An issue often facing employers, in every state, is: when does sick time or vacation time become wages and under what conditions should these days be paid out, especially when an employee separates employment. The Supreme Court of Massachusetts has weighed in on this and held that accrued, unused sick time is not wages under state law. The case is entitled Mui v. Massachusetts Port Authority, and issued from the Massachusetts Supreme Judicial Court.
The Court vacated a lower court’s decision for the employee, who had claimed that the Massachusetts Wage Act mandated that a separated employee be paid in full on the next regular pay day. Thus, argued the employee, by failing to pay him “on time” for this accrued, unused sick time, the Port Authority violated the law. The Court observed that the statute “does not mention sick pay,” and that a court does not “add language to a statute where the Legislature has not done so itself.” In this regard, the Legislature had refused to expand the meaning of wages under the statute other than those forms of compensation specifically mentioned.
The Court observed that “although an employee may use accrued sick time under appropriate conditions, such time may be considered ‘lost’ if not used. Such ‘use it or lose it’ sick time policies are common. 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 noted that the Authority’s policy was to pay separated employees a percentage of their accrued, unused sick time so long as they have worked there for at least two years and were not terminated for cause. Nevertheless, the Court stated that the only contingent compensation recognized as wages in the Massachusetts Wage Act was commissions and the word “wages” did not include any other type of contingent compensation.
Employers implementing sick leave, vacation or other policies, e.g. PTO, must always insert in the policy what happens to accrued, but unused, or unearned, time upon separation. And the employer can distinguish between those fired for cause and those who voluntarily resign.
As an employer should…