One question that comes up in my practice is whether accrued but unused sick time is considered “wages” under Massachusetts law and if an employer must pay a terminated employee such unused sick time upon termination. The Massachusetts Supreme Judicial Court has decided in a very recent case that unused sick time is not “wages.”
On January 29, 2018, the Massachusetts Supreme Judicial Court clarified this issue for a specific type of sick time payout plan. In the case of Mui v. Massachusetts Port Authority, MassPort had a policy to pay a percentage of unpaid sick time to certain eligible employees at the separation from employment. This payout was a benefit to reward employees for not using all of their sick time. Employees had to be employed for 2 years with MassPort, and not terminated for cause. A terminated employee brought suit under the Massachusetts Wage Act after MassPort refused to pay the employee, stating he was ineligible for this benefit.
The Wage Act, requires employers to pay all “wages” owed to any employee discharge from employment on the day of discharge. The employee in Mui v. MassPort argued that the sick time payout were “wages” under the Wage Act. As the Court noted, the Wage Act does not define the word “wages”, but the statute states that wages include any “holiday or vacation payments due an employee under an oral or written agreement” and “commissions when the amount of such commissions … has been definitely determined and has become due and payable to the employee.” The Court specifically pointed out that the Wage Act does not mention sick pay, and it refused to expand the definition to add compensation not expressly referenced by the legislature in this law.
All employers must understand the laws surrounding sick time and review their written policies to determine their compliance with such laws. State laws differ on this issue and an experienced employment law attorney can assist you in determining whether your business’ policy complies with these laws.