What Is a “Valid Set-Off” Under the Massachusetts Wage Act?

Unpaid wage law continues to develop in Massachusetts. Most recently, the Supreme Judicial Court (“SJC”) provided extensive guidance on what constitutes a valid deduction from wages–called a “valid set-off” in the law. In Camara v. Attorney General, 458 Mass. 756 (2011), the employer was a garbage collection and recycling company in New Bedford. It found that its drivers would sometimes damage the trucks and/or people’s property in the course of doing their jobs. It designated an employee to investigate incidents involving property damage, and if the accident was deemed to be due to the employee’s fault, gave the employee a choice: accept job discipline or pay the damages via a wage deduction. The Massachusetts Attorney General investigated and issued a citation to the employer. Appeals followed, and the SJC took the case.

The SJC found against the employer and expended some considerable effort to draw lines of what would be permissible as wage set-offs in Massachusetts. The crux of the decision in Camara was that the employer had carte blanche to make a final, unreviewable decision about the employee’s fault and impose either discipline or a wage set-off. The SJC did not find that this set-off was “valid” under the law because of the lack of due process for the employee, which fell far below what a person in the dock for negligence would be afforded. As the court put it, the law “does not support the proposition that such liability may exist solely by virtue of an employer’s pronouncement, without any need for independent determination or adjudication.”

However, some wage set-offs apart from tax deductions, retirement plan contributions, union dues, and judicial wage attachments are valid under Massachusetts law. Some examples cited by the attorney general are:

Where there is proof of an undisputed loan or wage advance from the employer to the employee; a theft of the employer’s property by the employee, as established in an “independent and unbiased proceeding” with due process protections for the employee; or where the employer has obtained a judgment against the employee for the value of the employer’s property.

The SJC went on to say:

We do not understand the Attorney General to be arguing that these are the only types of setoffs that are permissible under § 150; if that is her point, we do not agree with it. There well may be other circumstances — for example as part of a collective bargaining agreement — in which an employer and employee enter into a set-off arrangement that does not involve formal judicial or administrative proceedings but that would be valid because it can be shown that the parties have voluntarily agreed to a set of appropriately independent procedures for determining, in a manner that adequately protects the employee’s interests, both the existence and amount of the debt or obligation owed by the employee to the employer.

The SJC alluded to the fact that the employer’s policy in Camara was very effective, stating: “Between 2003 and 2006, ABC’s costs attributable to damage done to vehicles and personal property has been reduced by seventy-eight per cent.” However, the bottom line is that Massachusetts law holds employee wages sacrosanct, and right or wrong, employers must think twice before getting creative with wage deduction policies.

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