Employer Gets No Vacation From Its Vacation Pay Obligations

The Massachusetts Wage Act requires employers to pay involuntarily-separated employees the value of all accrued, unused vacation on their last day of employment. In a recent case before the Massachusetts Supreme Judicial Court (SJC), an employer that voluntarily continued a former employee’s salary for months, but failed to pay the employee his vacation pay when it terminated him, could not use the salary continuation to offset the vacation pay owed and was required to pay the employee the vacation pay owed, as well as his attorneys’ fees.

Gary Dixon was the Director of a nursing home owned by the City of Malden from 1983 until he was separated from employment in March 2007. At the time of his separation, Dixon had fifty days of unused vacation time, which totaled $13,615.54. Although not obligated to do so, the City continued Dixon’s benefits and paid him $19,700 in salary through June 2007. His final paystub in June reflected fifty vacation days still accrued, and Dixon wanted that money.

Dixon filed a lawsuit in the Superior Court, which dismissed his claim because he had been paid more in salary than he was owed as vacation. He appealed to the Massachusetts Appeals Court, but the Supreme Judicial Court took an interest in the matter and transferred the case to itself to determine whether the gratuitous weekly payments the City of Malden made to Dixon covered his claim for vacation pay owed. It concluded that it did not.

The SJC concluded that the City still owed Dixon his vacation pay and, because of that, he was entitled to his attorneys’ fees associated with the litigation. The SJC pointed out that the City did not comply with the Attorney General’s Advisory 99/1 that requires employers to pay employees unused vacation (and holiday) pay at the time of their separation from employment. Further, the City did not identify the subsequent payments to Dixon as vacation pay and his vacation balance on his pay stubs continued to reflect 50 days owed. The SJC also noted that the pay was due on Dixon’s final day of employment. The employer got lucky on one issue: At the time, whether to award treble damages was optional. In this case, the Superior Court had concluded that treble damages were not warranted, and the SJC upheld that conclusion. Dixon v. City of Malden, SJC–11137 (March 4, 2013). Today, employers are strictly liable for triple any amounts determined to be owed under the Wage Act.

With mandatory triple damages and attorneys’ fees afforded to successful employees under the MA Wage Act, employers might want to review the AG’s Vacation Pay Advisory to make sure their policies and procedures are in compliance. The Advisory can be found here.