Whether an employer may offer an employees a choice between deducting costs of accidents from their wages and disciplinary action.

ABC Disposal Service (“ABC”) employs drivers to collect solid waste throughout the Commonwealth. By company policy, when a driver damages an ABC truck or third party property, ABC first determines whether the accident was “preventable,” i.e. whether the driver failed to take reasonable precautions to avoid the accident. If ABC determines that the accident was preventable, the employee is given a choice between (1) having a set-off deducted from their paycheck until the cost of the damage is repaid, or (2) receiving unknown discipline, which typically consists of a written warning and probation but may also include suspension or termination. There is no appeal from ABC’s determination of fault and damages.

After a number of drivers complained, the Attorney General found that the policy violated the Wage Act, and assessed damages and a fine. ABC appealed to the Division of Administrative Law Appeals, which upheld the citation, and then to a Superior Court judge, who reversed. The Attorney General appealed, and the SJC transferred the case sua sponte from the Appeals Court. 

The Wage Act provides that “in no event shall wages remain unpaid by an employer for more than six days from the termination of the pay period in which such wages were earned by the employee.” G.L. c. 149, § 148. The Attorney General argues that a deduction from wages constitutes a “special contract” violating that provision, by having employees agree not to receive all of their wages. ABC argues (and the judge found) that the deduction is a “valid set-off,” explicitly permitted in G.L. c. 149, § 150. A “valid set-off” is a deduction for repayment of “a clear and established debt owed to the employer by the employee.” Somers v. Converged Access, Inc., 454 Mass. 582, 593 (2009). The Attorney General responds that a clear and established debt should be one established by law—not one obtained on threat of disciplinary action.

ABC’s argument proves too much. By its reading, an employer could unilaterally determine that an employee had taken some costly action—negligent or reasonable—and then compel the employee to agree to a “set-off” of already earned wages, on threat of termination. That would be an archetypical special contract in violation of § 148. Although the employees in this case may indeed have been negligent, and may ultimately have owed ABC some debt, the claim that ABC can deduct from their wages on threat of termination simply cannot be reconciled with the basic protections of § 148.

The limitation may not be significant for employers. ABC could, for example, offer to settle claims of negligence against employees, thus establishing actual debts that would support a set-off. Or it could decrease the future wage rate of employees it decided were unsafe drivers. Or it could provide bonuses for drivers with clean safety records. What it cannot do is use the threat of adverse employment action to extract agreements from employees to recover earned wages.