by Jocelyn B. Jones
Only 20 years ago, criminal prosecution was the sole means of enforcing the Massachusetts wage and hour laws. But the enforcement landscape has changed dramatically since 1993, when enforcement authority was transferred to the Attorney General’s Office from the former Department of Labor & Industries, and employees were authorized to initiate private lawsuits, in which those who prevailed were entitled to treble damages and attorneys’ fees, among other remedial measures. A further transformation took place in 1998, when the Attorney General was granted civil citation authority and monetary penalties for violations were enhanced, and with them, greater deterrence was set into play. The Legislature’s addition of these enforcement mechanisms in the 1990s increased the development of wage and hour related case law, particularly at the appellate level. This rather dramatic expansion of case law in the wage and hour arena has accompanied the crystallization of the viewpoint expressed by the Massachusetts Supreme Judicial Court (“SJC”) that these legal protections are to be interpreted broadly, to ensure that the laws accomplish their underlying goal of guaranteeing that all workers receive their earned wages. Consistent with this view, two recent SJC decisions underscore the expansive reach of the wage and hour laws’ protections.
LLC Managers & Wage Act Liability
In Cook v. Patient Edu, LLC, et al., the SJC addressed an issue of first impression about whether managers of a Limited Liability Company (“LLC”) may be held personally liable for violations of the Massachusetts Wage Act, M.G.L. c. 149, §148. A former employee brought suit in Superior Court against the LLC, as well as two of its managers, for unpaid wages. Relying on the statutory language and the express legislative purpose of protecting employees from long-term wage detention, the SJC concluded that “[b]ecause a manager or other officer or agent of an LLC…” may be a “person having employees in his service,” if he “controls, directs, and participates to a substantial degree in formulating and determining policy” of the business entity, he may thus be civilly or criminally liable for violations of the Wage Act.
Originally enacted in 1879, the Wage Act has been amended over the years to apply to both private and public sector employers. Among other provisions, the law requires that “[e]very person having employees in his service” must pay employees within the time limits specified within the statute. In addition, the statute expressly imposes liability on corporate officers and agents, as well as certain public officers. Cook’s managers pointed to these references and argued that because managers of LLCs are not specifically identified as employers under the Wage Act, in contrast to corporate or public officers, they cannot be held individually liable. But the SJC disagreed. The Court found that personal responsibility for Wage Act violations is not limited only to these particular categories of individuals. The SJC reasoned that the Legislature has merely provided examples of situations in which an individual may be deemed to be an employer. With that, the SJC remanded the case back to the trial court for further proceedings to determine what role the managers played and whether they were sufficiently involved with the LLC’s financial decisions to render either of them liable as a “person having employees in his service.”
This and other recent Massachusetts appellate decisions considering actions that may implicate workers’ rights under the wage and hour laws suggest that employers should consider that that courts are often likely to interpret statutory provisions in the light most favorable to workers. This reality, coupled with the prospect of individual liability, provides abundant motivation for business leaders to ensure that their employees are paid in full and on time.
Misclassification of Out-of-State Employees
Much has been made of the Massachusetts’ Employee Misclassification Law (or so-called Independent Contractor law), since its significant amendment in 2004. Today, the Massachusetts statute is arguably the most protective employment misclassification law in the country. The statute ensures that individuals who are properly classified as employees are afforded the protections intended for employees, including but not limited to timely payment of wages, minimum wage, overtime, as well as workers’ compensation, unemployment, the right to organize and nondiscrimination protections, i.e., statutory protections not available to independent contractors. Massachusetts has a history of leading the way in enacting laws that favor worker protections, and increasingly other states are following suit. Indeed, many state legislatures have either recently adopted misclassification laws very similar to ours or are currently considering doing so. A recent SJC decision highlights why all employers should be aware of this trend.
In Taylor v. Eastern Connection Operating, Inc., the SJC ruled that the Massachusetts Independent Contractor law applied to couriers who both lived and worked in New York while employed by a Massachusetts-based delivery company, Eastern Connection Operating. The SJC found that these individuals, who neither live nor work in Massachusetts, are nevertheless entitled to the protections of the Massachusetts Independent Contractor law. How, you may ask, can that be? The decision rests on the “choice-of-law doctrine,” which considers, among other things, the parties’ expressed intent as to which state’s law will govern legal disputes between them and which state has the most stake in the outcome of an lawsuit.
In considering these factors, the Court made two key findings in the case: 1) the employment contracts between the company and the couriers demonstrated that the parties intended to apply Massachusetts law, and 2) because the laws of New York and Massachusetts concerning employment misclassification are quite similar, applying Massachusetts law would not undermine New York public policy. As the Court wrote:
“Under both Massachusetts and New York law, a purported independent contractor who does not enjoy sufficient independence from the hiring party is deemed an employee. States seek to protect workers by classifying them as employees, and thereby grant them the benefits and rights of employment, where the circumstances indicate that they are, in fact, employees. New York simply uses a different mechanism to effectuate this aim than does Massachusetts” (emphasis supplied.)
Importantly, the Court also noted that “where no explicit limitation is placed on a statute’s geographic reach, there is no presumption against its extraterritorial application in appropriate circumstances.” And here, the SJC found that the Massachusetts Independent Contractor law contained no such limitation. For these reasons, the court held that the Massachusetts law applied to the plaintiffs’ claims and that because the plaintiffs could ultimately be found to be employees under Massachusetts law, the Superior Court erred by dismissing their wage claims on the basis that they were independent contractors.
As other states’ misclassification laws continue to evolve to more closely resemble those of Massachusetts, the Taylor case suggests that employers should take care to ensure that they understand the effect of contractual choice of law provisions and that their in-state and out-of-state workers are properly classified. Massachusetts’ more formidable wage protections may well be within their reach. And other states’ laws are helping them on their way.
The Cook and Taylor decision are but two of many important workers’ rights victories that have been handed down by the SJC over the past decade. As case law in the wage and hour arena continues to expand, we can expect that the SJC will continue to interpret the law with an eye towards ensuring the goal of protecting workers’ rights so clearly central to the state’s wage and hour laws.
Jocelyn B. Jones is Deputy Chief in the Massachusetts Attorney General’s Office (AGO), Fair Labor Division, a position she has held since 2007. She has served as an Assistant Attorney General in the Division since 2000, and as Special Counsel for Fair Labor Policy since early 2013.
* The Attorney General’s Fair Labor Division filed an amicus curiae brief on the behalf of the Plaintiff in the Cook matter. This article represents the opinions and legal conclusions of its author and not necessarily those of the Office of the Attorney General. Opinions of the Attorney General are formal documents rendered pursuant to specific statutory authority; this article is not intended to be an official Opinion of the Attorney General rendered pursuant to statutory authority.