Complaint for Unpaid Wages Not Barred by Statute of Limitations

Takeaway: An employer normally protected by state or federal statutes of limitation regarding an employee’s complaint of late or unpaid wages remains at risk of liability if a sufficient nexus is shown between a later-asserted claim and the original pleading.

The 1st U.S. Circuit Court of Appeals affirmed a decision by the U.S. District Court for Massachusetts in favor of the plaintiff to allow an amendment to a complaint for unpaid wages that otherwise would have been barred by the three-year statute of limitations because it “relates back” to the original pleading, which was filed well within the statute of limitations.

The appellate court also upheld the lower court’s denial of a portion of damages for unpaid wages calculated under the plaintiff’s preferred formula since there was insufficient evidence to demonstrate a specific amount was still outstanding.

In the 2019 original case filing, the plaintiff said his former employer violated the Massachusetts Wage Act (MWA) by failing to pay his full sales commission owed in 2015 on time—and also breached the employment contract.

The MWA imposes liability on employers who fail to pay wages earned by their employees in a timely manner. Moreover, the statute allows employees to recover triple damages for lost wages, in addition to attorney fees and filing costs.  

The plaintiff later added claims in 2020 arising from commissions owed in 2014 and 2016 based on information learned during the discovery phase.

The magistrate judge granted the motion to amend because it “relates back” to the circumstances of the original complaint. However, the judge limited discovery on the new allegations to a deposition of the defendant’s corporate witness.

Under the relation-back doctrine, an amended complaint can be treated, for purpose of the statute of limitations, as having been filed on the date of the original complaint.

Based in the company’s Atlanta office, the plaintiff worked from 2010 to 2017 as the product and sales director for Latin America. The defendant employer is an exporter of frozen meat products and is headquartered in Massachusetts. The company’s owner/president also serves as the primary salesperson for Russia and Ukraine.

A written employment contract in effect throughout the plaintiff’s tenure detailed his compensation plan, which included a base salary plus an annual sales commission equal to 15 percent of the net profits attributable to his sales, to the extent that net profits exceed $150,000. The company had to pay this commission within 60 days after the end of each calendar year.

These annual net profits were to be calculated under a formula whereby the plaintiff’s commission “would equal the gross sales order amounts that he generated and managed, minus six categories of deductions.” Those categories were as follows: goods sold; transportation, freight, storage and insurance; compensation paid to all Atlanta office employees and consultants; overhead, costs and expenses of the Atlanta office; interest on working capital; and a 15 percent return on the company’s capital investment in its Atlanta office.

The plaintiff alleged violations of the MWA and breach of contract related to his 2016 commission when his employer applied a one-time deduction in error for two years in a row (2015-2016) and unilaterally applied a new formula in 2016 that eliminated deductions applied to net profits and reduced the commission percentage from 15 percent to 7.5 percent, which garnered him $146,538—with only a third of that paid on time. Moreover, he argued, the company improperly deducted a 401(k) contribution from his 2014 and 2016 sales commissions.

After a bench trial, the district court ruled as follows:

• The defendant breached the employment contract in 2014 by deducting the plaintiff’s sales commission by $7,041 to fund his 401(k) account.
• The plaintiff failed to prove by a preponderance of the evidence that he was owed any commission in 2015 or that his employer applied improper calculations when determining no commission was owed for that year.
• The employer violated the MWA by failing to pay the plaintiff his 2016 commission by the contractual deadline and deducting its 401(k) contribution from his sales commission that year, which represented an unpaid wage.
• The defendant breached the employment contract due to late payment of the 2016 sales commission and improper deduction of the 401(k) contribution that year.

The district court properly afforded the plaintiff the ability under state or federal “relation-back” law to include additional claims for breach of contract and MWA violations in 2016, according to the appellate court.

By so ruling, the 1st Circuit agreed that the plaintiff’s amended complaint “asserts a claim or defense that arose out of the conduct, transaction or occurrence set out—or attempted to be set out—in the original pleading.”

However, the 1st Circuit also upheld the district court’s decision to reject damages for $146,538 in unpaid wages in 2016 because the plaintiff failed to provide evidence that he was shortchanged this amount when his employer cut his commission rate in half from 15 percent to 7.5 percent under a new formula, rather than the plaintiff’s preferred calculation.

After all, the appellate court reiterated, an employee seeking damages for unpaid wages must offer evidence of the specific amount still owed under the relevant calculation for a court to be able to evaluate whether the wages actually paid either exceeded or fell short of the employer’s contractual obligations.

Thus, the lower court award to plaintiff for $330,597 in damages as a result of 2014 and 2016 breaches of contract and for the 2016 MWA violation resulting in late or unpaid wages, which were tripled by law, stood affirmed as a whole.

Trindade v. Grove Services, Inc. & Spivak, 1st Cir., Nos. 23-1288 and 23-1333 (Jan. 12, 2024).

Anne Woodworth, J.D., is a freelance writer in Laurel, Md.