Employees Who Settle Cases Under the Wage Act Are Also Entitled to Attorneys’ Fees

Employers work hard to make sure employees can’t hire their own lawyers. One way to do that is to make sure employee-side lawyers cannot get paid, and that typically means fighting the court award of attorney’s fees.

An interesting question arose recently. Is an employee who settles a case under the Wage Act still entitled to an award of attorney’s fees?

On February 19, 2019,  the Massachusetts Supreme Judicial Court (“SJC”) ruled so, that employees who settle cases brought pursuant to the Massachusetts Wage Act (“Wage Act”) are indeed entitled to recover their attorneys’ fees, unless those are made part of the settlement.

In Ferman v. Sturgis Cleaners, Inc., 481 Mass. 488 (2019), the Plaintiffs filed suit against the Defendant, alleging that the Defendant failed to pay them approximately $28,000 in unpaid wages. On the eve of trial, the parties participated in a mediation that resulted in an agreement to settle the case for $20,500. Importantly, however, the parties reserved the issue of the Plaintiffs’ entitlement to attorneys’ fees for resolution by the Court. The Defendants argued that the Plaintiffs did not prevail, as required by the Wage Act, because they did not obtain judicial approval of the private settlement. The Plaintiffs, however, argued that the Court must apply the “catalyst test,”  whereby a Plaintiff may qualify as a prevailing party under the Wage Act if the “lawsuit is a necessary and important factor in causing the defendant to grant a material portion of the requested relief, a settlement agreement.”

The SJC held that the catalyst test applies in the context of determining prevailing parties under the Wage Act, because it promotes the two major purposes of a statutory fee-shifting provision: 1) to act as a powerful disincentive against unlawful conduct; and 2) to provide representation in cases that otherwise would not be financially prudent for an attorney to take on. “The catalyst test thus recognizes that successful litigation may be reflected in settlements as well as court rulings, as settlements are often ‘the products of pressure exerted by [a] lawsuit.’”

As a result, the SJC affirmed that the Plaintiffs were entitled to recover approximately $16,000 in attorneys fees and $1,000 in costs, in addition to the amount they received from their settlement. While attorneys’ fees are often negotiated privately during a settlement, Ferman provides a roadmap for seeking judicial intervention if the amount owed to the attorneys is the only impediment to settlement.

If you’re finding it hard to get paid your wages, let us know. We may be able to help.