The District of Massachusetts recently held that garden leave payments, whereby a former employee subject to a restrictive covenant is paid by the former employer for the duration of the restrictive period, do not constitute “wages” under the Massachusetts Wage Act.

In Carroll v. Mitsubishi Chemical America, Plaintiff Khristine Carroll, a former Director of Commercial Operations at Defendant Mitsubishi Chemical America (“MCA”), alleged that MCA breached its employment contract with her and unlawfully failed to provide her wages when MCA sought to opt out of the non-compete provision and related garden leave payments.

Carroll joined MCA when it acquired her original employer. In connection with the acquisition, MCA asked that Carroll sign an employment agreement (the “Agreement”) with restrictive covenants including a non-competition clause. For the extent of the 24-month period during which Carroll could not compete with MCA, Carroll was to receive a monthly fee equivalent to 100% of her highest monthly salary earned in the two-year period preceding the termination of her employment. The length of the non-compete period and the amount of the garden leave payments were “extensively negotiated.” Carroll ultimately executed the Agreement and began working for MCA.

However, Carroll ultimately resigned from her position and took a non-competitive position with another employer and curtailed her business activities to remain in compliance with the Agreement. Eventually, MCA...

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