Given the outpouring of wage and hour cases in Massachusetts, it is no surprise that in 2013, the Massachusetts Supreme Judicial Court issued an unprecedented number of decisions under the state's wage payment and related statutes. This post reviews a number of the SJC opinions, while saving decisions regarding the independent contractor statute (G.L. c.149, §148B) for another day. In general, employees rather than employers came out on top in these cases, reflecting the strong public policy in Massachusetts in favor of protecting an employee's earned wages.
In Cook v. Patient Edu, LLC, 465 Mass. 548, the Court ruled that the Wage Act imposed personal liability on managers and other officials of a limited liability company (LLC), despite the fact that the Wage Act makes no reference to LLCs but does specifically provide personal liability for the "president and treasurer of a corporation and any officers or agents having the management of such corporation." In reaching this conclusion, the Court ruled that the specific reference to corporate officers was not intended to be exclusive, but rather to provide a single example of a situation in which an individual could be deemed to be a "person having employees in his service" and therefore personally liable for nonpayment of wages. Cook indicates that the scope of personal liability extends beyond corporate officers and LLC managers to include any individual "with the authority to shape the employment and financial policies of an entity."
In Lipsitt v. Plaud, 466 Mass. 240, the Court ruled that the Wage Act does not prevent an employee from bringing common law claims such as breach of contract based on the nonpayment of wages. The primary significance of the decision is that a breach of contract claim is subject to a much longer statute of limitations (six years) compared to the three year statute which applies to Wage Act claims. From the employee standpoint, a breach of contract claim is far less desirable, since it does not provide for multiple damages, an award of attorney's fees or personal liability. However, the decision does provide a legal remedy for nonpayment of wages and commissions to an employee who waits more than three years to file suit.
In Dixon v. City of Malden, 464 Mass. 446, the plaintiff was employed as a nursing home director by the City of Malden. At the time of his termination he was owed approximately seven weeks of unused vacation time (apparently there was no "use it or lose it" policy). For whatever reason, the city chose to continue to provide severance pay by continuing the plaintiff's salary for three months, rather than paying the vacation pay plus a lesser amount of severance. When the employee filed suit under the Wage Act, the city argued that because it had provided the employee with three months of salary to which he was not legally entitled, he was not damaged by the failure to pay the accrued vacation. This argument persuaded the trial court judge, but not the SJC. The Court concluded that "the failure to pay unpaid wages [which includes vacation pay] cannot be mitigated by gratuitous, after-the-fact payments." The case makes no mention of a severance agreement and the result strongly suggests that an employee should not be paid any substantial amount of severance pay without being required to sign a severance agreement with a general release which specifically applies to claims under the Wage Act and similar wage payment laws.
Finally, in Taylor v. Eastern Connection Operating, Inc., 465 Mass. 191, the SJC reinstated a wage and overtime claim filed against a Massachusetts package delivery business by several drivers who lived in New York. The drivers, who claimed that they had been misclassified as independent contractors, had filed claims in Massachusetts alleging violation of the independent contractor statute as well as the Wage Act and the Massachusetts overtime act. The trial court dismissed the case, ruling that the independent contractor law did not apply to non-Massachusetts residents working outside the state. On appeal, the SJC reversed, relying on the choice-of-law provision in the written agreement between the drivers and the employer which stated that "this Contract and all rights and obligations of the parties shall be construed in accordance with the laws where the [Employer] is headquartered," i.e. Massachusetts. While the decision did not address the merits of the claim, the SJC decision allowed the plaintiffs to proceed with their claim that they were employees who had been misclassified as independent contractors and therefore entitled to multiple damages and attorney's fees under the Wage Act and the overtime law.
Our next post will address notable 2013 Massachusetts decisions dealing with independent contractor misclassification.
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