Monday, March 10, 2008

How I See It

Earned wage legislation is good for Bay State businesses

By Philip Gordon

Last month, the Legislature passed legislation that sent a clear message: paying employees their earned wages is important for Massachusetts. It is important to our workers, who depend upon their wages. It is important to the state, which depends upon the tax withholdings. And it is important to our businesses, which depend on an environment without competition from other businesses who neglect to pay their employees.

The bill, S.1059, which was sent to the desk of Gov. Mitt Romney, restored a requirement to provide triple damages to employees forced to go all the way through the court system in order to collect unpaid wages. The compensatory damages, three times the wage, is to compensate employees for losses they incur when they go without their earned wages. The bill is the same that passed both the House and Senate without opposition last year before being vetoed by Romney in his final weeks in office.

To understand the need for this bill is to understand the needs of working-class families: Four in 10 workers live paycheck to paycheck, and many are devastated when earned wages are withheld. Employers who fail to pay wages undermine the ability of residents to pay rent, student loans, taxes, health insurance premiums and more -- for which anything less than multiple damages can never compensate.

Moreover, there is no excuse to justify the far-reaching effects of missed payrolls with payroll services, accountants and easy-to-use software -- many of the same systems used for withholding state and federal tax payments. In recognition of this, the Legislature has long given workers the right to timely wage payment, and with the clarification in this bill, the law would provide strong protections to compensate employees for losses and motivate employers to make timely payments.

The legislation has wide support -- not just from employee advocates, but also from companies that compete with employers that underbid them by failing to pay workers and from those who support the unemployment and workers' compensation systems that survive on wage withholdings. At the bill's public hearings this year and last year, not one business or community leader testified in opposition.

Unfortunately, rather than sign the bill, Gov. Patrick sent the bill back to the Legislature in an amended form -- a form the Legislature wisely rejected. The governor's language attempted to exempt employers if they could show "good faith." But this would have created a loophole in what is designed to be a uniform practice and would have imposed a chilling effect on exactly those workers the law is designed to protect. Employers would use their spending power on attorneys to create doubt, argue good faith, and drag a case on for years -- making it difficult for workers to hire an attorney, much less recover the actual wages owed.

At the same time, the amendment was unnecessary. For the 12 years that most judges interpreted the law to mandate triple damages, there was no outcry from the business community or from employers found at fault for not paying employees and subjected to triple damages. That's because the vast majority of employers pay their people on time. This legislation has no bearing on employers who follows the law and pay their employees when their wages are due -- period.

However, this bill assists the vast majority of businesses, who seek a level playing field. When a company fails to pay its employees, it can use the illegal "savings" to underbid competition. Especially for small businesses, the ramifications from dishonest competition can be devastating.

The unamended bill is now back on Gov. Deval Patrick's desk. I urge him to sign this important and carefully crafted legislation into law.

Philip Gordon (pgordon@gordonllp.com ) is managing partner of Gordon Law Group LLP in Boston.