SJC Holds That Retention Bonuses Do Not Constitute ‘Wages’ Under the Massachusetts Wage Act

Quick Hits

• On October 22, 2025, the Massachusetts Supreme Judicial Court concluded that a retention bonus is not a “wage” for purposes of the Massachusetts Wage Act, and that such bonuses are instead a form of additional, contingent compensation outside the ambit of the Wage Act.
• The court reasoned that the purpose of a retention agreement is to benefit the employer by securing the services of an employee through a date that is of importance to the company, while compensating the employee for accepting the risk of being let go during a period of corporate transition or uncertainty.
• The court explained that retention bonuses should be treated like other types of contingent compensation that are in addition to the compensation an employee receives in exchange for the employee’s labor and services—and that the courts have previously held are outside the ambit of the Wage Act.

Background

Carlos Nunez, a senior director of finance, entered into a retention bonus agreement with Syncsort during a period of corporate transition. The agreement provided for two bonus payments, each contingent on Nunez remaining employed and in good standing through specified dates, in addition to other conditions, including no reduction in work schedule. Nunez received the first bonus payment after the initial retention date. Thereafter, Syncsort notified Nunez that it would be terminating his employment (due to a reduction in force) effective on the second retention date, but it did not make the second bonus payment to Nunez until several days after his last day of employment.

Nunez sued, claiming that Syncsort had violated the Wage Act by failing to provide him with the second bonus payment on or before his last day of employment, as required by the Wage Act. The lower courts ruled in favor of the employer, holding that the bonus was not a “wage” under the act.

The SJC’s Decision

In reaching its holding, the SJC observed that while the Wage Act is designed to ensure prompt payment of earned wages, not all forms of compensation constitute “earned wages” under the act. Indeed, although the act does not define the term “wages” or mention retention bonuses, it states that only certain specified types of compensation—e.g., vacation pay, holiday pay, and commissions that have been definitely determined and are due and payable—constitute “wages.” The court further noted that Massachusetts appellate courts have consistently excluded other forms of contingent compensation—such as discretionary bonuses, stock options, and severance—from the definition of “wages” under the act when they require something beyond an employee’s regular labor or services.

Applying this reasoning, the SJC examined the background and purpose of retention agreements and found that the agreement at issue fell squarely within the typical model of a retention agreement. The court then explained that it found “no reason why retention agreements should be treated any differently from other types of compensation that are contingent upon continued employment to a particular date and are in addition to the compensation the employee receives in exchange for his or her labor and services.” Accordingly, the court held, retention bonuses (like other forms of contingent compensation) are not encompassed by the Wage Act.

Although the SJC’s decision was unanimous, Chief Justice Kimberly S. Budd issued a concurring opinion in which she agreed that Nunez’s retention bonus payments were not “wages” subject to the Wage Act, but on different grounds than those described in Justice Gabrielle R. Wolohojian’s opinion for the court. Specifically, she argued that the bonus payments were not beyond the scope of the act because their payment was “contingent on certain enumerated conditions,” as the court had held, but rather because “it was offered in addition to the plaintiff’s regular pay, in exchange for something more than his regular work.” As grounds for this conclusion, Chief Justice Budd argued that “the mere existence of a contingency is not a reliable way to determine whether a payment is a wage,” since all wage payments are “contingent on an employee completing the ordinary duties associated with his or her job.” Thus, she reasoned, what distinguishes nonwage compensation from “wages” under the act is not whether it is contingent, but rather that it is “provided in exchange for something other than the typical work that an employee performs as part of his or her job” (emphasis in the original).

Key Takeaways

The SJC’s decision clarifies for Massachusetts employers that bonus payments required by retention agreements will not be treated as “wages” under the Massachusetts Wage Act, and that issues relating to retention-bonus payment or nonpayment will be governed by ordinary contract principles. That clarity is particularly important in Massachusetts, where a plaintiff who succeeds in establishing a failure to pay wages covered by the act is automatically entitled to recover treble damages, plus reasonable attorneys’ fees.

Ogletree Deakins’ Boston office will continue to monitor developments and will provide updates on the Massachusetts and Wage and Hour blogs as additional information becomes available.

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