Massachusetts v. Morash

PETITIONER: Massachusetts
RESPONDENT: Richard N. Morash
LOCATION: Boston Municipal Court

DOCKET NO.: 88-32
DECIDED BY: Rehnquist Court (1988-1990)
LOWER COURT: Massachusetts Supreme Judicial Court

CITATION: 490 US 107 (1989)
ARGUED: Feb 21, 1989
DECIDED: Apr 18, 1989
GRANTED: Oct 03, 1988

ADVOCATES:
Carl Valvo - on behalf of the Petitioner
Jason Berger - on behalf of the Respondent

Facts of the case

The Commonwealth of Massachusetts (Massachusetts) sued Richard N. Morash, the president of the Yankee Bank for Finance and Savings (Bank). Massachusetts alleged that, by failing to compensate two terminated employees for vacation time they accrued but did not use, Morash violated the Massachusetts Payment of Wages Statute (Statute). Massachusetts alleged the statute was pre-empted by the Employee Retirement Income Security Act of 1974 (ERISA). ERISA requires an employer to pay a discharged employee his full wages, including holiday or vacation payments, on date of discharge. The trial judge certified the preemption question to the Massachusetts Appeals Court. The Supreme Judicial Court of Massachusetts transferred the case to its docket on its own initiative and held that the policy constituted an employee welfare benefit plan and that the statute was pre-empted by ERISA.

Question

(1) Does a company’s policy of paying its discharged employees for their unused vacation time constitute an employee welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (ERISA)?

(2) Does ERISA’s broad pre-emption provision foreclose a criminal action to enforce that policy?

 

Media for Massachusetts v. Morash

Audio Transcription for Oral Argument - February 21, 1989 in Massachusetts v. Morash

Audio Transcription for Opinion Announcement - April 18, 1989 in Massachusetts v. Morash

William H. Rehnquist:

The opinion of the Court in No. 88-32, Massachusetts against Morash will be announced by Justice Stevens.

John Paul Stevens:

This case which comes to us on writ of certiorari to the Supreme Judicial Court of Massachusetts requires us to determine whether a company’s policy of paying its discharge employees’ vacation time constitutes an employee welfare benefit plan within the meaning of Section 3(1) of the Employee Retirement Income Security Act.

In May of 1986, petitioner, the Commonwealth of Massachusetts, started criminal complaints against the president of a bank alleging that he had violated the Massachusetts payment of wages statute by failing to compensate two discharged bank vice presidents for vacation time they had accrued but did not use.

Leaving that the bank’s policy to pay employees accrued vacation pay in lump sums upon termination be in ERISA plan, the Supreme Judicial Court held that the prosecution was preempted by the federal statute.

We reverse.

In an opinion filed with the Clerk of the Court today, we hold that the reference in ERISA to a “plan, fund, or program that provide vacation benefits” should be understood to include within the scope of ERISA vacation benefit funds in which the employee’s right to a benefit is contingent upon a future occurrence or the employee bears a risk different from his normal employment risk that should not be construed to include a single employer’s policy to pay employees for unused vacation time from its general assets.

The bank’s policy to pay employees a good vacation time upon termination does not constitute an employee welfare benefit plan and the prosecution, accordingly, is not preempted by ERISA.