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Appeal by petitioners Daniel Dunn and Bayview Development, LLC from two citations issued to them by the Attorney General's Fair Labor Division, one for unintentional failure to pay wages to a former Bayview employee during the period January 3, 2007 to May 9, 2007, in violation of M.G.L. c. 149, § 148 (ordering payment of $5,720, consisting of $4,820 in restitution for unpaid wages and vacation time and a $900 civil penalty), and the other for intentional failure to furnish employment records for inspection, in violation of M.G.L. c. 151, § 19(3) (ordering payment of a $200 civil penalty). Following a hearing, the total amount that the petitioners were ordered to pay by the two citations is reduced from $5,920 to $4,505.78, based upon the following adjustments:
(1) The total amount due under Citation No. WH080089 for failure to pay wages (No. WH080089) is reduced from $5,720 to $4,305.78, which consists of a recalculated amount for unpaid wages between January 3 and May 9, 2007 ($3,630.78), no restitution for unpaid vacation time (because the employee took the one week of pro-rated paid vacation time to which she was entitled when her employment ended), and a civil penalty reduced to $657, in proportion to the recalculated restitution amount.
(2) The $200 civil penalty assessed in Citation No. MW080061 for failure to furnish employment records is sustained.
The petitioners, Daniel Dunn and Bayview Development, LLC, appealed two citations issued to them by respondent Office of the Attorney General's Fair Labor Division on May 14, 2008. Citation No. WHO80089 charged the petitioners with unintentional failure to make timely payment of wages to an employee for work performed between January 3, 2007 and May 9, 2007, in violation of the Massachusetts Wage and Hour Law, M.G.L. c. 149, § 148, and ordered them to pay $5,720, consisting of $4,820 in restitution and a $900 civil penalty. Citation No. MW080061 ordered the petitioners to pay a $200 civil penalty for intentionally failing to furnish employment records for inspection on February 22, 2008, in violation of M.G.L. c. 151, § 19(3). The appeal, postmarked May 20, 2008, was timely filed within ten days of receipt of the citation. [fn. 1]
I held a hearing on January 20, 2009 at the Division of Administrative Law Appeals, 98 North Washington Street, Boston, Massachusetts. There are two cassette tapes of the hearing. I marked ten exhibits in evidence (Exhibits 1-9, offered by the Fair Labor Division, and petitioners' Exhibit B), and one for identification (petitioners' Exhibit C). [fn. 2] Mr. Dunn testified on the petitioners' behalf. The Fair Labor Division called two witnesses: Donna Rizzitano, the former Bayview employee on whose behalf restitution is sought, and Inspector Edward Minchello.
Both parties presented closing statements after witness testimony concluded. Following these statements, I closed the record with the exception of post-hearing memoranda addressing, among other issues, whether Ms. Rizzitano was entitled to restitution for two full weeks of paid vacation time that allegedly accrued on January 1, 2007, as the Fair Labor Division contended. The Fair Labor Division filed a post-hearing memorandum on February 4, 2009, in which it cited Electronic Data Systems Corp. v. Attorney General, 440 Mass. 1020, 798 N.E.2d 273, 274 (2003) in support of its position that Ms. Rizzitano was owed pay for two full weeks of unpaid vacation time. The petitioners did not file a post-hearing memorandum.
1. Bayview Development, LLC is a Massachusetts limited liability corporation based in Quincy. Through the first half of 2008, Bayview was engaged primarily in the construction project management business. (Dunn direct testimony.)
2. Daniel J. Dunn was, and remains, the president of Bayview and has acted as its chief executive officer. (Minchello direct testimony; Dunn direct testimony.)
3. Bayview outsourced the preparation of its payroll to Automatic Data Processing, Inc., which prepared and maintained a payroll journal showing, among other things, Bayview's employees and, for each of them, current and cumulative gross pay, federal and state tax deductions, and social security and medicare withholding amounts. (Exh. 8: Bayview payroll journal for pay period ending August 18, 2006; Dunn cross-examination.)
4. Donna Rizzitano was employed by Bayview beginning in 1997 (when it was known as Adams Development) as an administrative assistant, and ending with her resignation on May 9, 2007, when she was working as a construction project coordinator. (Rizzitano direct testimony; Rizzitano cross-examination; Exh. B: email from Donna Rizzitano to Daniel Dunn dated May 9, 2007.)
5. Ms. Rizzitano's gross weekly salary in August 2006 was $ 961.54 (approximately $50,000 per year), and her net weekly paycheck (after Bayview deducted federal and state taxes and medicare withholding) was $697.04. These amounts did not change through May 9, 2007, the date on which she resigned. (Minichello cross-examination; Exh. 8: Bayview payroll journal for pay period ending August 18, 2006.)
6. Although Ms. Rizzitano had no written agreement with Bayview regarding vacation time, and Bayview had no written policy regarding paid leave benefits, Mr. Dunn typically granted up to two weeks paid vacation leave per calendar year to a Bayview employee if the employee requested it and the work schedule could accommodate the request. Ms. Rizzitano understood throughout her employment with the company that under this arrangement, she could take up to two weeks of paid vacation time each year. Ms. Rizzitano took two full weeks of vacation each year she worked for Bayview except in 2007, and no pay was deducted for any of the vacation time she took. (Rizzitano direct testimony; Dunn direct and cross-examination.)
7. If Ms. Rizzitano had requested leave to take up to two weeks paid vacation before she resigned in May 2007, and the request did not conflict with work schedules, Mr. Dunn would have likely approved the request. (Dunn direct examination.)
8. During the summer of 2006, Ms. Rizzitano was assisting with the coordination of project change orders, and with scheduling work at and ordering materials for projects that Bayview was managing, including a condominium development in Quincy. (Rizzitano cross-examination.)
9. Bayview began to experience a business slowdown starting in August 2006, and payments to Bayview for work it had already performed began to slow at approximately the same time. Mr. Dunn told Bayview's employees, including Ms. Rizzitano, that he would keep them as busy as he could, but that they should seek other work. (Dunn direct examination.)
10. Bayview's business slowdown continued through May 2007. However, there is no evidence that Ms. Rizzitano's weekly pay rate was reduced at any time after August 2006, and the evidence is inconclusive as to whether Bayview reduced her workweek after that time. (Rizzitano direct and cross-examination; Dunn direct and cross-examination.)
11. Ms. Rizzitano took one week of vacation in March or April 2007, with no deduction from her pay. (Dunn direct testimony.)
12. Ms. Rizzitano did not receive a paycheck from Bayview for her last three full work weeks at Bayview-April 16-20, 2007, April 23- 27, 2007, and April 30-May 4, 2007-or for the first two days of the workweek that followed-May 7 and May 8, 2007. (Rizzitano direct and cross-examination; Minchello cross-examination; Dunn cross-examination.)
13. Ms. Rizzitano was also not paid in full for an earlier work week (April 9-13, 2007), and partial payment to her for that work week was dishonored by her bank. Mr. Dunn deposited to Ms. Rizzitano's personal checking account at Rockland Trust a check for $690 dated April 20, 2007 drawn on a personal account that he maintained with his wife at Sovereign Bank. A handwritten notation in the lower left corner of the check front states "W/E April 13th," meaning for the week ending April 13, 2007. (Exh. 9; copy of check front and back.) This check was dishonored on April 26, 2007 for insufficient funds, and Ms. Rizzitano's account was charged a three dollar fee as a result. (Exh. 9: copy of Rockland Trust advice for unpaid deposited items.)
14. During the early hours of May 9, 2007, Ms. Rizzitano informed Mr. Dunn by email that she would not be returning to work. (Exh. B.) Her email stated in part:
It breaks my heart to say that I won't be back to work. I have tried to hang on as long as I could but I am now in a position where I am forced to move in another direction. I understand the situation you are in and want more than anything to help because you are more than a boss to me you're like a brother but I need to think of my family's needs just as you would yours. I don't have any savings and I live week to week. This Friday would make 3 weeks that I wouldn't be paid and I just cannot afford it . . .
15. On the same day, Dunn deposited $600 to Ms. Rizzitano's account at Rockland Trust. (Exh. C; copy of deposit slip with handwritten notation "Donna-W/E 4-27-07 Various Work.") This deposit was not dishonored.
16. On May 16, 2007, Ms. Rizzitano filed a non-payment of wages complaint with the Attorney General's Office in which she claimed that Bayview owed her $4,830 for the period January 3, 2007 to May 9, 2007. (Exh. 1.) The complaint did not state that any portion of the claim was for paid vacation time.
17. On May 30, 2007, Fair Labor Division Inspector Edward Minchello forwarded a copy of Ms. Rizzitano's complaint for non-payment of wages to Mr. Dunn at Bayview, together with a letter advising that the complaint alleged a violation of M.G.L. c 149, § 148 and that Mr. Dunn could dispute it by filing a response with copies of supporting documents and other information. (Exh. 2; Minchello direct testimony.)
18. On February 8, 2008, Inspector Minchello sent to Mr. Dunn at Bayview, by both regular and certified mail, a written demand on behalf of the Attorney General's Fair Labor Division pursuant to M.G.L. c. 151, § 15 for payroll records, time sheets and other records used to determine wages for all employees from June 1, 2006 to June 30, 2007. [fn. 3] (Exh. 3; Minchello direct testimony.)
19. The certified mailing of Inspector Minchello's demand for payroll records was returned by the United States Postal service as unclaimed. (Exh. 4; Minchello direct testimony.)
20. Mr. Dunn did not provide the payroll records that Inspector Minchello demanded in his February 8, 2008 letter. (Minchello direct testimony.) Mr. Dunn sent an undated letter to Inspector Minchello at some point after February 8, 2008 in response to the Inspector's letters to him, in which Mr. Dunn stated that (1) in July and August 2006, he told Ms. Rizzitano that with work slowing down, she would have to work by the hour or on an as-needed basis, (2) he urged Ms. Rizzitano to find other full-time employment in March and April 2007, because Bayview had neither permanent, full-time work nor contracts for new work despite having placed bids, (3) on May 7, 2007 he told Ms. Rizzitano that he would be depositing money in her account to "catch up" with the week ending April 27, 2007, and he did so on May 9, 2007, (4) with that payment, any amounts she was owed would be for the work week starting April 30, 2007, (5) Ms. Rizzitano emailed him at 4:30 a.m. on May 9, 2007 to advise that she was leaving to find work elsewhere and did not work on that date, although she worked on the two preceding days, (6) he had tried without success to call Ms. Rizzitano to discuss "any funds she [was] owed from April 30 through May 7, 2007, and (7) he regretted not having replied to Inspector Minchello sooner, and had not done so because he was operating as a "one man band" doing everything including attempting to complete a project. (Exh. 5; Dunn direct testimony.)
21. After receiving this response, but no payroll records, from Mr. Dunn, Inspector Minchello prepared two citations to Mr. Dunn individually and to Bayview, one of them for an unintentional failure to make timely payment of wages to Ms. Rizzitano for work she performed between January 3, 2007 and May 9, 2007, in violation of M.G.L. c. 149, §148, for which the Fair Labor Division sought a payment of $5,720 comprising of $4,820.00 in restitution and a $900 civil penalty (No. WHO80089), and the other for intentional failure to furnish records for inspection on February 22, 2008, in violation of M.G.L. c. 151, § 19(3), for which the Fair Labor Division sought a $200 civil penalty (No. MWO80061). (Exhs. 6 and 7.)
22. The amount of restitution sought by the Fair Labor Division in Citation No. WHO80089-$4,820-consists of $2,892 for unpaid wages and $1,928 for unpaid vacation time. (Minchello direct, cross and redirect examination.)
23. Mr. Dunn and Bayview appealed both citations on May 20, 2008.
1. Unpaid non-vacation wages
Bayview and Mr. Dunn owe $3,366.28 in restitution for failure to pay non-vacation wages to Ms. Rizzitano in 2007.
a. Unpaid non-vacation wages: April 16-May 4, 2007
The amount of restitution sought by the Fair Labor Division in Citation No. WHO80089-$4,820-includes $2,892 for unpaid non-vacation wages that Ms. Rizzitano earned between January 3, 2007 and May 9, 2007. [fn. 4] In computing this amount, the Fair Labor Division assumed that Ms. Rizzitano's compensation was $964 per week, as she represented in her May 14, 2007 non-payment of wage complaint (Exh. 1). The period for which wages were not paid to her was assumed to be three weeks (April 16-20, 2007, April 23-27, 2007, and April 30-May 4, 2007). Multiplying $964 per week by three weeks generated the claimed unpaid wages amount of $2,892. Neither Inspector Minchello nor the Fair Labor Division was able to confirm Ms. Rizzitano's compensation when the citations were prepared because Bayview had supplied no payroll records, despite the Inspector's request for them. (See Findings 18-20, above, at 6-7.)
Ms. Rizzitano testified that she worked full-time at Bayview, meaning five days per week, through her last day of work on May 8, 2007. (Rizzitano direct and cross-examination.) Mr. Dunn testified that Ms. Rizzitano was working less than five days per week in 2007 because Bayview had little or no construction project work. (Dunn cross-examination.) It remained unclear from his testimony, however, whether he actually reduced Ms. Rizzitano's work week or daily hours, or whether, instead, she appeared for work daily and worked a full day through her last day of work at Bayview, but her work load diminished as the company's business declined.
Whatever the situation may have been, there is no evidence that Ms. Rizzitano's weekly rate of pay was reduced at any time after the pay period ending August 18, 2006-the only pay period for which the petitioners produced payroll records. These payroll records show Ms. Rizzitano's gross pay as $961.54 per week. (See Finding 5, above, at 4.) There is no evidence that this rate of compensation changed at any time through May 8, 2007, Ms. Rizzitano's last day of work at Bayview.
Bayview's payroll records from the work week starting August 21, 2006 through the work week ending May 11, 2007 would have been reliable evidence of Ms. Rizzitano's actual compensation through her last work day, but these were not produced despite Inspector Minchello's demand for them. The petitioners cannot profit from the absence of these records, least of all via an inference that they would have shown a reduction of Ms. Rizzitano's pay rate, work week or daily work hours, in view of their statutory obligation to maintain these records and produce them upon demand by the Attorney General, see M.G.L. c. 151, § 19, and their failure to produce the records or show reliably that these records do not exist. The effect of the petitioners' failure to produce Bayview's payroll records for any time subsequent to August 18, 2006 was the same as if the petitioners had spoliated those records outright-Ms. Rizzitano and the Fair Labor Division were hindered in proving her claim for unpaid wages and in refuting Mr. Dunn's assertion that she was paid part or all of what she was owed. In addition, this forum was hindered in determining Ms. Rizzitano's actual compensation rate when she left Bayview and the number of days she worked per week, or the number of hours she worked each day, in 2007.
If I treated the absence of missing records as the equivalent of spoliation, it would be appropriate for me to preclude the petitioners from contesting Ms. Rizzitano's assertion that she worked full-time without a reduction in pay through her last work day at Bayview. See Weidmann v. The Bradford Group, Inc., 444 Mass. 698, 831 N.E.2d 304, 309-12 (2005) (summary judgment for a former employee asserting claims for unpaid wages under M.G.L. c. 149, § 148 and under common law affirmed; the trial court properly sanctioned the employer for records spoliation by precluding it from challenging the employee's calculation of unpaid wages or asserting that it had overpaid the employee, in view of (1) the employer's duty to maintain employment records under the statute, and (2) its failure to produce plaintiff's employment records, allegedly because the paper records were lost or destroyed after the employer was notified of the plaintiff's potential claim for unpaid wages, and the electronic version of the records was unretrievable because the computer software used to read the documents was corrupted and the company that created the software was out of business.)
However, short of precluding or excluding Mr. Dunn's testimony on this point, it is appropriate for me to infer, instead, that the payroll records would have shown no reduction in Ms. Rizzitano's pay rate, work week or daily work hours through her last day of work. See Kippenhan v. Chaulk Services, Inc., 420 Mass. 124, 697 N.E.2d 527, 531 (1998) (the judicially-developed rule allowing the exclusion of evidence as a sanction for spoliation places the Massachusetts courts in a minority position among the courts of other states, most of which have adopted a less-severe rule that simply allows the trier of fact to infer that the destroyed evidence would have been unfavorable to the spoliator; nonetheless, exclusion is not a mandatory sanction, and in some circumstances it may be more appropriate to allow the use and consideration of the excluded evidence).
The Fair Labor Division did not move to exclude Mr. Dunn's testimony that Ms. Rizzitano was working less than five days per week in 2007, or to preclude the petitioners from contesting her assertion that she worked full time at the same weekly pay rate until she resigned. Neither remedy is necessary to resolve the conflicting testimony on this point, however. Instead, I draw an inference that the missing payroll records would have been unfavorable to the petitioners' position and would have supported, instead, Ms. Rizzitano's testimony that she worked full-time through May 8, 2007 at $961.54 per week. This inference is drawn appropriately, as well, from the petitioners' failure to offer written evidence showing that Ms. Rizzitano's work week or daily hours were reduced at any time before she resigned.
Against Ms. Rizzitano's testimony and the inferences that support her position, the petitioners have only Mr. Dunn's testimony that she was working less than five days per week in 2007 because Bayview had little or no construction project work. Mr. Dunn's testimony did not clarify whether Ms. Rizzitano's work week or hours were reduced in 2007 or whether, instead, Bayview actually made no adjustment to her work week, daily hours or rate of compensation even though her work load diminished as Bayview's business declined. Mr. Dunn's ambiguous testimony on this point is ineffective, therefore, in countering Ms. Rizzitano's testimony that she worked full-time at an unchanged pay rate through her last day of employment at Bayview. Nor does it counter the inference I have drawn that the missing records would have supported her testimony.
The evidentiary balance tips distinctly in Ms. Rizzitano's favor as to whether she worked full-time at an unchanged rate of compensation through her last day of work, and I conclude that she did so. Accordingly, I determine that the amount owed to Ms. Rizzitano for unpaid non-vacation wages for April 16-20, 2007, April 23-27, 2007, and April 30-May 4, 2007 is $2,884.62 ($961.54/week x 3 weeks).
b. Unpaid non-vacation wages: May 7 and 8, 2007
Ms. Rizzitano was also not paid for her work on May 7 and 8, 2007, and the amount she is owed for these additional two days must be added to the recomputed restitution amount. Her gross weekly rate of compensation in 2007-$961.54 per week-is equal to a daily gross pay of $192.31. I have already determined that Ms. Rizzitano was working full-time at an unchanged rate of compensation through her last day of work on May 8, 2007. She is therefore owed an additional $384.62 for her work on May 7 and 8, 2007 ($192.31/day x 2 days). Adding this sum raises the recomputed restitution amount for unpaid wages to $3,269.24 ($2,884,62 + $384.62).
c. Unpaid non-vacation wages: April 9-13, 2007
That is still not the total amount Ms. Rizzitano is owed for unpaid non-vacation wages she earned between January 3, 2007 and May 9, 2007. She is also owed an unpaid portion of net wages for the work week ending April 13, 2007.
The notation on the deposit slip for a $600 payment that Mr. Dunn deposited in Ms. Rizzitano's account on May 9, 2007 (Exh. C) refers to the week ending April 27, 2007. (see Finding 15, above, at 6.) However, payment to Ms. Rizzitano on April 20, 2007 for the workweek ending April 13, 2007 was dishonored for insufficient funds (see Finding 13, above, at 6), which left her unpaid for the week of April 9-13, 2007. Her gross salary for that week was $961.54 (as it was for the other weeks in question). Therefore, while the $600 payment by Mr. Dunn to Ms. Rizzitano's account on May 9, 2007 must be credited against the amount of gross wages not paid to Ms. Rizzitano in 2007, the gross pay that Ms. Rizzitano was not paid for the work week of April 9-13, 2007 ($961.54) must also be included in calculating the amount of unpaid wages that Ms. Rizzitano is owed. Offsetting these amounts against each other results in a net pay shortfall of $361.54 that must be added to the amount of unpaid wages owed for the period referenced in the appealed citations. Adding this sum raises the restitution amount I have recomputed thus far to $3,630.78 ($3,269.24 + $361.54).
d. Total unpaid non-vacation wages
Summing up what Ms. Rizzitano is owed for non-vacation wages not paid to her from January 3, 2007 to May 9, 2007 (the time period to which her complaint and the Fair Labor Division's citations refer):
(a) $361.54 of gross pay is owed to Ms. Rizzitano for the work week of April 9-13, 2007, after crediting a $600.00 partial payment of that amount by Mr. Dunn on May 9, 2007 that was not dishonored and deducting this amount from her weekly gross pay ($961.54 - $600.00 = $361.54).
(b) $2,884.62 of gross pay is owed to Ms. Rizzitano for the work weeks of April 16-20, 2007, April 23-27, 2007, and April 30-May 4, 2007 ($961.54/week x 3 weeks = $ 2,884.62).
(c) $384.62 of gross pay is owed to Ms. Rizzitano for two additional work days, May 7 and 8, 2007 ($192.31/day x 2 days = $384.62).
Adding these three amounts generates the total amount of unpaid non-vacation wages for the period referenced in Citation No. WHO80089 (January 3, 2007-May 9, 2007): $3,630.78. This is $738.78 more than the restitution amount of $2,892 that the Fair Labor Division computed for unpaid non-vacation wages for this period.
2. Unpaid vacation time
The restitution demanded in Citation No. WHO80089 also includes $1,928 for unpaid vacation time, an amount that was intended to be equal to two weeks of Ms. Rizzitano's gross pay. [fn. 5] Applying the Attorney General's own policy on paid vacation, I pro-rate the two weeks of annual vacation time that Bayview accorded to its employees under an imprecise oral policy to one week. However, because Ms. Rizzitano took one week of paid vacation before she terminated her employment on May 9, 2007, she is entitled to no restitution for unpaid vacation time, and as a result I vacate the amount of restitution sought for unpaid vacation time.
A Massachusetts employer is not required to provide its employees with paid vacation time. Webb Learning Systems, Inc. v. Fair Labor and Practices Div., Docket No. LB-01-1024, Decision, at 7 (Mass. Div. of Admin. Law App., May 6, 2002). If it chooses to do so, however, paid vacation time is treated as wages under M.G.L. c. 149, § 148. The first paragraph of the statute provides in pertinent part that "[t]he word 'wages' shall include any holiday or vacation payments due an employee under an oral or written agreement." The Attorney General has interpreted the statute to mean that:
Employers who choose to provide paid vacation to their employees must treat those payments like any other wages under M.G.L. c. 149, s. 148. (citation omitted.) Like wages, the vacation time promised to an employee is compensation for services which vests as the employee's services are rendered. Upon separation from employment, employees must be compensated by their employers for vacation time earned "under an oral or written agreement." M.G.L. c. 149, s. 148. Withholding vacation payments is the equivalent of withholding wages and, as such is illegal.
Advisory 99/1: An Advisory from the Attorney General's Fair Labor Division on Vacation Policies (1999), at 1, http://www.mass.gov/ago/docs/workplace/vacation-advisory.pdf . [fn. 6]
Although the statute defines paid vacation time as wages, it does not state whether, or to what extent, an employer may treat paid vacation time differently than it treats non-vacation wages-for example, by imposing conditions on the use of paid vacation time in a written personnel policy, or in an informal arrangement such as Bayview had. The overriding statutory constraint upon conditioning the accrual and use of vacation time is M.G.L. c. 149, § 148's "special contracts" prohibition, which states that "[n]o person shall by a special contract with an employee or by any other means exempt himself" from the statute's provisions. M.G.L. c. 149, § 148, fifth para.
Whether, and to what extent, an employer retains discretion within the confines of this "special contracts" prohibition to condition the accrual and use of vacation time by way of a personnel policy remains unsettled judicially. The issue was raised in the only compensation-for-unused-vacation case that appears to have generated published court decisions. It was not decided, however, as the Superior Court and the Supreme Judicial Court each found alternate grounds for upholding an award of compensation for unused vacation time to a terminated employee despite a written policy under which a departing employee did not receive pay for unused vacation time. Electronic Data Systems Corp. v. Attorney General, N.E.2d , 2002 WL 415554 (Mass. Super.Ct., Suffolk Cty., 2002), aff'd, 440 Mass. 1020, 798 N.E.2d 273, 274 (2003). The Superior Court found the policy contrary to M.G.L. c. 149, § 148's mandate that employees be paid for their earned wages upon termination, given the statute's definition of wages to include vacation payments due an employee under an oral or written agreement. For this reason, it affirmed an award of vacation pay compensation to the employee, although it modified the award by pro-rating it to reflect the time actually worked by the employee after his last anniversary date. On appeal by the employer, the Supreme Judicial Court noted the Attorney General's argument that an agreement requiring a departing employee to forfeit earned but unused vacation time violates the statute's "special contracts" prohibition, and Electronic Data Systems' argument that nothing in M.G.L. c. 149, § 148 precluded an employer from setting preconditions for vacation time or pay. The Court declined to decide this point, however. Instead, it affirmed the award of prorated vacation pay to the employee because the company's written personnel policy denying pay for unused vacation to employees who "left" employment did not apply to an employee who was terminated.
Short of office policies that require a departing employee to forfeit unused vacation time, the Attorney General recognizes, in Advisory 99/1, that an employer retains control over how and when paid vacation time is accrued and may be used. The Advisory states that:
Employers may establish the terms of employment and determine the hourly rate or salary to be paid as well as how many hours the employee is expected to work. Employers may likewise establish the amount of paid vacation the employee will receive and/or a specific time of the year when the employee can take a vacation, depending on the needs or demands of the business. Employers may establish procedures regarding the scheduling of vacations; i.e., whether employees must notify the employers as to their intent to take vacation, when they intend to take it, and how much vacation time they plan to take.
Advisory 99/1, at 2. [fn. 7]
The Advisory notes that "clear and unambiguous vacation policies" best protect an employer seeking to control how paid vacation time is accrued and how it may be used, such as one providing "that an employee earns vacation time at the rate of one day at the end of each month." Id. If vacation policies are unclear on this point, however, vacation pay must be prorated. The Advisory explains that:
. . . a policy that provides for employees to earn a given amount of vacation "a year," "per year," "on their anniversary date," or "every six months" is not clear because the definitions of the time periods are imprecise and subject to confusion concerning their start and end dates. Where an employer's policy is ambiguous, the actual time earned by the employee will be pro-rated according to the time period in which the employee actually works. For example, if an employee is to receive twelve vacation days "in a year," and the employee voluntarily or involuntarily terminates his or her employment after ten months of employment, the employee would be entitled to ten vacation days or one day per month worked.
Bayview's unwritten vacation policy allowed an employee to take two weeks of paid vacation per calendar year if requested and granted, work load permitting. These conditions on the accrual and use of vacation time fell well within the boundaries of employer discretion to set conditions on the accrual and use of vacation time per Advisory 99/1. That they did so is not genuinely disputed.
Ms. Rizzitano did not testify that she requested leave to take an additional week of paid vacation before leaving her position at Bayview on May 9, 2007. Her email of that date to Mr. Dunn (Exh. B) included no such request (see Finding 14, above, at 6), and there is other no other evidence in the record that she requested leave to take a second week of vacation. Because she did not ask to take this time before leaving her position, as Bayview's vacation policy required, Ms. Rizzitano is not entitled under Bayview's unwritten vacation policy to compensation for an additional, unused week of paid vacation.
The Fair Labor Division views Bayview's informal vacation time policy differently. Regardless of the conditions the policy imposed for using paid vacation time, the Division regards the two weeks of vacation time the policy made available as two weeks of additional wages that accrued each year on January 1 and for which an employee such as Ms. Rizzitano was entitled to full payment. Consistent with this approach, the restitution that the Division seeks on her behalf for the period January 3-May 9, 2007 includes additional pay for two weeks of vacation time ($1,923.08, based upon Ms. Rizzitano's gross weekly pay of $961.54-slightly lower than the $1,928 sought originally, which was based upon an estimated gross weekly pay of $964). (Minchello direct, cross and redirect examination.)
Bayview's unwritten paid vacation policy was imprecise as to when an employee accrued two paid vacation weeks, however. All that was promised to Bayview employees was two weeks per calendar year that would be granted if leave to take it was requested in advance and if the work schedule allowed this request to be accommodated. Under this arrangement, two weeks of paid vacation might accrue in the employee's favor on January 1 if it was requested and granted by that date, but it was more likely to be requested and granted at a later date, and it was also possible that an employee might not request, and might not take with leave, two full paid vacation weeks before the calendar year (or employment) ended. In view of this ambiguity, the vacation time that Ms. Rizzitano earned in 2007 before she left her employment with Bayview, and for which she is entitled to compensation, must be prorated in accordance with the time she actually worked at Bayview before she left her position that year, per Attorney General Advisory 99/1. Cf. Patient's Personal Needs, Inc. v. Attorney General, Docket No. LB-01-552, Decision (Mass. Div. of Admin. Law App., Nov. 28, 2001)(where (1) a company's written vacation policy provided that permanent employees accrued three weeks of paid vacation after five years of continuous employment, (2) the policy also stated that upon termination of employment, the employee's unused vacation would be paid in the final paycheck, and (3) the company's records showed that the employee in question was credited with accrued vacation time on the day following her employment anniversary date, the employee's eleventh employment anniversary-her last anniversary before voluntarily leaving the company- triggered a three-week vacation allowance and, as she used none of this time, she was entitled to three weeks of vacation pay.)
The vacation promised orally to Ms. Rizzitano was two weeks per calendar year, or, in other words, 2 weeks per 52 weeks of work. When she left Bayview on May 9, 2007, Ms. Rizzitano had worked 17.4 weeks in 2007, or 33.7 percent of 52 weeks. The prorated paid vacation time to which Ms. Rizzitano was entitled in 2007 when she left her employment at Bayview was, therefore, 33.7 percent of two weeks-a fraction of a week that I round up to one full week, because there is no evidence in the record that Ms. Rizzitano ever requested or took vacation during her employment at Bayview in increments of less than one week.
At most, then, Ms. Rizzitano was entitled to pay for one week of unused vacation time, at her weekly pay rate of $961.54, when she left her position at Bayview on May 9, 2007 if she had not already taken this time. However, she had already taken a week of paid vacation in March or April, 2007 (see Finding 11, above, at 5-6) when she terminated her employment. No additional paid vacation time had accrued in her favor as of that date, and she had been compensated for the one week of prorated vacation time to which she was entitled. In recomputing the restitution amount demanded in Citation No. WH080089, consequently, I include no amount for unpaid vacation.
3. Civil Penalties
The assessment of civil penalties against Bayview and Mr. Dunn for the violations in question was appropriate. However, although I sustain the $200 penalty assessed against both petitioners for intentional failure to furnish employment records, I reduce the penalty assessed against them for unintentional failure to pay wages to Ms. Rizzitano from $900 to $630, commensurate with my recalculation of the restitution amount for unpaid wages that is owed to her.
Neither penalty amount is facially unreasonable. The $900 penalty assessed in Citation No. WH080089 for unintentional failure to pay wages due and owing was well below the maximum penalty that may be assessed for each instance of a first-time violation of M.G.L. c. 149, § 148 that is not willful. See M.G.L. c. 149, § 27C(a)(2). The $200 penalty that was assessed in Citation No. MW080061 for intentional failure to furnish employment records for inspection in February 2008 was well below the maximum penalty that may be assessed for each instance of a first-time, willful violation of M.G.L. c. 151, § 19. [fn. 8]
Nor was the assessment of the penalties against both petitioners unreasonable. Each of them is subject to civil penalty assessment for the violations in question. Bayview was Ms. Rizzitano's employer, and M.G.L. c. 149, §§ 27C(a)1 and 2 each lists an employer as a person who may be penalized for violating M.G.L. c. 149, § 148 and M.G.L. c. 151, § 19. Mr. Dunn is deemed to have been her employer as well under M.G.L. c. 149, sec. 148, fifth para.,which provides in pertinent part that "[t]he president and treasurer of a corporation and any officers or agents having the management of such corporation shall be deemed to be the employers of the employees of the corporation within the meaning of this section. . . ." Mr. Dunn admitted that he was the president of Bayview and acted as its chief executive officer (see Finding 2, above, at 4), and as a consequence both he and the corporation are each deemed, per the statute, to have been Ms. Rizzitano's employer during the time in question. See Allen v. Interlearn Software Corp., N.E.2d , 2006 Mass.App.Div. 71, 2006 WL 1277813 (Mass. App. Div. 2006).
The $900 civil penalty assessed for an unintentional violation of M.G.L. c. 149, § 148 was based upon an alleged failure to pay both wages for time worked and wages in the form of unpaid vacation time, the combined value of which was stated in Citation No. WH080089 to be $5,720, the amount for which the Fair Labor Division sought restitution. The penalty amount was therefore based upon this sum.
I have found, however, that Ms. Rizzitano took the prorated vacation time to which she was entitled prior to leaving her employment with Bayview, leaving no unpaid vacation time for which she is entitled to compensation. In view of this finding, I recalculated the restitution amount by eliminating from it the amount sought for unpaid vacation time ($1,928). This reduced the restitution amount from $4,820 to $3,366.28, which is 70 percent of the restitution amount claimed in the citation. I reduce the penalty proportionately because the penalty amount was based upon the restitution amount. The recalculated penalty for failure to pay wages is, therefore, $630, which is 70 percent of the penalty amount claimed in the citation.
With this recalculated penalty amount ($630) added to recalculated restitution amount ($3,366.28), the total amount due under Citation # WH080089 is $3,996.28.
The amount of the penalty assessed in Citation No. MW080061 for violating the recordkeeping requirements of M.G.L. c. 151, § 19-$200-was reasonable and I sustain it.
M.G.L. c. 151, § 15 prescribes unambiguously the employer's obligations to keep and maintain employee records, including records of wages paid and hours worked, and to produce these records when the Attorney General requests them. See above, at 7, n.3. M.G.L. c. 151, § 19(3) provides in pertinent part that:
An employer or the officer or agent of a corporation who fails to keep the true and accurate records required under this chapter or to furnish a record to the attorney general . . . or an authorized representative of the attorney general . . . shall have violated this section and shall be punished or shall be subject to a civil citation or order as provided in section 27C of chapter 149 . . .
The Fair Labor Division showed that it requested Bayview's employee records on February 8, 2007 (see Exh. 3) and that neither Bayview nor Mr. Dunn produced them (see Findings 18-21, above, at 7-9), except for a single day of payroll records that Mr. Dunn furnished at the prehearing conference (Exh. 8). The Fair Labor Division showed, thus, that the petitioners violated the recordkeeping requirements of M.G.L. c. 151, § 19. As a result, the burden shifted to Bayview and Mr. Dunn to "demonstrate by a preponderance of evidence that the citation or order was erroneously issued . . . ." M.G.L. c. 149, § 27C(b)(4).
Mr. Dunn explained that Bayview's payroll records were prepared by an outside payroll firm, Automatic Data Processing, Inc. (ADP), and that after keeping these records at Bayview's relatively small office, he transferred them to an offsite storage facility owned by a third party (Simply Self Storage in Hingham). He testified that the payroll records that Inspector Minchello requested were available from neither of these third parties; ADP did not maintain the records it prepared for clients such as Bayview for more than a year, he explained, and the storage facility either disposed of Bayview's stored records when the company ceased paying rent or the records were disposed of together with the storage facility's inventory as a result of foreclosure proceedings against its owner.
Although M.G.L. c. 151, § 15 does not preclude an employer from outsourcing the preparation and maintenance of payroll or other employee records to third-party preparers, or from storing records off-site at premises leased from a third party, the employer remains responsible under the statute for maintaining these records and producing them for inspection upon demand by the Attorney General. This responsibility does not evaporate if a third party records preparer or storage space lessor disposes of these records, any more than it would if the records were lost due to fire or other casualty at the employer's premises. As a practical matter, there are a variety of steps that employers may take at reasonable cost and with minimal effort to create backup hard copy or electronic archives that will survive the loss of original records. There is no evidence that Bayview or Mr. Dunn made any effort to keep or create backup copies of records prepared for it by third parties or stored offsite.
That said, there is no need to determine what Bayview and Mr. Dunn should have done to protect payroll records and assure that they could be produced if and when the Attorney General demanded them. The petitioners have not proved that these records do not exist and cannot now be produced. They have done no more than assert, without proof, that Bayview's payroll records are not available from the business processing company to which its payroll preparation was outsourced (ADP), and that the storage facility where these documents were kept (Simply Self Storage) no longer has them. The record does not show what effort was made to retrieve these records from the payroll preparer or the storage facility, or whether either entity confirmed in writing that they no longer have the records or any backup of them. Mr. Dunn did not request, for example, that I issue a subpoena to compel the production of these documents by the payroll preparer or the storage facility, even though this type of discovery was explained and discussed during the prehearing conference.
In these circumstances, the prejudicial effect of the petitioners' failure to produce Bayview's payroll records was the same as if the petitioners had spoliated the records outright (see the discussion of this prejudice above, at 11). I consider this prejudice together with the statutory obligation to maintain employee records, the petitioners' failure to prove reliably that the records did not exist, and the maximum penalty that could have been assessed against the petitioners for failure to produce Bayview's employment records when the Fair Labor Division demanded them. Having done so, I conclude that the $200 penalty was not disproportionate to the violation alleged in Citation No. MW080061, and that the facts present here do not support a downward adjustment of the penalty amount.
The outcome here results in a reduction of the total amount that the petitioners were ordered to pay by the two citations from $5,920 to $4,505.78. The disposition of the two citations that reduced the total amount due may be summarized as follows:
1. Citation No. WH080089. The total amount due under this Citation for failure to pay wages is reduced from $5,720 to $4,305.78, which consists of a recalculated amount for unpaid wages ($3,630.78) and a reduced civil penalty of $675.
(a) The amount of restitution for unpaid non-vacation wages during the time in question is recalculated from the amount demanded in the citation ($2,892) to $3,630.78. This amount includes:
(i) $2,884.62 of unpaid gross pay for three work weeks included in the Fair Labor Division's computation (April 16-20, April 23-27 and April 30-May 4, 2007), based upon a gross pay rate of $961.54 shown in the only payroll documents of record;
(ii) $384.62 of unpaid gross pay for two additional days that the employee worked at Bayview (May 7 and 8, 2007) before she left her position at the company; and
(iii) $361.54 of unpaid gross pay owed to the employee for an earlier work week (April 9-13, 2007) after crediting a partial payment of $600 made to the employee after she left her position.
(b) The amount of restitution for unpaid vacation time ($1,928) is eliminated entirely. The employee took one week of paid vacation in 2007 under an oral policy that allowed up to two weeks of paid vacation per calendar year if requested and granted, company workload permitting. She is not entitled to compensation for an additional week of vacation time because she did not ask to take this time before leaving her position, as the vacation policy required. In addition, because the policy was ambiguous as to whether the two paid vacation weeks accrued at the beginning of the calendar year, the employee's annual vacation time is prorated, per Attorney General Advisory 99/1, through the last date of her employment at Bayview (May 8, 2007), and she was paid for the one week of prorated vacation time to which she was entitled, leaving no unpaid vacation pay that can be recovered here.
(c) Because the civil penalty for unpaid wages was based upon a combined failure to pay wages and vacation pay and, thus, upon the total original restitution amount sought by the citation ($4,820), and because that amount is reduced here to $3,630.78-75 percent of the restitution amount claimed in the citation-the penalty amount is reduced proportionally from $900 to $675.
2. Citation No. MW080061. The $200 civil penalty assessed by this Citation for failure to furnish employment records is sustained.
I modify the amount due under Citation No. WH080089 from $5,720 to $4,305.78, which consists of a recalculated amount for unpaid wages ($3,630.78) and a reduced civil penalty ($675), with no amount owed for unpaid vacation. I sustain the $200 civil penalty sought by Citation No. MW080061. The total amount due under both Citations is reduced, therefore, from $5,920 to $4,505.78.
DIVISION OF ADMINISTRATIVE LAW APPEALS
Mark L. Silverstein
Dated: July 28, 2009
1/ M.G.L. c. 149, § 27C(b)(4) provides in pertinent part that "[a]ny person aggrieved by any citation or order issued pursuant to this subsection may appeal said citation or order by filing a notice of appeal with the attorney general and the division of administrative law appeals within ten days of the receipt of the citation or order."
2/ The petitioners had intended to offer another document at the hearing as their Exhibit A, but decided not to do so. There is no Exhibit A, consequently.
3/ M.G.L. c. 151, § 15 provides that:
Every employer shall keep a true and accurate record of the name, address and occupation of each employee, of the amount paid each pay period to each employee, of the hours worked each day and each week by each employee, and such other information as the commissioner or the attorney general in their discretion shall deem material and necessary. Such records shall be kept on file for at least two years after the entry date of the record. Such records shall be maintained at the place of employment, at an office of the employer, or with a bank, accountant or other central location and shall be open to the inspection of the commissioner or the attorney general, or their authorized representatives at any reasonable time, and the employer shall furnish immediately to the attorney general, commissioner or representative, upon request, a copy of any of these records. Every employer shall furnish to the commissioner, or the attorney general, or their authorized representative, on demand, a sworn statement of such record, and, if the commissioner or the attorney general shall so require, upon forms prescribed or approved by him. An employer shall allow an employee at reasonable times and places to inspect the records kept under this section and pertaining to that employee.
4/ The remaining amount-$1,928 for accrued, unpaid vacation time-is addressed below, at 15-21.
5/ At the gross pay rate shown in the only payroll documents of record-$961.54-this amount would be $1,923.08. It is unnecessary to make this adjustment, however, because I determine that nothing is owed for unpaid vacation time.
6/ Pursuant to M.G.L. c. 23, § 1, the Attorney General administers and enforces M.G.L. c. 149, § 148 and M.G.L. c. 151. Advisory 99/1 was issued pursuant to this authority.
7/ For example, although an employee "retains all earned vacation leave," an employer may "cap, prospectively, the amount of vacation time or pay which it must provide to the employee," for example by implementing a "use it or lose it" vacation policy. Advisory 99/1, at 1-2.
8/ The maximum monetary penalties that may be assessed for violating M.G.L. c. 149, § 148 or M.G.L. c. 151, § 19 vary depending upon whether a criminal proceeding is brought against the violator or whether (as here) the Attorney General issues, instead, a civil citation requiring the payment of a civil penalty, in which case the maximum penalty is less if there was no prior conviction or monetary penalty for violating either statute.
The maximum civil penalty that may be assessed for each violation of M.G.L. c. 149, § 148 or of M.G.L. c. 151, § 19 is, generally, $25,000, see M.G.L. c. 149, § 27C(b)(1). A specific exception lowers the maximum penalty. If the employer, contractor or subcontractor was not convicted previously of violating Chapters 149 or 151 or assessed a civil penalty for violating either chapter, the maximum penalties that may be assessed for violations of M.G.L. c. 149, § 148 or of M.G.L. c. 151, § 19 are $15,000 if the violation was intentional, and $7,500 if the employer, contractor or subsonctractor "lacked specific intent" to violate the statutory provision in question. M.G.L. c. 149, § 27C(b)(2). The amount of a civil penalty assessed under the statute must "take into consideration previous violations of this chapter [chapter 149] or said chapter 151 by the employer, the intent by such employer to violate the provisions of this chapter or said chapter 151, the number of employees affected by the present violation or violations, the monetary extent of the alleged violations, and the total monetary amount of the public contract or payroll involved." Id.