Recent Massachusetts Wage Act Decisions: Key Compliance Insights for Employers

Massachusetts employers know the importance of complying with the state’s Wage Act, G.L. c. 149, § 148. Two recent court decisions offer fresh guidance to help employers achieve compliance, including around paying PTO upon separation of employment and regarding the Wage Act’s reach beyond state borders.

Siedel et al. v. GPM Investments, LLC 

The Siedel case presented a question of first impression for the Massachusetts Superior Court: whether an employer with a single “annual leave” PTO policy may designate a fixed number of hours as vacation time for purposes of the Wage Act, thereby limiting payout obligations upon separation. The court held that such a designation is permissible. Relying heavily on the Attorney General’s Advisory 99/1, which instructs employers to specify what portion of PTO counts as vacation, the court reasoned that this interpretation avoids uncertainty and aligns with the statutory language. The court rejected the employee’s argument that all accrued PTO should be treated as vacation, noting that the Wage Act does not require employers to provide vacation at all. The Wage Act requires only to pay out upon separation what is contractually designated as vacation. Thus, the employer’s policy designating 24 hours of PTO as vacation complied with the Wage Act.

Key Takeaways for Employers from Siedel

• Designation Matters and Advanced Designation is Key: Using Siedel as precedent, employers offering a single PTO bank may be able to designate clearly a set number of hours as vacation for Wage Act purposes.
• No Obligation to Provide Vacation: The Wage Act does not require vacation benefits; it only governs payment for vacation time promised.
• The Siedel decision is not binding appellate precedent, so employers should work closely with counsel to consider the structure of their PTO policy to ensure compliance with the Wage Act.

Serebrennikov v. Proxet Group LLC d/b/a Rails Reactor and Vladimir Medvedovsky

In Serebrennikov, the Massachusetts federal district court, after finding that the executive at issue was an employee and not an independent contractor, held that the Wage Act applied to an out-of-state resident because Massachusetts was “the state with the most significant connection to the parties’ working relationship.” In applying the “significant relationship test”, the court considered the following factors in reaching its conclusion: the employer’s location, the location where the employee performs work, the frequency of interactions between employer and employee in Massachusetts, whether another state has a significant relationship with the employee and work performance, and whether a contract exists that includes a choice of law provision.

The court concluded that the executive’s work benefitted, and was directed by, a Massachusetts entity, and allowed claims for unpaid vacation time and certain travel expenses to proceed (although it dismissed the employee’s discretionary bonus claim). 

Key Takeaways for Employers from Serebrennikov

• As has always been the case, labels in agreements do not override statutory obligations, i.e., one is not an independent contractor just because a written agreement states as much.
• Employers with remote workers or operations across states should evaluate whether Massachusetts law could govern certain aspects of employment, by assessing which state has the most “significant relationship” to the employee.
• Employers should draft employment contracts with due care, particularly with respect to choice of law provisions that govern relationships with employees in states that differ from where the employer is headquartered.

Mintz employment attorneys stand by ready to review employer policies and worker classifications to ensure Wage Act compliance.

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