In the recent decision Crocker v. Townsend Oil Company, Inc., the Massachusetts Supreme Judicial Court held that a general release that intends to release claims under the Massachusetts Wage Act, M.G. L. c. 149, §148 ("Wage Act") will be enforceable as to those claims only if the release contains an explicit waiver of Wage Act claims. If specific language waiving Wage Act claims is not included in a general release, such claims will not be released.
This case arose out of the alleged misclassification of Plaintiff employees as independent contractors. In connection with the termination of their services, plaintiffs signed separation agreements that contained a general release of all claims. Subsequently, plaintiffs, claiming that they were, in fact, employees, brought suit under the Wage Act seeking unpaid wages and overtime. They argued that the general release was invalid as to the Wage Act claims under the language of the Wage Act that prohibits parties from entering into "special contracts" that affect employee rights under the Wage Act. Defendant argued that plaintiffs waived their Wage Act claims when they entered into an agreement that contained a general release.
Balancing the Wage Act's statutory language with the recognized policy of enforcing settlements and releases, the Court concluded that a general release can cover Wage Act claims but only if the release of the Wage Act claims is stated in "clear and unmistakable terms." The Court went on to say that "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."
The Court's decision is a significant one for employers who seek to limit their exposure to claims under the Wage Act. An employer who wishes to limit its liability under the Wage Act must ensure that a general release contained in a separation agreement specifically refers to a waiver of rights under the Wage Act and does so in language that is clear and understandable to the employee. Only by including such language will the release of Wage Act claims be enforceable.