The Massachusetts Supreme Judicial Court has held that accrued, unused sick time is not “wages” by the Massachusetts Wage Act, M.G.L.c. 149, § 148, and thus does not require payment within the time frame prescribed by the Act.

Tze-Kit Mui v. Massachusetts Port Authority

The sick leave policy of the Massachusetts Port Authority allows “eligible employees” – that is, employees who have been employed by Massport for more than two years and who have not been terminated for cause – to be paid a percentage of their accrued, unused sick time upon separation from Massport. The policy was in place before the adoption of the state Earned Sick Time Law, which specifically provides that employers are not required to compensate employees for accrued, unused sick time.

Tze-Kit Mui, a longtime employee of Massport, applied for retirement while disciplinary charges against him were pending, and several weeks later, Massport discharged him for cause. Because the termination was for cause, Massport did not pay him for his accrued, unused sick time. An arbitrator subsequently overturned the discharge, finding that Mr. Mui could not have been discharged because he had already retired. Once the arbitrator ruled that Mr. Mui had retired, Massport paid him the full value of his accrued, unused sick leave. However, because the grievance proceedings lasted for more than a year, he was not paid his sick leave “on the day of his discharge.” The Massachusetts Wage Act requires that “any employee discharged from employment shall be paid in full on the day of his discharge the wages or salary earned by him.”

Mr. Mui then sued Massport under the Wage Act, contending that he was entitled to treble damages because Massport had failed to pay his sick leave within the time frame required by the Act.

The superior court determined that Mr. Mui’s accrued, unused sick time was “wages” under the Wage Act and granted Mr. Mui’s motion for judgment on the pleadings. Massport appealed, and on its own initiative, the Supreme Judicial Court transferred the case from the appeals court.

The Supreme Judicial Court reviewed the lower court’s decision de novo and based on the plain language of the Wage Act. The Wage Act does not define “wages,” but says that “’wages’ shall include any holiday or vacation payments due an employee under oral or written agreement” as well as “commissions when the amount of such commissions has been definitely determined and has become due and payable to the employee.” (Emphasis added.)

“Notably, the act does not mention sick pay,” the Court said, “[but] the word ‘include’ in a statute generally signals that entities not specifically enumerated are not [necessarily] excluded.” Nonetheless, the Court concluded that it could discern no legislative intent to include sick pay as “wages.”

The Court contrasted vacation time with sick time, noting that vacation time can be used for any reason while sick time is to be used only for certain reasons, such as the illness of an employee or the employee’s family member. “Thus, because its usage is conditional,” the Court said, “. . . employees are not typically compensated for accrued, unused sick time.” In addition, many employers have “use it or lose it” sick time policies, and “because accrued, unused sick time is not compensable under a ‘use it or lose it’ sick time policy, such time clearly is not a wage under the act.”

The Court concluded that Massport’s sick time policy was nothing more than a “contingent bonus” provided to employees who met certain criteria. “We have not broadly construed the term ‘wages’ for the purpose of the act to encompass any other type of contingent compensation [except commissions].”

Implications for employers with operations in Massachusetts

The Court’s decision in Mui is consistent with its other decisions on contingent compensation –that it is not “wages” under the Massachusetts Wage Act.

As already noted, Massport’s policy was in place before the state adopted the Earned Sick Time Law, and that law specifically provides that accrued, unusued sick leave does not have to be paid out to employees. However, if employers use vacation time to meet their obligations under the Earned Sick Time Law, then the accrued time will be “wages.” As the Attorney General’s FAQ regarding the Earned Sick Time Law notes, “Employers who use a vacation policy to meet the requirements of the earned sick time law should note that Massachusetts law requires unused vacation to be treated as any other wages. Employees must be paid for all earned vacation upon termination of employment.” (Emphasis added.)

For a printer-friendly copy, click here

Attorneys

Back to Page