Pay violations will trigger new penalties
Employers who fail to pay workers full wages, withhold their final paychecks, or deprive them of overtime pay could be hit with triple penalties under a new state law passed yesterday.
The law, designed in part to compensate employees whose credit was damaged or whose bills piled up because they weren't properly paid, would impose mandatory treble damages on employers who are found in court to have violated so-called wage-and-hour laws.
Supporters said the new rule will deter unprincipled companies from neglecting to pay their workers fairly and promptly.
Opponents said the law will unjustly penalize employers who make honest mistakes in determining which workers are owed overtime pay and will hurt cash-strapped companies that can't make payroll because of financing problems. They also said the prospect of triple damages could make Massachusetts a target for wage-and-hour lawsuits.
The measure, which Governor Deval Patrick allowed to become law without his signature, was put in motion by a 2005 Supreme Judicial Court decision in Wiedmann v. Bradford Group Inc. In that case, the court ruled triple damages may be awarded when an employer is found to have acted with "reckless indifference" or "evil motive." Previously, the triple damages standard was less clear, so some judges imposed it automatically while others used wider discretion.
Lawyers who represent employees argued that without a mandatory treble damages penalty, employers who lost wage-violation lawsuits could be ordered to reimburse workers for back pay, plus interest - but not have to compensate them for the financial ripple effects caused by not having paid them properly in the first place. Many employment attorneys said that was an inadequate remedy.
"If you don't get your wages, your credit report may suffer, you may miss mortgage payments or health payments, and you may have to decide whether you're going to buy food or clothing this month," said Philip J. Gordon, a Boston lawyer who represents employees in wage disputes and contract negotiations. "So this law sets in place a mechanism to compensate employees for their losses, and it tells employers in this state to take the payment of wages seriously."
But Boston lawyer Richard L. Alfred, who frequently defends companies in class-action wage-and-hour cases, said the new law was "very ill-conceived."
"It's bad for business in Massachusetts, it's bad policy, and it's not consistent with the governor and the Legislature's efforts to promote business," Alfred said. "Ultimately, it's going to hurt the working people of the state because this is going to be a disincentive for businesses to locate here and to expand."
Alfred said a complicated network of state and federal laws is often interpreted in conflicting ways by employers, lawyers, and government agencies. For example, professional, executive, and administrative employees are exempt from overtime pay, but interpretations differ as to what jobs fall into those categories.
As a result of the complexities, Alfred said, companies that mistakenly classify employees should not be automatically subjected to triple penalties.
But Gordon, noting that only employees who sue their employers and win in court would be entitled to triple damages, said: "The majority of employers who act in good faith aren't running into problems, because their employees aren't suing them."
Alfred believes the law will make the state a magnet for wage-and-hour lawsuits.
"There is predictably going to be a large influx of litigation here, aimed at Massachusetts employers, who will then be put in the very difficult position of being second-guessed on good-faith decisions where sound minds and very reasonable, rational people would differ as to the result," he said.
Sacha Pfeiffer can be reached at pfeiffer@globe.com.
