In two decisions issued this spring, the Supreme Judicial Court of Massachusetts, reversed decisions issued by Massachusetts lower courts and broadly interpreted the scope of Massachusetts wage law with respect to its extra-territorial reach and potential individual liability for violations. Taylor v. Eastern Connection Operating, Inc., 465 Mass. 191 (Mass. 2013); Cook v. Patient Edu, LLC, 465 Mass. 548 (Mass. 2013).
In Taylor, the Court considered claims of independent contractor misclassification filed by New York-based couriers for a Massachusetts corporation pursuant to Mass. Gen. Laws ch. 149, § 148B. The couriers in question lived and worked only in New York. However, their independent contractor agreements contained a Massachusetts choice of law provision and a Massachusetts forum selection clause. Plaintiffs filed a purported class action lawsuit in Massachusetts claiming that they were misclassified as independent contractors within the meaning of G.L. c. 149 §148B. The case was dismissed by the Superior Court, based on its conclusion that the Massachusetts independent contractor statute did not apply to non-resident workers performing services only outside of Massachusetts because they could not be reclassified as employees under that statute and would not have viable claims under the Massachusetts Wage Act. Because there is no express territorial limit contained in the MA wage statutes, and because application of Massachusetts law to the New York-based couriers would not be “contrary to a fundamental policy of a state [that] has a materially greater interest than the chosen state in the determination of the particular issue” (i.e. New York), the Supreme Judicial Court reversed the dismissal by the Superior Court.. The SJC further concluded that the workers would be able to assert claims under the Massachusetts wage payment, overtime and minimum wage statutes. Also see Dow v. Casale, 83 Mass. App. Ct. 751 (Mass. App. Ct. 2013)(Florida-based worker could bring claim for commissions and unreimbursed business expenses under MA wage law based on minimum contacts with MA).
In Cook, the court addressed whether and when an individual could be held liable as an “employer” under the Massachusetts Wage Act (a decision the Court of Appeals for the Second Circuit recently declined to answer for purposes of the New York Labor Law). The SJC made clear in Cook that managers of limited liability companies (LLCs) can be held individually liable for violations of the Massachusetts payment of wages act, including the imposition of mandatory treble damages and attorneys’ fees. Historically, the Wage Act had been interpreted to impose individual liability only to officers of corporations.
Plaintiffs in Cook brought claims against two managers of the defendant LLC for failure to pay wages. The Superior Court dismissed plaintiffs’ claims, based on its conclusion that the Wage Act “does not by its plain language, impose liability on the managers of an LLC.”
The SJC reversed the Superior Court’s order dismissing the case. It recognized that the legislative intent of the Wage Act was to make employers liable and to hold individual managers responsible as employers, irrespective of the form of the business entity. Although the SJC acknowledged that the Wage Act does not by its plain language impose liability on managers of LLCs, the LLC did not exist as a business form at the time the Wage Act was amended to provide for individual liability. Therefore, individual liability can be imposed where a “"person having employees in his service . . . controls, directs, and participates to a substantial degree in formulating and determining [wage] policy.”
In light of these expansive decisions by the SJC, Jackson Lewis partner and wage-and-hour practitioner Guy Tully observes that “Employers based in Massachusetts or with operations in Massachusetts which have not examined wage-and-hour coverage and liability issues must take immediate steps to do so. For those Massachusetts based companies utilizing the services of independent contractors outside of Massachusetts, it is important to carefully review the choice of law and forum selection clauses in those agreements to help eliminate the inadvertent application of Massachusetts law to those relationships.”
Massachusetts – like New York, Illinois, California and other populous states – has a robust state wage enforcement scheme which employers disregard at their own peril. Businesses operating in and/or out of the state of Massachusetts must regularly review their wage-and-hour practices for compliance with federal and state law.