Client Alert: Garden Leave Payments Under MA Noncompetition Agreement Act Not Covered by Wage Act | Bowditch & Dewey

A Massachusetts federal district court has ruled that non-compete leave payments to former employees in their employer’s yard are not considered “wages” under the Massachusetts Wages Act.

As a refresher, the Massachusetts Non-Compete Agreements Act (MNAA) establishes certain conditions that must be included in a non-compete agreement in order for it to be considered valid and enforceable. One such requirement is the provision of garden leave or mutually agreed considerations. Under the MNAA, “gardening leave” is where a former employee is paid at least 50% of the maximum base salary on a pro-rata basis over a limited period of time.

of Carroll vs. Mitsubishi Chemical AmericaPlaintiff is a former director of commercial operations for Mitsubishi Chemical America (“MCA”) who has resigned from her position and taken a job with a non-competitive employer pursuant to the non-compete clause of her employment agreement. Later, when MCA opted out of the non-compete clause and attempted to cancel the related gardening leave payments, Carol filed a lawsuit, alleging breach of her employment contract and wage law.

In response to MCA’s motion to dismiss, the court refused to dismiss Carroll’s contract claim, but supported MCA on the wage law argument, stating that gardening leave payments were “wages” within the meaning of the wage law. I reasoned that it wasn’t. Further, the Court stated, “There is no evidence that the legislature intended to award treble damages and attorneys’ fees and costs to professionals exercising the alleged contractual rights. We have found that money owed to an employee under contractual obligations is not included in the definition of earned wages, regardless of whether the work was performed.”

As noted in our previous client alert from April 2022: Reuters vs Methuen Citythe Massachusetts Supreme Court ruled that employers are liable three times for damages for late wage payments, even if the employee has not yet filed a lawsuit alleging a wage claim.

therefore, carol The decision narrowly construed the scope of the wages law and indicated that employers would not be entitled to triple damages under the wages law for breaches of non-compete obligations.

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