Massachusetts employers should take a closer look at how they structure employee bonus plans. A recent state court ruling in Pres v. Sensys Gatso USA, Inc. serves as a cautionary tale. Vague or poorly defined bonus terms can result in those payments being considered “wages” under the Massachusetts Wage Act — a mistake that can carry mandatory treble damages and attorneys’ fees.
By way of background, the Massachusetts Wage Act (the Act) is known for its strict requirements for payment of “wages” and its automatic treble damages and payment of plaintiff’s attorney fees for violations. “Wages” generally include an employee’s earned salary, hourly pay, and certain commissions — amounts that are due in exchange for the employee’s regular labor or services. By contrast, contingent or discretionary compensation typically falls outside the purview of the Act, particularly where payment is conditioned on clearly defined criteria or continued employment through a specific date. But as Pres illustrates, simply labeling a bonus as contingent on “measured objectives” is not enough to keep it out of Wage Act’s purview.
Bonuses Without Clear Contingencies or Conditions May Be “Wages”
Pamela Pres was hired by Sensys Gatso USA, Inc. (SGU) in April 2021 as a Senior Accountant. Her written offer letter included an annual salary plus “four bonus payments totaling $9,000, against measured objectives.” SGU never defined “measured objectives” nor paid Ms. Pres any quarterly bonuses while she...
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