Massachusetts High Court Rules Treble Damages Provision Not Retroactive

Posted on September 6, 2011 by Noel Tripp

While it is generally understood that decisions of courts apply retroactively (as interpretations of the law) while newly enacted statutes do not (as pronouncements of new law) unless expressly provided by the statutory language, challenges to these principles often arise, especially when the decision or enactment modifies recoverable damages. In a victory for employers, Massachusetts’ highest court ruled last week that the 2008 legislation which created a “treble damages” remedy for violations of the Massachusetts Wage Act applies only to violations which occurred after the statute’s enactment date of July 12, 2008. Rosnov v. Molloy, 2011 Mass. LEXIS 735 (Mass. Aug. 31, 2011). This decision is in accord with a prior federal court decision.  DiFiore v. Am. Airlines, Inc., 688 F. Supp. 2d 15 (D. Mass. 2009).

Rosnov concerned an attorney who worked for a separate law office and, after leaving that office, was able to prove at trial that she was entitled to a commission for a referral based on an oral contract.  Following the jury’s verdict, plaintiff argued to the trial court that the treble damages provision should apply even though her claim was brought in 2007 and related to events occurring in an earlier time period. The trial court agreed, and awarded treble damages.  In analyzing the case under the traditional rule regarding retroactivity, the Supreme Judicial Court of Massachusetts observed that “the distinction between legislation that concerns ‘substantive rights,’ and legislation that concerns ‘procedures’ and ‘remedies,’ has proved to be difficult to draw.” Nevertheless, the court ruled that “Absent an express legislative directive to the contrary . . . the mandatory treble damages . . . should not be retroactively applied.” Finding no such express directive, the court held that the provision did not apply to claims accruing before the enactment date of July 12, 2008.   

While this ruling is favorable to employers, and hopefully will inform courts analyzing retroactivity of damages provisions  under other statutes, such as New York’s Wage Theft Prevention Act (and the decisions to date have indicated the statute does not apply retroactively), the harsh reality in Massachusetts is that the treble damages provision remains applicable for wage claims accruing after July 2008, creating significant potential liabilities.

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NY Appellate Court Holds That World Yacht Applies Retroactively

Posted on June 21, 2010 by Noel Tripp

In Samiento v World Yacht, 10 NY3d 70 (2008), the New York Court of Appeals held that whether a labeled service charge is a “gratuity” for purposes of N.Y. Labor Law § 196-d that must be distributed to service staff depends on the “reasonable customer’s” understanding. One of the many questions unanswered by the decision is whether this standard applies only prospectively to § 196-d compliance following the Court’s February 2008 ruling. In a blow to industry employers, the Appellate Division’s First Department, the intermediate appeals court encompassing Manhattan, has ruled that employers can be subject to liability for undistributed service charges prior to the World Yacht decision. Ramirez v Mansions Catering, Inc., 2010 NY Slip Op 4857, 2 (N.Y. App. Div. 1st Dep't June 8, 2010). A New York federal court is currently considering the same issue. 

Generally, the question of retroactivity turns on whether a new judicial decision constitutes “the creation of a new legal principle.” Id. at * 1. If it does not, then it is simply an interpretation of the law, and has retroactive application. In Ramirez, the Court observes that the question answered by World Yacht had been acknowledged but, importantly, not answered by the Court of Appeals’ earlier opinion on the same subject. Id. at * 2 citing Bynog v Cipriani Group, (298 AD2d 164 (2002), affd as mod 1 NY3d 193 (2003). Because the legal issue addressed in World Yacht – namely “whether mandatory service charges could constitute "gratuities" under Section 196-d” – had not been resolved previously, World Yacht “was not a departure from existing law” and did not constitute a “new rule.” Id.  This conclusion ignores the fact that the entire industry generally believed that, consistent with federal law, the combination of using the term “service charge” and taxing the collected monies provided an employer with the right to retain the collected monies in whole or in part.

Food service and hospitality industry employers have been focused on this issue for over 2 years. While all such employers should ensure their current practices fully comply with this decision, at least based on this decision, liability can be imposed for periods prior to February 2008 within the 6 year statute of limitations. 

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