Court Clarifies Retention Bonuses Are Outside The Scope Of The Massachusetts Wage Act

Highlights

• The Massachusetts Supreme Judicial Court held that retention bonuses contingent on continued employment and performance are not "wages" under the Massachusetts Wage Act (the Wage Act).
• This decision reinforces that contingent compensation is not subject to the Wage Act's requirement of payment on the final day of employment.
• Employers should distinguish contingent compensation from regular wages in employment agreements to mitigate risk under the Wage Act.

The Massachusetts Supreme Judicial Court (SJC) held in Nunez v. Syncsort Inc. on Oct. 22, 2025, that retention bonuses contingent on continued employment and performance are not "wages" under the Massachusetts Wage Act (the Wage Act). This confirms that Massachusetts employers do not need to pay retention bonuses or similar forms of conditional compensation to terminated employees on their final day of employment.

Background

The plaintiff, Carlos Nunez, was hired in May 2020 as a senior director of finance at Syncsort Inc., with an annual salary of $185,000. Following a corporate merger, his role was reduced to part-time and his salary adjusted accordingly. To incentivize his continued employment during the merger period, Syncsort offered Nunez a retention agreement that provided for a $15,000 bonus, payable in two equal tranches on Nov. 18, 2020, and Feb. 18, 2021, contingent on Nunez remaining employed, maintaining his regular work schedule and remaining in good performance standing. However, Syncsort terminated Nunez's employment as part of a reduction in force effective Feb. 18, 2021.

Nunez met the conditions for both payments, but Syncsort paid Nunez the second tranche eight days after the termination of his employment. He filed suit under the Wage Act, alleging that the delayed payment violated the Wage Act's requirement that terminated employees be paid all wages in full on their final day of employment.

The case was initially heard in Concord District Court, where cross-motions for summary judgment were denied. Upon reconsideration, the court ruled in favor of Syncsort, finding that the bonus was contingent compensation and not a "wage" under the Wage Act. The Appellate Division affirmed, and the SJC granted direct appellate review.

SJC Ruling

The SJC affirmed judgment for the employer, holding that the retention bonus was not a "wage" under the Wage Act. Justice Gabrielle Wolohojian, writing for the court, emphasized that "[t]he retention bonus payments were not made solely in exchange for the plaintiff's labor or services, but rather depended on additional contractual conditions, and were additional contingent compensation outside the scope of the Wage Act." Because the retention bonus was not a "wage" under the Wage Act, terms and obligations related to its payment were governed by ordinary contract principles.

The court noted that the Wage Act does not define "wages" broadly enough to include such additional contingent compensation, with the exception of commissions, which are explicitly referenced in and included under the Wage Act. In its decision, the SJC cited prior opinions that excluded stock options, unused sick time, profit sharing and severance payments from the definition of "wages" under the Wage Act.

The retention agreement at issue in Nunez was designed to incentivize the employee to remain employed during a period of corporate transition. The bonus was conditioned not only on continued employment, but also on performance and schedule requirements. The court found this structure analogous to other forms of contingent compensation previously excluded from Wage Act coverage.

Chief Justice Kimberly Budd authored a concurring opinion, adding: "Whether compensation is a wage under the statute depends on its function, not on whether it is contingent on one or more conditions." She emphasized that the bonus was "in addition to the plaintiff's salary" and served a distinct purpose in ensuring stability during a time of transition, not merely compensating for typical work.

Considerations for Employers

This decision provides important clarity for Massachusetts employers. Retention bonuses and similar additional, contingent compensation arrangements are not subject to the Wage Act's strict timing and penalty provisions, provided they are distinctly structured as additional compensation for conditions beyond ordinary labor or services. In light of this recent SJC decision, Massachusetts employers may wish to consider:

• clearly defining the purpose and conditions of retention and incentive bonuses and similar payments contingent on remaining employed through a certain date, particularly clarifying that the payments are in exchange for meeting some requirement(s) beyond solely providing regular labor or services
• ensuring that such payments are distinguished from and additional to regular wages in employment agreements and similar documents
• reviewing existing compensation structures and compensation agreement templates to ensure clarity and compliance, including with respect to timing of payment, to reduce potential exposure to Wage Act claims

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