Health Law Case Brief: Alla Feygina v. Hallmark Health System, Inc., et al.

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By: Kelly McGee, Esq.

 In Feygina v. Hallmark Health System, Inc., the Superior Court of Massachusetts granted the plantiff’s motion for summary judgment holding that a physician employee with a claim for unpaid wages was entitled to treble damages under the Massachusetts Wage Act, but not additional amounts for increased income tax liability or prejudgment interest.[1]  The Court ultimately determined that the liquidated damages mandated by the Wage Act are compensatory, not punitive, in nature, and that the treble damages ordered fully compensate the physician employee for all harm caused by the employer’s refusal to pay.[2]  In addition, the Court did not agree with the employer’s claim that it fell under the “hospital” exception to the Wage Act due to the employer’s affiliation with a hospital.[3]

Alla Feygina, M.D., was employed by Hallmark Health Medical Associates, Inc. (“HHMA”) and its predecessor from 1998 to December 31, 2010.  The parties entered into an employment agreement for the calendar year 2010 under which HHMA agreed to pay Dr. Feygina a base salary plus an incentive payment of 100% of excess revenue over expenses.[4]  HHMA paid Dr. Feygina the full amount of the base salary for 2010, but never paid the owed incentive compensation.  HHMA calculated the incentive compensation owed to Dr. Feygina and issued her a check for that amount minus deductions for taxes and other withholdings on September 23, 2011.[5]  HHMA indicated in language in the cover letter and on the check stub that the payment represented satisfaction of any and all incentive compensation HHMA owed Dr. Feygina.[6]

On September 28, 2011, Dr. Feygina’s attorney wrote to HHMA’s counsel seeking clarification as to whether HHMA intended to make the payment subject to the condition that she accept it as full and final payment.[7]  Dr. Feygina believed that the check did not represent the full amount owed her for incentive compensation in 2010, and HHMA later acknowledged receiving additional managed care payments for work performed by Dr. Feygina’s practice after sending the initial check.[8]  Dr. Feygina’s attorney made the same inquiry in subsequent letters on December 8, 2011 and September 10, 2012, but never received a response from HHMA.[9]

The Court stated that it was undisputed that HHMA had a contractual obligation to pay Dr. Feygina $255,755.82 in incentive compensation for 2010.[10]  HHMA asserted that it complied with part of its obligations by issuing a check in the amount of $167,399 to Dr. Feygina on September 23, 2011.  However, the Court held as a matter of law that “the tender of partial payment subject to the condition that it be accepted as a ‘full and final payment’…is not an effective tender.”[11]

Further, the incentive compensation owed to Dr. Feygina constituted “wages” under the Massachusetts Wage Act, and any damages paid to Dr. Feygina would be subject to the trebling provisions of the Wage Act.[12]  The parties agreed that Dr. Feygina would be paid according to the compensation plan in the employment agreement, which set forth both Dr. Feygina’s base salary and her incentive compensation.[13]  Thus both the base salary and the incentive compensation constituted “wages.”

HHMA contended that it should not be subject to the provisions of the Wage Act under the hospital exception, which states that the Act “shall not apply…to an employee of an incorporated hospital which provides treatment to patients free of charge, or which is conducted as a public charity….”[14]  The Court determined that although HHMA is affiliated with a hospital (Hallmark Health Systems, Inc.), HHMA is not an incorporated hospital and the exception does not apply.[15]

Finally, the Court held that while Dr. Feygina was entitled to treble damages as a matter of law, the treble damages in the Wage Act are compensatory in nature and “she is not entitled to recover any amount of consequential damages for increased federal income tax liability in addition to this amount.  That would give her an unfair windfall.”[16]  Although most statutes that give trial judges’ discretion to award double or treble damages are meant to be punitive in nature, the treble damages provided for in the Wage Act are intended to be compensatory.[17]  In 2008, the Massachusetts legislature amended § 150 of the Wage Act to specify that an award of mandatory treble damages will constitute “liquidated damages, for any lost wages and other benefits.”[18]  The Court determined that the addition of this phrase makes clear that the mandatory award of treble damages is compensatory, not punitive.  As the First Circuit held in Matamoros v. Starbucks Corp., the statutory liquidated damages are not punitive, but instead “constitute compensation for the retention of a workman’s pay which might result in damages too obscure and difficult of proof for estimate other than by liquidated damages.”[19] Although HHMA’s breach resulted in a higher federal income tax liability for Dr. Feygina, the Court determined that the treble damages awarded to Dr. Feygina sufficiently compensated her for all direct damages, and she is not entitled to additional damages for increased tax liability or prejudgment interest.[20]  The Court did state, however, that Dr. Feygina may be entitled attorneys’ fees under the Wage Act and scheduled a hearing on Dr. Feygina’s request for attorneys’ fees, unless the parties reached a settlement prior to the hearing date.[21]

Kelly McGee, Esq. is an attorney in the Providence office of Donoghue, Barrett & Singal, P.C.  She is licensed to practice in Massachusetts, Rhode Island, and the District of Columbia, and is a Board member of the Rhode Island Women’s Bar Association.  Ms. McGee received her law degree from Boston College Law School.  She served as President of the law school’s Health Law Society and as the law school representative for the Health Law Section Steering Committee of the Boston Bar Association.

[1] 31 Mass. L. Rptr. No. 12, 279, 284-285 (August 5, 2013).

[2] Id. at 284.

[3] Id. at 282.

[4] Id. at 280.

[5] Id.

[6] Id.

[7] Id.

[8] Id. at 281.

[9] Id. at 280-81.

[10] Id.

[11] Id. at 281.

[12] Mass. Gen. Laws ch. 149, § 148.

[13] 31 Mass. L. Rptr. No. 12, 279, 282 (August 5, 2013).

[14] Mass. Gen. Laws ch. 149, § 148.

[15] 31 Mass. L. Rptr. No. 12, 279, 282 (August 5, 2013).

[16] Id. at 282-83.

[17] Id. (citing to Wiedmann v. Bradford Group, Inc., 444 Mass. 698, 710 (2009) and Goodrow v. Lane Bryant, Inc., 432 Mass. 165, 178 (2000)).

[18] Id.; see also Mass. Gen. Laws ch. 148 § 150.

[19] 699 F.3d 129, 140 (1st Cir. 2012).

[20] 31 Mass. L. Rptr. No. 12, 279, 284 (August 5, 2013).

[21] Id. at 285.

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