Ironically, a General Release Needs to Be Specific to Apply to Wage Act Claims

Often, when settling a dispute, I include a general release that goes something like this:

Releasors hereby forever release and discharge Releasees from, and/or based on, any and all suits, etc. which Releasors ever had, now have or may in the future claim to have against Releasees, arising out of any acts or conduct that occurred from the beginning of time to the date of this Agreement.

Plainly, such a release is intended to “wipe the slate clean” and give the parties the comfort of knowing that neither can be sued by the other for any conduct that occurred up to that point in time – whether the other party knows about the conduct/claim or not.  As a recent case from the Superior Court, Fratea v. Unitrends, Inc., reminds us, however, a general release of this sort will not bar a former employee from pursuing a claim under the Massachusetts Wage Act.

When Michael Fratea left the employment of Unitrends, he executed a release in exchange for the payment of $1,875. Thereafter, Fratea filed suit against the company and two individuals, alleging a violation of the Wage Act because he was not paid overtime compensation. The defendants countered that the release Fratea executed barred him from pursuing such a claim, and they moved to dismiss. In analyzing the issue, the Superior Court relied heavily on a 2012 decision by the Supreme Judicial Court, Crocker v. Townsend Gulf Oil Co., Inc. In Crocker the SJC:

[A]cknowledged that, as a general rule, releases in written contracts that are freely entered into between the parties should be enforced, even as to claims that were not specifically in the parties’ minds at the time the release was executed. On the other hand, the legislative purpose behind the Wage Act is to “provide strong statutory protection for employees and their right to wages” — a purpose made explicit by a provision in the statute itself prohibiting an employer from exempting itself from coverage by any “special contract.” Striking a balance between these competing policies, the SJC held that an employment termination agreement that includes a general release will be enforceable as to Wage Act claims “only if such an agreement is stated in clear and unmistakable terms.” That is, “the release must be plainly worded and understandable to the average individual, and it must specifically refer to the rights and claims under the Wage Act that the employee is waiving.”

Fortunately for the defendants in Fratea, the release at issue specifically stated that Fratea was releasing claims under “the Massachusetts Wage Payment Act (M.G.L.c. 149 148) ….” While Fratea argued that this was not specific enough (because his claim was predicated on the failure to pay him overtime compensation), the Superior Court noted that:

  1. The key for the SJC in Crocker was to “make sure that an employee did not ‘unwittingly’ waive his or her rights;”
  2. “[T]he adequacy of the language should be measured against the ‘average individual’ in the plaintiff’s position;”
  3. The agreement specifically advised Fratea in bold and capitalized text that he should consult with an attorney; and
  4. The agreement gave Fratea two weeks to consider whether to accept the proposal.

As such, the Superior Court ruled that there was no reason not to enforce the release at issue and bar Fratea from pursuing his Wage Act claim.

So the next time you want to obtain a release from a former employee that will cover potential Wage Act claims, take a look back at Fratea (and Crocker) to be sure that you are giving yourself the best possible chance of being able to enforce such a release if the former employee decides to test it by filing a Wage Act Complaint.