From the interview:

Armstrong: “Can you explain what this new wage and labor bill sets out to do?”

Gordon: “The bill puts the teeth back into a 1993 law protecting wages that was the subject of a controversial decision by our state supreme court last summer. The bill requires employers who skip payroll to pay those employees 3 times the amount of the missed wages. The problem is that when employees miss their wages, they have tough decisions to make about paying rent or mortgage, medical care, taxes, food, tuition. The idea is not to punish employers for missing payroll, just to compensate employees for their suffering.”

Armstrong: “What types of compensation does it cover?”

Gordon: “It covers wages. That’s really just about anything an employee earns – hourly pay, salary, commissions, bonuses, benefits, vacation, overtime.”

Armstrong: “What about employers that make an honest mistake?”

Gordon: “It’s tough to make a mistake with payroll. You hire the employees, you set their hours, you set their pay rate, and you know when payroll is due. If you take it seriously, how do you mess that up? But, let’s say you somehow missed a payroll. Most employees won’t file a lawsuit if you apologize and make it up. Keep in mind that to get the triple damages, the employee has to file a law suit.”

Excerpts from the program:

Sullivan: “Why do we need this legislation?”

Gordon: “To strengthen a 1993 law protecting wages that was the subject of a controversial decision by our state supreme court last summer. The bill requires employers who skip payroll to pay those employees 3 times the amount of the missed wages.”

Sullivan: “How long does it take to get restitution?”

Gordon: “Typically, wages are due every two weeks, and it can take up to 18 months to prosecute a case. The reason for triple damages is straightforward – if, at the end of a case, all an employer has to pay is the original amount due, then there’s no incentive to abide by the law in the first place. Triple damages are the remedy.

The concept is simple: the employer hires the employee, sets the wages, sets the hours and knows when pay is due. This legislation is geared to compensate employees for losses incurred when they’re not paid – that’s where triple damages come into play.”

Sullivan: “What will the new law do?”

Gordon: “This law will do two things. First, it’s designed to be a deterrent – if you don’t pay your employees, you’ll owe them 3 times their wages. Second, it’s designed to compensate employees for damages they suffer. When workers don’t get paid, they may be left with very tough choices to make – do I pay the heating bill, buy food for the kids, or clothing? It compensates them for the hardships caused.

It’s also geared to leveling the playing for competitive businesses. This bill is good for business. For example, I got a call from a company out in Worcester. They’re in the mortgage business. They were consistently underbid by a competitor who was holding payroll and using the savings to lower costs. By cheating employees out of wages, he could underbid the honest businesses. The company wanted to know what could be done about this – that’s wear this legislation can help.

But mostly, it’s about employees who haven’t been paid wages. When I testified before the Labor and Workforce Development Committee on behalf of the bill, I was joined by Dennis Rugoletti, a client whose employer not only failed to pay his wages, including salary, but also promised him health insurance and then failed to pay the premiums. But he never told Dennis. Dennis only found out that he didn’t have insurance when his wife was diagnosed with cancer. His story is just one of the thousands of employees victimized each year that underscore the need for legislation clarifying the important and strong protections afforded under Massachusetts Law.”

Sullivan: “So what happens in a case like that?”

Gordon: “Unfortunately he has to sue, which can take quite awhile. He doesn’t get the money right away. Hopefully we can make the law strong enough and clear enough that defense attorneys can’t try to figure out ways to avoid compensating employees.”

Sullivan: “What about undocumented workers who may be afraid to report employers who cheat them out of wages?”

Gordon: “It’s a good question, but the law is clear – whether or not you’re documented, you deserve to get paid for your work. I know undocumented workers are hesitant to report problems because of concerns about getting deported. But if the employer chooses to make immigration status an issue, he puts himself in a vulnerable position for hiring illegal immigrants in the first place. In any case, that’s certainly one of the risks.”

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.