A Massachusetts Federal District Court has held that an employer’s garden leave payments to a former employee pursuant to a non-compete provision are not considered “wages” under the Massachusetts Wage Act.
As a refresher, the Massachusetts Noncompetition Agreement Act (MNAA) sets forth certain conditions that must be included in any noncompete agreement for it to be deemed valid and enforceable. One such requirement is the provision of garden leave or other mutually agreed upon consideration. Under the MNAA, “garden leave” is where the former employee is paid at least 50% of their highest base salary on a pro rata basis during the entire restricted period.
In Carroll v. Mitsubishi Chemical America, the plaintiff, a former commercial operations director at Mitsubishi Chemical America (“MCA”), resigned from her position and took a job with a non-competitive employer in compliance with the non-compete provision of her employment contract. When MCA then sought to opt out of the non-compete provision and cancel related garden leave payments, Carroll sued, alleging breach of the employment contract and violation of the Wage Act.
On MCA’s motion to dismiss, the court declined to dismiss Carroll’s contract claims, but sided with MCA as to the Wage Act claim, reasoning that the garden leave payments were not “wages” within the meaning of the Wage Act. Moreover, the court stated that “there is no evidence that the Legislature intended to provide treble damages and attorneys’ fees...
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