Retention Bonuses Are Not Wages Under Massachusetts Law

The Massachusetts Supreme Judicial Court (SJC) recently resolved a dispute in Nunez v. Syncsort Inc., holding that retention bonuses do not constitute “wages” under the Massachusetts Wage Act.

According to a Troutman Pepper Locke article, the decision continues a line of cases distinguishing conditional compensation from wages subject to the Act’s strict timing and payment requirements.

The case arose when an employee received a $15,000 retention bonus payable in two installments, but contingent on remaining employed and in good performance standing on specified retention dates. The employee was employed through the first retention date but terminated before the second, resulting in a delay in the final bonus payment beyond the termination date.

The plaintiff filed suit alleging a violation of the Wage Act, claiming that the delayed payment constituted unpaid wages. The lower courts granted summary judgment for the employer, finding that the payment was contingent and not a wage, a conclusion the SJC ultimately affirmed.

In its decision, the SJC reasoned that retention bonuses fall outside the scope of the Wage Act because they are not “made solely in exchange for the plaintiff’s labor or services,” but are contingent on continued employment or other conditions.

The Court emphasized that prior appellate cases uniformly rejected attempts to classify contingent compensation as wages when payment depends on conditions beyond the employee’s labor. Retention agreements, like other contingent compensation arrangements, are treated consistently with this precedent.

Employers in Massachusetts should review bonus structures and contract language to align with the SJC’s interpretation.

Legal teams elsewhere can reference the case for the proposition that bonus payments should be clearly conditioned on continued employment and good standing, rather than on compensation earned for labor performed. Explicitly stating that retention bonuses are in addition to base salary, and not earned pro rata, may mitigate risk.