Massachusetts Court Holds That Retention Bonuses Are Not “Wages”

On October 22, 2025, the highest court in Massachusetts ruled that an employee’s retention bonuses were not subject to the Massachusetts Wage Act provision requiring wages to be paid on the final day of employment. The court concluded the retention bonus payments were not “wages.” Instead, they are a form of “additional, contingent compensation” outside the scope of the Wage Act.

Achtergrond

Syncsort Incorporated (Syncsort) hired the plaintiff as a full-time employee in May 2020. In the months that followed, the plaintiff was reduced to part-time status and entered into a retention bonus agreement with the company. The agreement specified that the retention bonus was an incentive for the plaintiff to continue working for Syncsort as the company underwent a rebranding effort in the context of a merger.

Per the retention bonus agreement, the employee would receive two equal payments totaling $15,000 if he remained employed and in good standing with the company on two separate retention dates. He remained employed through the first retention date of November 18, 2020, and was paid the first payment twelve days later. A few weeks later, the employee was notified that his employment would end due to a reduction-in-force on February 18, 2021, the second retention date. He remained employed until this date and the company paid him the second payment eight days later.

The only issue before the court was whether Syncsort violated § 148 of the Wage Act because the second retention bonus payment was not paid on his last day of employment. The law requires an employee discharged from employment to be paid in full on the day of his discharge. G. L. C. 149, § 148. The plaintiff sought mandatory treble damages for this alleged violation.

Retention Bonuses Are Outside the Scope of the Wage Act

The court affirmed a lower court’s appellate ruling that the plaintiff’s retention bonus payments were not “wages” under Wage Act. Therefore, Syncsort did not violate the law by failing to pay the retention bonus payment on his last day of employment. Instead, Syncsort’s retention bonus agreement could only be governed under ordinary contract principles.

According to the court, the retention bonus payments made by Syncsort were not “wages” because they were not made solely in exchange for the plaintiff’s labor or services. The payments were made in addition to plaintiff’s salary and depended on additional contractual conditions. Here, the plaintiff agreed to additional compensation conditioned on his continued employment to dates set by Syncsort as an incentive for him to stay during a time of uncertainty. The two bonus payments he ultimately received were a form of additional contingent compensation, falling outside the scope and coverage of the Wage Act.

This ruling follows the court’s reluctance to classify forms of additional compensation contingent on an employee’s continued employment to a certain date as “wages” under the Wage Act. Previous cases have excluded various forms of compensation such as severance, sick pay, and deferred compensation from coverage under the Act. The ruling is also consistent with federal court precedent that retention bonuses are not “wages” under the Wage Act.

Praktische overwegingen voor werkgevers

The legislature and previous rulings provide clarity as to what forms of compensation are within the scope of the Wage Act. Employers need to be mindful that “wages” must be paid to an employee on the last day of employment to avoid the automatic treble damages penalty of the law.

Employers should pay special attention to the language used to describe forms of employee compensation to avoid mandatory treble damages as well as attorney’s fees for Wage Act violations. To avoid a requirement that they be paid on the last day of employment, retention or incentive bonuses should clearly indicate the contingent nature of the bonus and should be communicated verbally and in writing to the extent necessary.