Electronic Data Systems Corp. v. Attorney General

• Decision Date: 11 June 2009
• Docket Number: SJC-10260
• Citation: 907 N.E.2d 635,454 Mass. 63
• Parties: ELECTRONIC DATA SYSTEMS CORPORATION v. ATTORNEY GENERAL & another.<SMALL><SUP>1</SUP></SMALL>
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

907 N.E.2d 635

454 Mass. 63

ELECTRONIC DATA SYSTEMS CORPORATION v. ATTORNEY GENERAL & another.¹

SJC-10260

Supreme Judicial Court of Massachusetts, Suffolk.

Argued February 2, 2009.

Decided June 11, 2009.

Robert P. Morris, Boston, for the plaintiff.

Kevin Conroy, Assistant Attorney General (Marsha Hunter, Assistant Attorney General, with him) for Attorney General.

The following submitted briefs for amici curiae:

Ben Robbins, Martin J. Newhouse, & Jo Ann Shotwell Kaplan, Boston, for New England Legal Foundation & others.

Sherley E. Cruz, Boston & Cynthia Mark for Greater Boston Legal Services.

Philip J. Gordon, Boston, for National Employment Lawyers Association, Massachusetts Chapter.

Present: MARSHALL, C.J., IRELAND, SPINA, COWIN, CORDY, BOTSFORD, & GANTS, JJ.

BOTSFORD, J.

In this case we return to the question whether the written vacation pay policy of the plaintiff, Electronic Data Systems Corporation (EDS), violates G.L. c. 149, § 148 (Wage Act, or § 148), when applied to an employee who is involuntarily terminated. See Electronic Data Sys. Corp. v. Attorney Gen., 440 Mass. 1020, 798 N.E.2d 273 (2003) (EDS I). Giving deference to the Attorney General's reasonable interpretation of the Wage Act and in agreement with the Superior Court judge and the division of administrative law appeals (DALA), we conclude that the statute requires such an employee to be paid for unused vacation time remaining at the time of involuntary discharge; and that because the EDS policy does not provide for such payment, it contravenes the Wage Act. We therefore affirm the judgment of the Superior Court.²

Background. The facts are not contested. Francis Tessicini was an employee of EDS or one of its predecessor companies for twenty-one years, from 1984 to 2005. On April 8, 2005, EDS eliminated Tessicini's position.

EDS's written vacation pay policy (vacation pay policy, or policy), as updated on July 30, 2004, provides that beyond the first year of employment, the amount of an employee's paid vacation time is based on the number of full calendar years he or she has worked for EDS or one of its predecessor companies. Under the policy, a person who has been employed for twenty years or more is eligible for five weeks of paid vacation per calendar year, to be used by December 31 of that year or lost.³ The policy further provides that "vacation time is not earned and does not accrue. If you leave EDS, whether voluntarily or involuntarily, you will not be paid for unused vacation time (unless otherwise required by state law)."

At the time of his discharge on April 8, Tessicini had used only one day of vacation in calendar year 2005. Pursuant to its vacation pay policy, when EDS discharged Tessicini, it did not pay him for any part of his unused vacation time. On May 5, 2005, Tessicini filed a written complaint with the Attorney General's fair labor division, alleging that EDS owed him vacation payments under the Wage Act.⁴ The Attorney General issued a citation that, as amended, required payment of $1,799.70 to Tessicini, and assessed a civil penalty of $3,490 for intentional failure to make timely payment of wages. EDS appealed from the citation to DALA, which issued a written decision affirming the citation, but calculating the payment owed to Tessicini as $1,970.95.⁵ EDS then sought review of DALA's order in the Superior Court pursuant to G.L. c. 30A, § 14. Ruling on EDS's motion for judgment on the pleadings, a judge in the Superior Court denied the motion and affirmed DALA's decision. EDS appealed, and we granted its application for direct appellate review.

Discussion. Pursuant to G.L. c. 30A, § 14(7) (c), EDS challenges DALA's decision affirming the Attorney General's citation, and the citation itself, as being based on an error of law. We review questions of law in administrative decisions de novo. Belhumeur v. Labor Relations Comm'n, 432 Mass. 458, 463, 735 N.E.2d 860 (2000), cert. denied, 532 U.S. 904, 121 S.Ct. 1227, 149 L.Ed.2d 137 (2001).

The Wage Act provides in pertinent part:

"Every person having employees in his service shall pay weekly or bi-weekly each such employee the wages earned by him to within six days of the termination of the pay period during which the wages were earned if employed for five or six days in a calendar week ...; and any employee discharged from such employment shall be paid in full on the day of his discharge .... The word `wages' shall include any holiday or vacation payments due an employee under an oral or written agreement....

"...

"No person shall by a special contract with an employee or by any other means exempt himself from this section ..." (emphasis added).

G.L. c. 149, § 148. The parties offer differing interpretations of these statutory provisions. EDS argues that because "vacation payments" under the Wage Act's partial definition of "wages" are only those "due" under the terms of an oral or written employment agreement, the agreement may restrict or limit an employee's right to those payments without violating the Act's "special contracts" clause. Applying that interpretation to this case, EDS claims that under the language of § 148, no payment is "due" Tessicini "under [the] written agreement," id., where its policy explicitly provides that employees leaving EDS on a voluntary or involuntary basis will not be paid for unused vacation time. The Attorney General, in turn, argues that, once Tessicini had accumulated vacation time according to the vacation pay policy, it became "due" under the definition of "wages," and therefore constituted "wages earned," which § 148 mandates must be paid in full on the day of his discharge; the Attorney General considers the portion of EDS's vacation pay policy denying payment for unused vacation time to constitute an unenforceable "special contract" under the "special contracts" clause of the statute.

In EDS I, which concerned an earlier version of the EDS vacation pay policy that was worded slightly differently, the same parties offered the same interpretations of the Wage Act that they present here. EDS I, 440 Mass. at 1020-1021, 798 N.E.2d 273. At that time, EDS's policy stated, "If you leave the company, you do not receive vacation pay for unused vacation time" (emphasis added). Id. at 1020, 798 N.E.2d 273. Construing the policy against EDS as the drafter, we concluded that the policy reasonably could be read to require forfeiture of unused vacation time only for employees who voluntarily left employment. Id. at 1021, 798 N.E.2d 273. Because the employee in EDS I was involuntarily terminated, we did not reach the interpretive question whether the Wage Act permits an employer not to pay an employee for unused vacation time when he or she is involuntarily terminated. Id. at 1021-1022, 798 N.E.2d 273. Following EDS I, EDS modified the wording of its policy to make clear that employees leaving involuntarily also forfeit unused vacation time. This case, arising under the modified policy, presents the question we earlier left open.

As EDS and the Attorney General recognize, the critical phrase in § 148 is the partial definition of "wages": "The word `wages' shall include any holiday or vacation payments due an employee under an oral or written agreement." Given its express reference to what is "due" to the employee under an "agreement," we begin with a review of the vacation pay policy itself. As the Superior Court judge noted, there are contradictions in the policy. While the policy does state, in connection with its provision refusing payment for unused vacation time if an employee leaves or is terminated, that "vacation time is not earned," the structure of and other language in the policy indicate otherwise. The policy states that employees are eligible for "vacation pay" (emphasis added) based on the number of hours worked each week and, after the first year, ties the number of paid vacation weeks for which an employee is eligible to the number of years the employee "ha[s] worked" for EDS. The clear import of these provisions is that paid vacation at EDS is earned.

Against this background, we turn to the interpretive task at hand, namely, the meaning of § 148. We do not do so in a vacuum. In 1999, pursuant to the Attorney General's exclusive authority to enforce G.L. c. 149, the Attorney General issued Advisory 99/1, an advisory regarding the Wage Act's treatment of employers' vacation policies.⁶ The advisory states:

"Employers who choose to provide paid vacation to their employees must treat those payments like any other wages under [the Wage Act].... Like wages, the vacation time promised to an employee is compensation for services which vests as the employee's services are rendered. Upon separation from employment, employees must be compensated by their employers for vacation time earned `under an oral or written agreement.'"

Id. at 1. In a section titled "No Forfeiture of Earned Vacation Time," the advisory states:

"Since [the Wage Act] provides for the timely payment of all wages earned, an employer may not enter into an agreement with an employee under which the employee forfeits earned wages, including vacation payments. Examples of these agreements are vacation policies that condition the payment of vacation time on continuous employment or that require that employees provide notices to quit. Employees who have performed work and leave or are fired, whether for cause or not, are entitled to pay for all the time worked up to the termination of their employment, including any earned, unused vacation time payments."

Id. at 2. The advisory further provides that an employer may require employees to "use all of their accumulated vacation time by a certain period of time or lose all or part of it," but that:

"Under such policies, the employer must provide adequate prior notice of the policy to employees and must ensure that employees have a reasonable opportunity to use the accumulated vacation time within the...