In a recently decided case, the Supreme Judicial Court held that two employees who asserted claims under the Massachusetts Wage Act, G.L. c. 149, §§148 and 150, were entitled to recover attorneys’ fees from their former employer where the parties had entered into a private settlement agreement. In Ferman v. Sturgis Cleaners, Inc., the SJC held that the employees were entitled to an award of attorneys’ fees where their lawsuit acted as a “necessary and important factor” in causing their former employer to “provide a material portion” of the relief they requested in the form of a private settlement.
In Ferman, the plaintiffs-employees alleged that their former employer failed to pay them approximately $28,000 in unpaid regular and overtime wages. Ultimately, the parties entered into a settlement agreement by which the employer agreed to pay the former employees $20,500, but reserved the issue of the employees’ attorneys’ fees for the court to resolve. The Superior Court determined that the employees were the prevailing party because their lawsuit was a necessary and important factor in obtaining from their former employer a material portion of their claims in a settlement, i.e. 70% of their demand.
The SJC affirmed the Superior Court’s decision, expressly adopting the use of the “catalyst test” when determining whether employees who bring suit under the Wage Act are prevailing parties and, therefore, entitled to attorneys’ fees and costs. The Court wrote, “a plaintiff prevails for the purposes of an award of attorneys’ fees under the Wage Act when his or her suit satisfies the catalyst test by acting as a necessary and important factor in causing the defendant to provide a material portion of the relief demanded in the plaintiff’s complaint.” Applying this reasoning, the Court held that the Ferman employees qualified as prevailing parties for the purposes of an award of attorneys’ fees, regardless of whether the settlement was court approved.
The Court also recognized that its holding promoted two purposes of the Wage Act: (1) to deter unlawful conduct; and (2) to incentivize attorneys to take cases that otherwise would not be financially prudent for them to take. Further, the Court noted that the catalyst test encourages the prompt settlement of meritorious claims.
As a result of Ferman, employers who settle Wage Act claims with their employees should address the award of any attorneys’ fees as part of their Wage Act settlement to avoid the possibility of any further liability. Otherwise, they may be facing a separate claim for attorneys’ fees. Additionally, employers faced with meritorious Wage Act claims may want to settle these matters sooner rather than later in order to avoid a run-up of the employees’ attorneys’ fees.