Testimony of Philip Gordon Before The Labor and Workforce Development Committee

S. 928 – An Act to Protect Employee Wages

and

H. 3775 – An Act to Protect Employees from Unscrupulous Employers
Introduction (by Philip J. Gordon)

Chairman McGee, Chairman Rodrigues and distinguished members of the Committee. Good morning. We are here today to ask you to clarify Massachusetts law so there is no mistake that when an employer fails to pay an employee their wages, that employee is entitled to three times the amount owed – not as a punishment for employers, but rather as compensation for the great harm employees suffer when employers skip payroll. Doing so will also help level our business playing field, by making certain that when businesses operate in our Commonwealth, they aren’t competing against dishonest employers who cheat their employees and use their payroll stash to unfairly underbid competition.

We testify before you today in support of S.928 and H.3775, Acts clarifying the provisions of the Wage Act in Massachusetts. My name is Philip Gordon, and I am an attorney with the firm Gordon and Balikian, LLP. I am joined on this panel today by Mr. Ara Balikian and Mr. Dennis Rugoletti.

Mr. Balikian is an attorney and my law partner. We practice in the area of employment litigation with a specialty in wage and hour law, and we represent many individuals who have been victimized by unscrupulous employers who fail to pay their employees for the work they have performed. Mr. Rugoletti is one of those individuals.

Mr. Rugoletti will tell you his story – one where his employer not only failed to pay his salary, but also promised him health insurance and then failed to pay the premiums. Mr. Rugoletti’s wife was just diagnosed with cancer. So, not only is his family without his pay, but they have no health insurance for her care. Their story is one of thousands of employees victimized each year that underscore the need for legislation clarifying the important and strong protections afforded under Massachusetts law.

I will submit written testimony from all of us at the conclusion of our panel, along with a couple of word changes to the filed legislation recommended by a member of this committee during a meeting we had prior to today’s hearing.

The written testimony below is of both Messrs. Gordon and Balikian, combined here for your convenience.

Current Law

Presently, Massachusetts’ statutory law assures that employees are paid wages at regular intervals for work performed, under what has come to be called the Wage Act (M.G.L. c.149). This requirement applies to wages in the form of hourly and prevailing wages, salary, earned commissions, accrued vacation, holiday pay and offered benefits (the corresponding statutes, c.151, regulates overtime pay). If a company fails to pay an employee, the employee must first file a claim with the attorney general, and then, after the attorney general has reviewed the claim or 90 days has passed, the law provides the Employee a private right of action directly against the employer. You should note that this does not apply to the relationship between businesses and independent contractors – only that relationship between employers and employees.

Intent of the Wage Act

When signed into law in 1886, the Legislature recognized the imbalance between employers and employees, as well as the competitive landscape among businesses, and enacted the Wage Act (1) to deter employers from denying their employees earned wages, (2) to impose a structure to compensate employees for their losses, and (3) to level the playing field among businesses operating in the Commonwealth.

In 1993, the Legislature strengthened the Act by inserting the words “including treble damages” as a required remedy for violation of the Act. The Legislature could have used the more flexible “may” language with respect to the treble damages, as they did in 1969 with the c.93A legislation, but they did not. Mandatory multiple damages requirement was not only necessary to protect employers and employees, it was also not unusual, particularly in the wage area. Federal law has required it for failure to pay overtime or minimum wages since 1977 and many other states do the same. But, the statutory language in Massachusetts has been misinterpreted.

Why mandatory, multiple damages? Because of the serious problems that arise when employees aren’t paid – missed rent, student loans, tax payments, health insurance premiums, car payments, groceries, etc. – and for which anything less than multiple damages could not compensate. With payroll services, easy to use computer programs, accountants and plenty of other ways to make sure employers never miss payments, there’s no excuse to justify the far reaching effects of missed payroll.

The undeniable original intent of our state law was for treble damages remedy to be mandatory. Treble damages obviously serves the purpose of deterring employers from taking advantage of their employees, compensating employees for their losses, and leveling the playing field for honest employers doing business against those who use their payroll cash to compete.

Problem

Unfortunately, while the vast majority of judges correctly interpret the statute, a certain few have been misinterpreting the awarding of treble damages to be at their discretion. What is presently just a few isolated cases of misinterpretations could however, lead to widespread confusion as to the intent of the statute, and the consequences for misinterpretation of the law are far reaching.

For those few cases that go to court, when judgment is awarded to the employee in a Wage Act case without the award of treble damages, the employer at fault benefits unfairly by essentially paying only what was originally owed to the employee. Thus, the employer gets the benefit of using unpaid wages to their advantage while employees are forced to hire a lawyer – that is, if they can afford an attorney. And then they must hope that months or years later they are able to recover the wages that were due. This leaves the employee without compensation for their suffering and has an extremely adverse effect on their families and the community. It also fails to deter future violations.

By passing S.928 and H.3775 and clarifying your intent, you also serve employers. When a company withholds wages, it can utilize the savings to underbid its competition or unfairly lower the costs of its products or services. The ramifications from dishonest competitors can be devastating, especially for small businesses abiding by the law, paying wages and taxes on wages. The Legislature has an interest in ensuring a level playing field amongst employers. By clarifying the Wage Act, all employers are protected.

Caveat

Finally, we would strongly caution against changing the statute, and our opinion weakening it, by including any provision that suggests that treble damages are mandatory only in cases where there is willful conduct or in cases of multiple offenses. In addition to being unwarranted and counter to the original intent of the law, such language would create a giant loophole for unscrupulous employers to legally avoid paying their employees, and impose a chilling effect on the class of individuals who could not hire an attorney to represent them through the “intent” hurdle – exactly the group of workers the statute was designed to protect. Employers would simply use their spending power on attorneys hired to create doubt and argue innocent intent, dragging a case on for years and making it extremely hard for an employee to prevail or to hire an attorney to represent them at the outset.

Solution

S.928 and H. 3775 clarifies the Legislature’s view that withholding pay from an employee is an act warranting treble damages, as compensation for damages and not subject to the interpretation of individual or legislative judges. This bill ensures proper interpretation and application of the Wage Act benefiting and protecting employees and employers – a win for all of your employers and constituents.

Thank you for the opportunity to testify in support this legislation. We look forward to getting a favorable review from the Committee.