Table of Contents III IV V VI i ii iii iv v vi vii vii ix x 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 Back Cover

Mass-Peculiarities - 2025 Edition

Authored by the Boston Office’s Wage & Hour Litigation Practice Group Mass-Peculiarities An Employer’s Guide to Wage & Hour Law in the Bay State 2025 Edition

© 2025 Seyfarth Shaw LLP All Rights Reserved 2025 MASSACHUSETTS PECULIARITIES An Employer’s Guide to Wage & Hour Law in the Bay State ____________________________________________________________________________ Editors in Chief Robert A. Fisher & Alison H. Silveira Wage & Hour Litigation Practice Group Seyfarth Shaw LLP Boston, Massachusetts Patrick J. Bannon Anthony S. Califano Erin Chow Ariel D. Cudkowicz Christina Duszlak C.J. Eaton Emily C. Ehl Robert A. Fisher Christopher W. Kelleher Adrienne C. Lee Hillary J. Massey Kristin G. McGurn Barry J. Miller Emily J. Miller Molly C. Mooney Beth Sherwood Alison H. Silveira Abigail D. Skinner Dawn Reddy Solowey Michael E. Steinberg Jean M. Wilson Seyfarth Shaw LLP Two Seaport Lane, Suite 1200 Boston, Massachusetts 02210 (617) 946-4800 www.seyfarth.com

© 2025 Seyfarth Shaw LLP Massachusetts Wage & Hour Peculiarities, 2025 ed. Legal Notice Copyrighted © 2025 SEYFARTH SHAW LLP. All rights reserved. Apart from any fair use for the purpose of private study or research permitted under applicable copyright laws, no part of this publication may be reproduced or transmitted by any means without the prior written permission of Seyfarth Shaw LLP. Important Disclaimer This publication is in the nature of general commentary only. It is not legal advice on any specific issue. The authors disclaim liability to any person in respect of anything done or omitted in reliance upon the contents of this publication. Readers should refrain from acting on the basis of any discussion contained in this publication without obtaining specific legal advice on the particular circumstances at issue. Comprehensive legal advice on any particular situation is beyond the scope of this publication. While we have tried to be accurate and up to date, the matters discussed herein are continuously subject to change. Because application of the law depends on the particular circumstances of each situation, readers should consult an attorney before acting. Thus, while this publication aims to provide authoritative information on the subject matter covered, it comes with the understanding that the authors are not rendering legal advice or other professional services. From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations.

© 2025 Seyfarth Shaw LLP Massachusetts Wage & Hour Peculiarities, 2025 ed. | i Table of Contents Page INTRODUCTION .......................................................................................................................... 1 I. THE MASSACHUSETTS WAGE ACT............................................................................ 2 A. Wages Under Massachusetts Law .......................................................................... 2 1. What Is Included in Wages (and What Is Not)? ......................................... 2 2. Commissions............................................................................................... 3 3. Vacation Pay ............................................................................................... 4 a. Caps and “Use It or Lose It” Policies ............................................. 5 b. General “Leave” Category .............................................................. 6 c. Designation of Accrual Rate ........................................................... 6 d. Unlimited Vacation Policies ........................................................... 7 e. Changes to Vacation Policies.......................................................... 7 4. Earned Sick Time........................................................................................ 7 5. Severance Payments.................................................................................... 8 6. Bonuses ....................................................................................................... 8 a. Discretionary Bonuses .................................................................... 8 b. Formulaic Bonuses.......................................................................... 9 7. Stock ........................................................................................................... 9 8. Expense Reimbursements ........................................................................... 9 B. Frequency and Timing of Payment....................................................................... 10 1. How Frequently Must Wages Be Paid? .................................................... 10 2. When Must Wages Be Paid?..................................................................... 10 3. Payment of Wages Upon Termination...................................................... 11 C. How Must Wages Be Paid? .................................................................................. 11 1. Checks and Drafts ..................................................................................... 11 2. Direct Deposit ........................................................................................... 12 3. Pay Cards .................................................................................................. 12 D. When Are Wages “Earned”? ................................................................................ 12 E. What Deductions Can an Employer Make from an Employee’s Wages? ............ 13 1. Mandatory Deductions.............................................................................. 13

Table of Contents (con’t) Page ii | Massachusetts Wage & Hour Peculiarities, 2025 ed. © 2025 Seyfarth Shaw LLP 2. Deductions Authorized by Statute ............................................................ 14 a. Deductions for Lodging and Meals............................................... 14 (1) Lodging ............................................................................. 14 (2) Meals................................................................................. 14 (3) Deductions and the Calculation of Overtime.................... 15 b. Uniforms – Deductions Not Allowed ........................................... 15 c. Other Statutorily Permissible Deductions..................................... 16 3. Deductions Not Specifically Listed Above............................................... 16 4. Employee Notification of Deductions ...................................................... 18 F. Unclaimed Wages ................................................................................................. 18 II. MINIMUM WAGE .......................................................................................................... 18 A. The Minimum Wage Rate in Massachusetts ........................................................ 19 1. Coverage Under the Massachusetts Minimum Fair Wage Law ............... 19 2. Coverage Under Federal Minimum Wage Law........................................ 20 B. The DLS’s Minimum Wage Regulations ............................................................. 20 C. Exemptions from Massachusetts and Federal Minimum Wage Law ................... 21 1. Volunteers ................................................................................................. 21 2. Interns/Trainees......................................................................................... 23 a. The Federal Exemption for Interns ............................................... 23 b. Massachusetts Exemption for Interns ........................................... 25 D. The Payment of Special Sub-Minimum Wages.................................................... 26 1. Tipped Employees .................................................................................... 27 2. Student Workers........................................................................................ 27 3. Workers with Disabilities ......................................................................... 28 E. The Prevailing Wage for Work on Public Contracts ............................................ 30 1. Construction of Public Works in Massachusetts ...................................... 31 2. Operation of Equipment in Public Works in Massachusetts .................... 33 3. Other Prevailing Wage Provisions in Massachusetts ............................... 33 4. Davis-Bacon and Related Acts ................................................................. 34

© 2025 Seyfarth Shaw LLP Massachusetts Wage & Hour Peculiarities, 2025 ed. | iii III. HOURS OF WORK & COMPENSABLE TIME ............................................................ 34 A. The Workweek...................................................................................................... 34 B. Compensable “Working Time”............................................................................. 35 1. Meal Breaks .............................................................................................. 35 a. Exemptions ................................................................................... 36 b. Liability for Missed, Late, or Short Breaks and Failure to Compensate Employees for Work Performed During Breaks ........................................................................................... 36 2. On-Call Time ............................................................................................ 38 3. Reporting Pay............................................................................................ 39 4. Sleep Time ................................................................................................ 40 5. Compensable Travel Time ........................................................................ 40 a. Commuting Time .......................................................................... 41 b. Overnight Travel ........................................................................... 42 c. Travel in a Company Vehicle ....................................................... 42 IV. OVERTIME ...................................................................................................................... 43 A. Calculation of the Regular Rate of Pay................................................................. 43 1. Compensation Included in the Calculation of the Regular Rate of Pay Under Federal Law ............................................................................ 44 2. Compensation Excluded from the Calculation of the Regular Rate of Pay Under Federal Law ........................................................................ 45 3. Additional Compensation Excluded from the Calculation of the Regular Rate of Pay Under Massachusetts Law ....................................... 45 4. Determining Whether to Apply the Massachusetts or Federal Calculation of the Regular Rate ................................................................ 46 5. Calculation of the Regular Rate for an Hourly Employee ........................ 46 6. Calculation of the Regular Rate for an Employee Paid on a Commission Basis Only............................................................................ 46 7. Calculation of the Regular Rate When a Bonus Is Included in the Rate ........................................................................................................... 47 8. Calculation of the Regular Rate for an Employee Paid by a Method Other Than an Hourly Rate....................................................................... 48 a. Piecework...................................................................................... 48 b. Day Rates and Job Rates............................................................... 49

Table of Contents (con’t) Page iv | Massachusetts Wage & Hour Peculiarities, 2025 ed. © 2025 Seyfarth Shaw LLP c. Semi-Monthly or Monthly Salary ................................................. 49 9. Calculation of the Regular Rate Using the Fluctuating Workweek Method (FWW)......................................................................................... 50 10. Calculation of the Regular Rate Using the Fixed Salary Method............. 52 11. Calculation of the Regular Rate for an Employee Working at Two or More Rates............................................................................................ 53 B. Sunday and Holiday Overtime Pay Requirements................................................ 54 V. EXEMPTIONS FROM OVERTIME ............................................................................... 54 A. White Collar Exemptions...................................................................................... 55 1. Minimum Compensation Requirements ................................................... 56 2. Salary Basis Test....................................................................................... 57 a. Compensation Paid in Addition to Salary..................................... 58 b. Deductions from Salary ................................................................ 58 (1) Deductions for Disciplinary Reasons................................ 59 (2) Deductions for Personal Absences.................................... 60 (3) Deductions for Sickness or Disability............................... 60 (4) Deductions Taken Pursuant to the Family and Medical Leave Act and Massachusetts Leave Laws......... 60 (5) Deductions from Vacation or Leave Banks ...................... 61 (6) Responses to Downturns in Business: Reductions in Pay and Furloughs............................................................. 62 c. Violations of the Salary Basis Test ............................................... 63 d. Safe Harbor for Employers That Make Impermissible Deductions .................................................................................... 64 3. Duties Tests for White Collar Exemptions ............................................... 65 a. Executive Employee Exemption................................................... 65 (1) Management Duties .......................................................... 66 (2) A Customarily Recognized Department or Subdivision ....................................................................... 67 (3) Directing the Work of at Least Two or More FullTime Employees ............................................................... 68

© 2025 Seyfarth Shaw LLP Massachusetts Wage & Hour Peculiarities, 2025 ed. | v (4) Authority Necessary to Qualify as an Executive .............. 68 (5) Application of Executive Exemption to an Employee Who Performs Both Exempt and NonExempt Duties................................................................... 69 b. Administrative Employee Exemption........................................... 71 (1) Primary Duty Is Office or Non-Manual Work Directly Related to the Management or General Business Operations of the Employer............................... 72 (2) Exercise of Discretion and Independent Judgment........... 74 (3) Matters of Significance ..................................................... 76 (4) Examples of Positions That Qualify for the Administrative Exemption ................................................ 77 (5) Examples of Positions That Do Not Qualify for the Administrative Exemption ................................................ 78 c. Professional Exemption ................................................................ 79 (1) Learned Professional Exemption ...................................... 79 (2) Creative Professional Exemption...................................... 82 d. Computer Professional Exemption ............................................... 84 4. Highly Compensated Employee Exemption ............................................. 86 B. Other Exemptions ................................................................................................. 87 1. Outside Sales Exemption .......................................................................... 87 a. Federal Outside Sales Exemption ................................................. 87 b. Massachusetts Outside Sales Exemption ...................................... 89 2. Federal Commissioned Inside Sales Exemption....................................... 90 3. Motor Carrier Exemptions ........................................................................ 91 a. Federal Motor Carrier Act Exemption .......................................... 91 b. Massachusetts Motor Carrier Exemption...................................... 93 c. Massachusetts Common Carrier Exemption................................. 94 4. Seasonal Exemptions ................................................................................ 94 a. Federal Seasonal Exemption......................................................... 94 b. Massachusetts Seasonal Exemptions ............................................ 95 5. Blanket Exemptions for Certain Businesses ............................................. 96 6. Other Massachusetts Exemptions ............................................................. 97

Table of Contents (con’t) Page vi | Massachusetts Wage & Hour Peculiarities, 2025 ed. © 2025 Seyfarth Shaw LLP VI. TIPS AND SERVICE CHARGES ................................................................................... 98 A. Definition of a Tip or Service Charge................................................................... 99 B. The Sharing of Tips and Service Charges........................................................... 102 C. “No Tipping” Policies......................................................................................... 105 D. Mandatory Pooling of Tips and Service Charges ............................................... 105 E. The Tip Credit and Service Rate......................................................................... 106 F. Liability for Violations ....................................................................................... 108 G. Penalties for Violations....................................................................................... 109 VII. MASSACHUSETTS EQUAL PAY ACT ...................................................................... 109 A. “Comparable Work” ........................................................................................... 110 B. Permitted Justifications for Wage Differentials.................................................. 111 C. Prohibition on Salary History Requests .............................................................. 112 D. Prohibition on Pay Secrecy Requirements.......................................................... 112 E. Self-Evaluation Defense ..................................................................................... 113 F. Damages.............................................................................................................. 114 VIII. SUNDAYS, HOLIDAYS AND DAYS OF REST......................................................... 114 A. Work on Sundays and Holidays.......................................................................... 114 1. Default “Closure Rule” ........................................................................... 115 2. Exemptions ............................................................................................. 115 3. Permits for Necessary Sunday Work or Labor ....................................... 115 4. Employees Who Work in Retail Establishments .................................... 116 a. Voluntariness of Work Requirement .......................................... 117 b. Former Sunday Premium Pay Requirement ............................... 117 5. Legal Holidays ........................................................................................ 118 6. Penalties for Violation of Sunday and Holiday Work Laws................... 121 B. Day of Rest Laws................................................................................................ 122 1. One Day of Rest in Seven ....................................................................... 122 2. Sunday Work Without a Day Off ........................................................... 123

© 2025 Seyfarth Shaw LLP Massachusetts Wage & Hour Peculiarities, 2025 ed. | vii 3. Exemptions to the One Day of Rest in Seven and the Sunday Work Without a Day Off Provisions................................................................. 123 4. Penalties for Violation ............................................................................ 124 IX. JOINT EMPLOYMENT................................................................................................. 125 X. CLASSIFYING WORKERS AS INDEPENDENT CONTRACTORS......................... 128 A. The Threshold Question...................................................................................... 129 B. The Massachusetts ABC Test for Independent Contractors ............................... 130 1. Level of Control Exercised by the Putative Employer ........................... 131 2. Services Provided Are Outside the Usual Course of Business ............... 133 3. Independent Trade, Occupation, Profession, or Business....................... 136 C. Real Estate Brokers Are Exempt from the ABC Test......................................... 137 D. Franchisor-Franchisee Relationships .................................................................. 138 E. Liability for Misclassification as an Independent Contractor............................. 138 XI. MANDATED TIME OFF AND MASSACHUSETTS LEAVE LAWS ....................... 140 A. The Massachusetts Earned Sick Time Law ........................................................ 140 1. Pay for Time Off Pursuant to the ESTL ................................................. 142 2. Notification of Intent to Use Sick Time and Employee Certification ............................................................................................ 143 3. Effect of Termination and Breaks in Service and Recordkeeping and Notice Requirements ........................................................................ 144 B. Massachusetts Leave for Domestic Violence Victims and Family Members ............................................................................................................. 144 C. Massachusetts Paid Family and Medical Leave ................................................. 147 1. Overview ................................................................................................. 147 2. Employee and Employer Contributions.................................................. 148 3. Private Plan Exemptions ......................................................................... 149 4. Notice and Posting Requirements ........................................................... 149 5. Maintaining Health Insurance and Other Benefits.................................. 151 6. Anti-Retaliation Provisions..................................................................... 152 D. Massachusetts Parental Leave Act...................................................................... 152 E. Small Necessities Leave Act............................................................................... 154 F. Civic Duty Leaves............................................................................................... 156 1. Massachusetts Jury Duty Leave.............................................................. 156

Table of Contents (con’t) Page viii | Massachusetts Wage & Hour Peculiarities, 2025 ed. © 2025 Seyfarth Shaw LLP 2. Massachusetts Employees Testifying in a Criminal Action ................... 157 3. Leave for Veterans Participating in Memorial Day or Veterans Day Activities ................................................................................................. 157 4. Military Leave......................................................................................... 157 5. Time Off to Vote..................................................................................... 158 XII. OTHER MISCELLANEOUS MASSACHUSETTS LAWS ......................................... 158 A. Massachusetts Personnel Records Law .............................................................. 158 B. Temporary Workers Right to Know Law ........................................................... 160 1. Notice Requirements............................................................................... 161 2. Limitations on Fees Charged to Temporary Workers............................. 162 3. Additional Restrictions ........................................................................... 163 4. Enforcement and Penalties...................................................................... 163 C. Massachusetts Pay Transparency Act ................................................................. 164 XIII. ATTORNEY GENERAL’S OFFICE COMPLAINTS, INVESTIGATIONS AND ENFORCEMENT ........................................................................................................... 166 A. Procedure for Filing a Complaint with the Office of the Massachusetts Attorney General................................................................................................. 167 B. The Attorney General’s Investigatory Procedure ............................................... 168 C. Criminal Penalties ............................................................................................... 168 D. Civil Penalties Imposed by the Attorney General............................................... 169 E. The Attorney General’s Means of Enforcement ................................................. 170 XIV. CIVIL ENFORCEMENT BY PRIVATE LITIGANTS ................................................. 171 A. Who is a Proper Plaintiff?................................................................................... 171 B. Potential Defendants Under The Wage Act, Including Individual Liability ...... 172 C. Statutes of Limitations ........................................................................................ 173 D. Massachusetts Wage and Hour Class Actions .................................................... 174 E. Defenses .............................................................................................................. 175 F. Arbitration........................................................................................................... 177 G. Damages in Civil Lawsuits ................................................................................. 179 H. Settlement ........................................................................................................... 182

© 2025 Seyfarth Shaw LLP Massachusetts Wage & Hour Peculiarities, 2025 ed. | ix XV. EMPLOYEES COVERED BY A COLLECTIVE BARGAINING AGREEMENT..... 183 A. Is the Employer a Public or Private Entity?........................................................ 183 B. Is the Dispute Subject to Mandatory Arbitration Under the CBA? .................... 184 C. What Forms of Compensation In A CBA Can Be a Wage Under the Wage Act? ..................................................................................................................... 185 XVI. RETALIATION FOR COMPLAINTS REGARDING WAGE AND HOUR VIOLATIONS ................................................................................................................ 186 XVII. WAGE ASSIGNMENTS & GARNISHMENTS ........................................................... 188 A. Assignments ........................................................................................................ 188 B. Garnishments ...................................................................................................... 189 1. Calculating Garnishments Under Massachusetts Law and the CCPA ...................................................................................................... 189 2. Garnishments for Support Orders ........................................................... 191 3. Additional Protections for Members of the Military .............................. 192 4. Terminating Employees Subject to Garnishments.................................. 192 XVIII. POSTING REQUIREMENTS........................................................................................ 193 A. General Wage and Hour Notices ........................................................................ 193 B. Posting Days of Rest and Sunday Work ............................................................. 194 C. Posting Work Hours for Minor Employees ........................................................ 194 D. Posting the Special Minimum Wage Paid to Employees with Disabilities ........ 195

© 2025 Seyfarth Shaw LLP Massachusetts Wage & Hour Peculiarities, 2025 ed. | 1 Introduction The Commonwealth’s wage and hour laws continue to create challenges for employers that operate in the state. With a patchwork of arcane and complex statutes that impose many nonintuitive requirements, Massachusetts laws impose obligations on employers that far exceed the scope of federal law. Included in these laws are, for example: an unforgiving law requiring the timely payment of wages; a minimum wage and overtime law that differs in important respects from federal law; possibly the most complex tip statute in the country; and a more narrowly defined constriction in the use of independent contractors than permitted under federal and other state laws. On top of these substantive requirements, employers who violate these laws often face the imposition of mandatory treble damages. Since the publication of the 2022 edition, courts have interpreted these statutes in new ways, broadening the protections for employees and increasing employer obligations. Most notably, in Reuter v. City of Methuen, the Supreme Judicial Court held that an inadvertent late payment of an employee’s final wages by even a single day triggers treble damages. The dynamic nature of this area of the law creates significant challenges for employers, particularly given the risk of triple damages for violations. Understanding the legal landscape in Massachusetts is a business necessity; in the context of a class action lawsuit, an inadvertent violation could provide a windfall recovery to employees at catastrophic expense to an employer. This publication provides a comprehensive summary of Massachusetts wage and hour laws, including an analysis of the significant court decisions and regulatory authorities interpreting those laws and, where applicable, the ways in which they differ from federal law. The 2025 edition reflects a restructuring of some chapters and includes new sections designed to reflect some of the most current issues to be litigated. It is our goal to assist in-house counsel and human resources professionals in identifying policies and practices that may expose their Massachusetts business to risks that may be significantly reduced or avoided altogether. This edition covers the period through February 2025 and incorporates thoughts and comments we have received on prior editions. As always, we welcome your suggestions for our next edition, as we strive to provide the most user-friendly, helpful guide to the business community on these complex laws.

2 | Massachusetts Wage & Hour Peculiarities, 2025 ed. © 2025 Seyfarth Shaw LLP I. THE MASSACHUSETTS WAGE ACT The Massachusetts Wage Act (Massachusetts General Laws Chapter 149, Section 148) is the most common vehicle by which employees sue for unpaid wages and other wage and hour violations under state law. The statute governs the timing and frequency of wage payments in the Commonwealth and defines what constitutes wages.1 The language of the statute is complex and difficult to interpret, but it broadly addresses the following:  What is included in wages (and what is not)?  How frequently must wages be paid?  When must wages be paid (i.e., how long after the end of the pay period)?  How must wages be paid (i.e., in what form)?  When are wages “earned”?  What deductions can an employer make from an employee’s wages? These questions do not always have clear answers, and the law in Massachusetts is continually evolving. Plus, the statute may apply to individuals working outside of the Commonwealth, not just within, provided there are sufficient connections to Massachusetts.2 The statute is enforced through Section 150 of Chapter 149, which among other provisions, provides for automatic treble damages, regardless of the employer’s good faith, interest and attorneys’ fees for violations.3 This section summarizes the current law to help employers navigate these muddy waters. A. Wages Under Massachusetts Law 1. What Is Included in Wages (and What Is Not)? This question has been the subject of much debate in Massachusetts in recent years. The Wage Act specifically states that wages include commissions that are due and payable, as well as holiday and vacation pay due under an oral or written agreement. Otherwise, it does not explicitly define the term “wages.” Interpreting the statute, Massachusetts courts have held that 1 The Payment of Wages statute contains two narrow exemptions. See M.G.L. ch. 149, § 148. First, the statute does not apply to an employee of (1) a hospital “supported in part by contributions from the commonwealth or from any city or town,” (2) “an incorporated hospital which provides treatment to patients free of charge,” or (3) a hospital “conducted as a public charity,” unless the employee requests that the hospital pay him or her weekly. Id. Second, the statute does not apply to an employee of a cooperative association if the employee is a shareholder in the association, unless the employee requests that the association pay him or her weekly. Id. 2 See, e.g., Dow v. Casale, 83 Mass. App. Ct. 751 (2013) (affirming trial court’s determination that employee working from his home in Florida could sue under the Wage Act). A discussion regarding Dow and its progeny is contained in Section XIV. 3 M.G.L. ch. 149, § 150. A complete discussion regarding remedies for wage and hour violations can be found in Section XIV.

© 2025 Seyfarth Shaw LLP Massachusetts Wage & Hour Peculiarities, 2025 ed. | 3 the definition of wages does not include contributions to deferred compensation plans, deductions from pay for the purchase of stock if an employee requests the deductions, severance pay, discretionary bonuses, earned sick time or health insurance premiums. Additional details and distinctions regarding commissions, vacation pay, severance, bonuses, stock purchase plans and expense reimbursements are discussed below. 2. Commissions The term “commission” is commonly understood to refer to compensation owed to those in the business of selling goods, services, or real estate, set typically as a percentage of the sales price.4 Commissions are considered wages under the Massachusetts Wage Act if “the amount of such commissions, less allowable or authorized deductions, has been definitely determined and has become due and payable to [an] employee.”5 Courts consider commissions to be “definitely determined” if the amount due can be precisely ascertained,6 and to be “due and payable” when any contingency that must occur for the employee to receive the commissions has occurred.7 If the amount of total commissions is “arithmetically determinable,” a dispute regarding the amount of deductions that should be made from the commissions will not prevent the commissions from being “definitely determinable.”8 The Massachusetts Appeals Court has noted that “[b]y its terms, the language of the wage act regarding commissions applies broadly, and is restricted in its application only by the requirements that the commissions be ‘definitely determined’ and ‘due and payable.’”9 One federal court, however, held that when an employee is terminated, commissions that are definitely determined but not yet due and payable under the applicable 4 Suominen v. Goodman Indus. Equities Mgmt. Grp., LLC, 78 Mass. App. Ct. 723, 738 (2011). Notwithstanding this basic definition, there has been substantial litigation over whether a payment is a commission covered by the Wage Act or not. “Courts have determined that a commission must be based on the sales or revenue generated by the individual employee, as distinguished from a payment based on a percentage of the business’s overall profits, which is not a commission.” Israel v. Voya Institutional Plan Servs., LLC, No. 15-CV-11914-ADB, 2017 WL 1026416, *4 (D. Mass. Mar. 16, 2017) (citing Feygina v. Hallmark Health Sys., Inc., No. MICV2011-03449, 2013 WL 3776929, *5 (Mass. Super. July 12, 2013) (“Where an employee is promised both a base salary and additional payments based ‘on the amount of revenue [s]he generated’ for her employer, those additional payments are ‘commissions’ subject to the Wage Act.”) and Suominen v. Goodman Indus. Equities Mgmt. Grp., LLC, 78 Mass. App. Ct. at 738 (profit sharing plan not commission under the Wage Act)). 5 M.G.L. ch. 149, § 148. For a discussion of commissions and calculation of regular rate of pay under Massachusetts and federal law, see Section IV.A. 6 Wiedmann v. The Bradford Group, Inc., 444 Mass. 698, 708 (2003) (commissions are “definitely determined” when they are “arithmetically determinable”); see also McAleer v. Prudential Ins. Co. of Am., 928 F. Supp. 2d 280, 287 (D. Mass. 2013) (a commission plan that affords an employer “[d]iscretion [to interpret or calculate commissions] prevents commissions from being definitely determined if the employer is under no obligation to award them”) (citing Wiedmann, 444 Mass. at 705). 7 Klauber v. VMware, Inc., 80 F.4th 1, 11 (1st Cir. 2023) (“[E]ven if a commission is susceptible to definite determination, it is not ‘due and payable’ until all ‘dependent contingencies have been met.’”) (citing Ellicott v. Am. Cap. Energy, Inc., 906 F.3d 164, 169 (1st Cir. 2018)); Sterling Research, Inc. v. Pietrobono, No. 02–40150, 2005 WL 3116758, *11 (D. Mass. Nov. 21, 2005); Micciche v. N.R.I. Data & Bus. Prod., Inc., No. 09–11661, 2011 WL 4479849, *6 (D. Mass. Sept. 27, 2011) (commission not due and payable because contingencies relating to entitlement had not occurred). 8 Wiedmann, 444 Mass. at 705. 9 Okerman v. VA Software Corp., 69 Mass. App. Ct. 771, 776 (2007); M.G.L. ch. 149, § 148; see also Rosnov v. Molloy, No. ESCV2007-0740, slip op. at 4-6 (Mass. Super. Apr. 20, 2009) (Kerns, J.) (finding referral fee that attorney agreed to pay associate for bringing in case constituted commission under the Wage Act).

4 | Massachusetts Wage & Hour Peculiarities, 2025 ed. © 2025 Seyfarth Shaw LLP commission plan solely because the plan requires a waiting period before payment, are wages that must be paid upon termination.10 When an employer has a plan that governs the payment of commissions and the plan sets forth contingencies required to earn commissions, courts will apply the terms of that plan.11 In the absence of a plan or agreement governing the payment of commissions, however, courts have generally held that an employee earns the commission and it becomes due and payable when they close the sale, even if there is a delay in actual payment on the sale.12 There has been much litigation over the enforceability of various provisions typically found in commission plans. For example, while commission plans often contain a provision requiring employment at the time of payout, such provisions are not enforceable in Massachusetts if the employee has done everything else required to earn a commission.13 On the other hand, Massachusetts courts have found “windfall provisions” – provisions granting the employer discretion to adjust commissions paid on specifically-defined large deals – to be enforceable.14 Given the intricacies of the payment of commissions under Massachusetts law, employers should carefully review incentive plans for compliance. 3. Vacation Pay Neither Massachusetts nor federal law requires employers to provide paid vacation benefits to employees. When employers do provide paid vacation, however, it must be treated as a wage under the Wage Act.15 The Massachusetts Attorney General’s Fair Labor Division issued an advisory on vacation policies that sets forth its interpretation of the law relevant to vacation pay.16 The Attorney General’s interpretation of the Wage Act, as stated in that advisory, has been treated 10 Israel, 2017 WL 1026416, at *7. 11 McAleer, 928 F. Supp. 2d at 287 (“When a compensation plan specifically sets out the contingencies an employee must meet to earn a commission, courts apply the terms of the plan.”); see also Klauber, 80 F.4th at 12 (“Under Massachusetts law, employers and employees may agree to contingencies that must be satisfied before commission payments become due and payable such that they qualify as protected earnings for Wage Act purposes.”). 12 McAleer, 928 F. Supp. 2d at 287. 13 Israel, 2017 WL 1026416, at *7 (“commissions that [plaintiff] earned during his final months of employment” were wages under the Wage Act where the plaintiff “did the work to earn the commissions prior to his resignation, and the fact that it may have taken [the employer] a few months to make a final calculation as to the exact amount of the commissions [wa]s not sufficient to take them outside the scope of the Wage Act.”); Feygina, 2013 WL 3776929, at *2, 5 (holding that commissions earned prior to termination of employment were protected by the Wage Act even though they were not calculable until several months later). 14 Klauber, 80 F.4th at 12 (enforcing reconciliation provision of commission plan that included review of commissions paid on “exceptional transaction”); Green v. D2L Ltd., No. 1:20-CV-10241-IT, 2023 WL 6050290, *8 (D. Mass. Sept. 15, 2023) (finding no violation of Wage Act where employer modified commission pursuant to terms of windfall provision); Daly v. T-Mobile USA, Inc., 93 Mass. App. Ct. 1123 (2018) (enforcing windfall provision); Vonachen v. Computer Assocs. Int’l, Inc., 524 F. Supp. 2d 129, 136 (D. Mass. 2007) (same). 15 M.G.L. ch. 149, § 148; Elec. Data Sys. Corp. v. Attorney Gen., 454 Mass. 63, 67 (2009) (“EDSC II”); Hahnfeldt v. Newman, 94 Mass. App. Ct. 1120 (2019) (“vacation pay due under an agreement is specifically included in the definition of wages pursuant to G. L. c. 149, § 148”); Massachusetts v. Morash, 490 U.S. 107, 110 (1989); Massachusetts Attorney General Advisory 99/1. 16 Massachusetts Attorney General Advisory 99/1; see also Souto v. Sovereign Realty Assocs., Ltd., Civ. No. 0501281, 2007 WL 4708921, *3 (Mass. Super. Dec. 14, 2007).

© 2025 Seyfarth Shaw LLP Massachusetts Wage & Hour Peculiarities, 2025 ed. | 5 with deference and some of its provisions have been given effect by the Massachusetts Supreme Judicial Court (SJC).17 The advisory asserts that withholding vacation payments constitutes withholding wages and violates the Wage Act because an employee may not forfeit earned wages, including vacation payments, by agreement.18 Similarly, if an employer terminates an employee, whether or not for cause, or if an employee resigns his or her employment voluntarily, the employer must pay the employee all wages earned through the termination date, including any earned and unused vacation time.19 Employers and employees cannot contract around the requirement that an employee must be compensated for earned vacation upon termination.20 However, an employer may establish as part of the terms of employment “the amount of paid vacation the employee will receive and/or a specific time of the year when the employee can take a vacation, depending on the needs or demands of the business.”21 The employer may also establish procedures for scheduling vacations.22 Employers will benefit from drafting unambiguous vacation pay policies because Massachusetts courts have resolved ambiguities in favor of employees.23 a. Caps and “Use It or Lose It” Policies Employers may cap the amount of vacation time that employees can accrue or earn.24 For example, an employer may state in its policy that after accruing a total of four weeks of vacation, an employee will cease to earn additional vacation days until he or she has used some of the accumulated time.25 Thus, the employee would stop earning additional vacation time until the total accrued time drops below four weeks.26 In addition, the employer may enforce a “use it or lose it” policy that requires its employees to use all accumulated vacation time by a certain date or 17 EDSC II, 454 Mass. at 68-69. 18 Massachusetts Attorney General Advisory 99/1; EDSC II, 454 Mass. at 68. Examples of impermissible agreements include vacation policies that condition the payment of vacation time on continuous employment or that require employees to provide notice prior to quitting. EDSC II, 454 Mass. at 69 (“[I]f an employee is ‘discharged from . . . employment,’ the value of the vacation benefit earned up to that date and that would still be available if the employee remained at the job must be ‘paid in full on the day of his discharge.’”). 19 EDSC II, 454 Mass. at 69-71; Massachusetts Attorney General Advisory 99/1. Continued payment of salary or other benefits after termination does not alleviate this obligation. Dixon v. City of Malden, 464 Mass. 446, 451-52 (2013). 20 EDSC II, 454 Mass. at 70 (“[T]he Wage Act would have little value if employers could exempt themselves simply by drafting contracts that placed compensation outside its bounds—as [the employer] attempted to do, when it stated that ‘vacation time is not earned.’”). 21 Massachusetts Attorney General Advisory 99/1. 22 Id. 23 Elec. Data Sys. Corp. v. Attorney Gen., 440 Mass. 1020, 1020-21 (2003) (EDSC I) (holding that personnel policy which stipulated that “[i]f you leave the company, you do not receive vacation pay for unused vacation time” only applied to employees who voluntarily left the company because policy was ambiguous and ambiguity should be resolved in favor of employee). 24 Massachusetts Attorney General Advisory 99/1. 25 Id. 26 Id. Such caps must be applied prospectively.

6 | Massachusetts Wage & Hour Peculiarities, 2025 ed. © 2025 Seyfarth Shaw LLP lose all or part of it.27 A cap on accrual of vacation time or a “use it or lose it” policy, however, may result in an illegal forfeiture of earned wages if the employer fails to provide employees with adequate notice of the policy or with an adequate opportunity to use the vacation time.28 Exactly what constitutes an adequate opportunity to use accrued vacation is not discussed in the advisory, nor have the courts addressed that issue. b. General “Leave” Category Some employers combine sick leave,29 personal leave, vacation leave, and other types of leave into one general category called “annual leave,” “paid time off,” or “PTO.”30 If an employer with a general leave policy designates the number of hours or days of leave that are considered vacation, when an employee terminates employment, the employer is only required to pay the employee the unused hours designated as vacation.31 Proof of designation of vacation time can be used to rebut a complaint of unpaid wages pursuant to the Wage Act.32 An employer offering a combined paid leave benefit that makes no distinction between vacation and other types of leave may risk the entire allotment of leave being treated as vacation. c. Designation of Accrual Rate An employer should articulate clear guidelines regarding the accrual of vacation time, including the rate of accrual. For example, a policy might provide that an employee earns vacation time at the rate of one day per month and that the day is earned on the last day of each month, or the policy might specify that an employee accrues ten days each year on June 30. Similarly, an employer that combines leave into one bank should include guidelines regarding accrual of vacation time versus other leave time. For example, an employer that provides thirty days of paid time off per year might specify that vacation accrues at a rate of one and one-half days per month on the last day of the month, and that “other” time accrues at a rate of one day per month. An employer should set accrual rates within very specific time frames because “a policy that provides for employees to earn a given amount of vacation ‘a year,’ ‘per year,’ ‘on their anniversary date,’ or ‘every six months’ is not clear . . . and subject to confusion concerning [the accrual] start and end dates. Where an employer’s policy is ambiguous, the actual time earned by the employee will be pro-rated according to the time period in which the employee actually 27 Id.; see also EDSC II, 454 Mass. at 69 (noting that vacation pay may be “lost by disuse”). 28 Massachusetts Attorney General Advisory 99/1. 29 Employers are not required to pay out unused earned sick time upon termination of employment. M.G.L ch. 149, § 148C. The SJC has held that sick leave does not constitute “wages” for purposes of the Wage Act. Mui v. Massachusetts Port Auth., 478 Mass. 710, 713 (2018); Ligotti v. Daly XXL Commc'ns, Inc., Civ. No. 16-11522-MLW, 2018 WL 1586340, *7 (D. Mass. Mar. 26, 2018) (relying on M.G.L ch. 149, § 148C); Mehic v. Dana-Farber Cancer Inst., Civ. No. 145-cv-12934-IT, 2017 WL 637681, *12 (D. Mass. Feb. 16, 2017) (“Without either a policy or contractual agreement to pay plaintiff unused, accrued sick time at the time of her termination, she is not entitled to recover under the MWA.”). 30 Massachusetts Attorney General Advisory 99/1. 31 Id. 32 Id.

© 2025 Seyfarth Shaw LLP Massachusetts Wage & Hour Peculiarities, 2025 ed. | 7 works.”33 An employer may also include a probationary period in its vacation policy, which stipulates that an employee will begin to accrue vacation time only after a set period of time, such as six months. Here again, the time frame should be clearly indicated. d. Unlimited Vacation Policies A growing number of employers have implemented unlimited vacation policies in Massachusetts. Under such policies, employees generally are free to take vacation as they wish. They do not accrue vacation time, and employers therefore do not pay out vacation time upon termination.34 Neither Massachusetts courts nor the Massachusetts Attorney General have opined on whether such policies are lawful.35 e. Changes to Vacation Policies An employer may amend the terms of its vacation policy, and any other condition of employment affecting wages, at any time.36 Any such amendments must be prospective in nature, and employees must be given advance notice regarding the changes.37 A new policy is more likely to be permissible if the employer gives the employees a copy of policy changes in advance and requires that each employee acknowledge in writing his or her understanding of the changes.38 If a new policy will result in a forfeiture of accrued but unused vacation days, employees must be given a reasonable opportunity to use the time before it is forfeited. 4. Earned Sick Time The Wage Act does not apply to earned sick time. In Mui v. Massachusetts Port Authority, the SJC recognized that “[l]ike vacation time, sick time is often accrued as one works for an employer,” but distinguished it from vacation time because “unlike vacation time, which can be used for time away from work for any reason, sick time is to be used only when the employee or a 33 Id. 34 EDSC II, 454 Mass. 63 (“the [Wage Act] requires such an employee to be paid for unused vacation time remaining at the time of involuntary discharge”) (emphasis added). 35 California has a similar law requiring the payment of accrued vacation upon separation, and at least one California Court of Appeal has weighed in on an unlimited vacation policy. See McPherson v. EF Intercultural Found., Inc., 47 Cal. App. 5th 243, 265 (2020). In that case, the Court of Appeal ruled in favor of exempt employees seeking pay for vacation time that they claimed to have accrued, despite their employer’s unlimited, no-accrual vacation policy because the employer in practice expected employees to take just two to four vacation weeks per year. The Court of Appeal, in dicta, opined that an unlimited PTO plan might avoid final-pay obligations if it is in writing and (1) clearly provides that employees’ ability to take paid time off is not a form of additional wages for services performed but rather for a flexible work schedule, including employees’ ability to decide when and how much time to take off, (2) spells out the rights and obligations of both employee and employer and the consequences of failing to schedule time off, (3) allows employees in practice to take time off or to work fewer hours instead of taking time off, and (4) is administered fairly so that it neither becomes a de facto “use it or lose it policy” nor results in inequities, such as where one employee works many hours, taking minimal time off, and another works fewer hours and takes more time off. Id. at 268-69. 36 Massachusetts Attorney General Advisory 99/1. 37 Id. 38 Id.

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