The Massachusetts Supreme Judicial Court recently issued a
significant decision allowing employers to obtain an employee's
release of Massachusetts wage and hour claims as part of a
severance agreement. In Crocker v. Townsend Oil Company, Inc.
("Crocker"), the Massachusetts high court held that an
employee may release claims under the Massachusetts Wage Act
("MWA") in a severance agreement if the release language
meets certain criteria established by the Court.
In Crocker, two oil delivery drivers brought suit against Townsend
Oil Company claiming that they had been incorrectly classified as
independent contractors rather than employees while performing
services for Townsend. Accordingly, the plaintiffs alleged that
they were owed a substantial amount of unpaid wages and overtime
under the MWA. In addition to denying that the plaintiffs were
misclassified, the defendant company Townsend argued that the
plaintiffs had waived their MWA claims by executing a general
release of claims as part of each plaintiff's severance
agreement with the company.
Despite the MWA's statutory language providing that no person
"shall by a special contract or by any other means exempt
himself" from the MWA, the Court held that, in certain
circumstances, an employee may be able to release his or her MWA
claims to further the strong public policy favoring the
enforceability of general releases. As a result, Massachusetts
employers can now limit their exposure to state-based claims for
unpaid wages, including overtime, and also for failure to promptly
pay wages. The Court's holding is particularly significant
given that an employer found liable for violating the MWA is
subject to "treble" or triple damages, as well as
attorneys' fees and costs.
In order for a post-employment release of MWA claims to be
considered valid, the Crocker court ruled that it must be stated in
"clear and unmistakable terms." Specifically, "the
release must be plainly worded and understandable to the average
individual, and it must specifically refer to the rights and claims
under the Wage Act that the employee is waiving."
Unfortunately for Townsend, the Court determined that the
defendant's general release was insufficient to constitute a
release of the plaintiffs' MWA claims because they were not
clearly identified.
Despite the utility of the Court's ruling in Crocker allowing
employees to release MWA claims in a severance agreement, employers
must be aware that federal wage and hour claims, governed by the
Fair Labor Standards Act, cannot be released in a severance
agreement without a court's involvement and approval. Still, we
encourage employers to modify their severance agreements to take
advantage of this new, favorable ruling regarding the release of
MWA claims. The WilmerHale Labor and Employment Group is ready
to assist you in this regard.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.