What Happened?

As a reminder for all employers in Massachusetts, the Supreme Judicial Court (SJC) recently clarified that retention bonuses do not qualify as “wages” under the Massachusetts Wage Act. This ruling impacts how employers’ structure and pay retention bonuses during corporate transitions. On October 22, 2025, in Carlos Nunez v. Syncsort Incorporated (SJC-13709), the SJC held that retention bonuses are additional, contingent compensation, not payment for regular labor or services. The Court affirmed that these bonuses fall outside the Wage Act’s protections, even if all conditions are met before termination.

Overview

Why this matters: The Wage Act imposes strict requirements for paying earned wages (salary, unused vacation, commissions) and severe penalties for violations, including mandatory treble damages and attorney’s fees. By excluding retention bonuses from the definition of wages, the SJC confirmed that disputes over these payments are governed by contract law, not the Wage Act.

Action Steps for Compliance

• Clarify Bonus Terms: State that retention bonuses are in addition to regular pay and contingent on specific conditions.

• Define Conditions Clearly: Include fixed retention dates, performance requirements, and outcomes for different termination scenarios.

• Review Policies: Ensure agreements and handbooks reflect this distinction.

• Pay Final Wages Promptly: Terminated employees must receive earned wages o the termination date; resignations must be paid on the next payday.

• Consult Legal Counsel: Seek guidance when structuring compensation to avoid Wage Act exposure.

Additional Information

Key Risks for Employers

• Misclassifying contingent compensation as wages could lead to unnecessary litigation.
• Failure to pay actual wages on time still triggers strict liability under the Wage Act.
• Employees may attempt to argue that other forms of contingent pay fall under the Wage Act.

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