back three years with triple damages and other related monetary damages. We also must advise full disclosure as required in this case for a valid release. Some clients, however, may be willing to take the risk of a later suit and sit on the other horn of the dilemma posed by this case.

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