The Massachusetts Wage Act governs the payment of wages. Employers who fail to pay “wages” within the strict deadlines set forth in the Act are subject to treble damages, attorneys’ fees, and costs. It is therefore essential to understand which forms of compensation constitute “wages” under the Act.
As explained in a previous post in The Fitch Briefs, salaries and fixed hourly wages present the most straightforward cases for application of the Act, while incentive payments require closer scrutiny. For example, commissions fall within the Act once they are “definitely determined” and “due and payable.” Profit-sharing arrangements, by contrast, are not covered by the Act because they are contingent on a set of factors broader than an employee’s individual labor or services.
Recently, in Nunez v. Syncsort Inc., the Massachusetts Supreme Judicial Court addressed whether retention bonuses—another form of incentive compensation—are “wages” under the Act. The SJC concluded that they are not.
In reaching this conclusion, the SJC reiterated that not all forms of employee compensation or benefits qualify as “wages.” Rather, “wages” are limited to payments made solely in exchange for an employee’s labor or services. Retention bonuses, by their nature, do not fit that mold. Retention bonuses are contingent payments made in exchange for an employee’s continued employment through a specified date, typically during a period of transition or uncertainty. Notably, they are paid in addition to the compensation an employee receives in exchange for performing his or her job.
Moreover, as in Nunez, retention bonuses often depend on further contractual requirements, such as the employee remaining in good standing and the employer’s obligation to pay the retention bonus if it terminates the employee without cause before the retention period ends.
Put simply, retention bonuses are not “wages” under the Wage Act. They are a form of additional, contingent compensation. As such, payment of retention bonuses is governed by the terms of the retention agreement itself, not the strict requirements of the Wage Act.
Wages, Retention Bonuses, Incentive Payments, Employment Law