Under the Massachusetts Weekly Payment of Wages Act (“Wage Act”), the President, Treasurer and “any officers or agents having the management of such corporation” are considered to be employers and are subject to individual liability for failing to comply with its requirement. In a previous blog post, Managers of LLCs Can Be Personally Liable Under the Massachusetts Wage Act, I had written about Cook v. Patient Edu, LLC, where the Massachusetts Supreme Judicial Court clarified that managers of limited liability companies (not just the officers of a corporation) could be held individually liable under the Wage Act. In Cook, the SJC concluded that it did not matter whether the entity was a limited liability company or corporation, and determined that “individuals with the authority to shape the employment and financial policies of an entity [were] liable for the obligations of that entity to its employees.”
In a recent unpublished decision, Segal v. Genitrix, LLC, the Massachusetts Appeals Court, relying on Cook, appears to have expanded the scope of individual liability under the Wage Act to certain equity holders of limited liability companies.
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Historically, Massachusetts courts routinely ruled that it was a violation of the Massachusetts Wage Act to fail to pay an employee who had been promised payment for her work only after the employer received sufficient funding. For example, in Stanton v. Lighthouse Financial Services, Inc., U.S. District Court Judge Nancy Gertner found not only once, but twice, that John Stanton was an employee under the Wage Act, was entitled to payment of deferred compensation under his employment contract and confirmed that there was no carve out from the Wage Act’s requirements for startups. In reaching her decision, Judge Gertner reasoned that a deferred compensation agreement where the compensation was forfeited violated the Wage Act provision prohibiting the entering into of a special contract to avoid Wage Act obligations. Since Stanton, a number of Massachusetts state and federal court cases have ruled that compensation contingent upon a company’s receiving certain levels of funding were wages that were required to be paid in accordance with the Wage Act and required such wages to be paid promptly and upon termination of employment – even if funding had not then occurred.
In what could be viewed as a new twist, Superior … Keep reading
As I have previously warned in prior blog posts here and here, the Massachusetts Wage Act exposes a company and individuals having management responsibility for the company to mandatory treble damages and attorneys’ fees for failing to pay wages. Because the statute, however, does not define the term “wages,” employees have attempted to apply the Wage Act’s beneficial damages provision to any type of compensation. A true “bonus” need not be wages and the failure to pay a bonus would then not subject an employer or its management to the risk of treble damages or attorneys’ fees. Nevertheless, it is not always easy to determine if a particular payment is a bonus or wages.
A recent Massachusetts case, Boesel v. Swaptree, Inc., helped clarify the distinction between wages and a bonus. Specifically, Boesel discussed three provisions in an employment agreement that can be used to clarify how the payment to an employee should be characterized:
- Describe a bonus in a provision that is separate from the provision describing base salary. In Boesel, the plaintiff argued that the discretionary bonus in his employment agreement was earned ratably over the course of the year and was part of
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In a June 13, 2013 decision, the Massachusetts Supreme Judicial Court clarified that managers of Limited Liability Companies (LLCs) can be individually liable for violations of the Massachusetts Weekly Payment of Wages Act, and, thus, be personally responsible for treble damages and attorneys’ fees.
In Cook v. Patient Edu, LLC, the lower court had originally dismissed claims asserted against the two managers of the defendant LLC for failure to pay more than $68,000 in compensation owed to the plaintiff under an employment contract. In dismissing the claims, the lower court reasoned that because the Wage Act, by its plain language, only imposes liability upon the “president and treasurer of a corporation and any officer or agent having the management of the corporation or entity;” it does not impose liability on “managers of a limited liability company.” The SJC, taking the case from the Appeals Court on its own motion, reversed the lower court’s decision, ruling that “… a manager or other officer or agent of an LLC, limited liability partnership or other limited liability business entity may be a ‘person having employees in his service,’” and thus may be civilly or criminally liable for violations of the … Keep reading
As summer approaches, many companies will face the tempting invitation from students to work “for free” as interns. While some companies may consider jumping at the chance to enhance their workforce without incurring the costs of compensation, health insurance and other benefits of being an employee, as the U.S. District Court for the Southern District of New York just reminded the business community, having unpaid interns can be perilous if you don’t know – or if you ignore – the law.
Like many businesses, Fox Searchlight Pictures, Inc. hires a number of unpaid interns every year. In 2011, however, several of their “interns” sued, claiming that they should have been paid for the hours they had worked performing routine tasks that would otherwise have been performed by regular employees in connection with the production of the film Black Swan. On June 11, 2013, U.S. District Court Judge William H. Pauley III issued a ruling in which he agreed that two interns, Eric Glatt and Alexander Footman, were “classified improperly as unpaid interns and are ‘employees’…” of Fox Searchlight. Judge Pauley went on to say that these putative interns:
…worked as paid employees work, providing an immediate advantage to
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As we have previously posted in Choice of Law in a Contract Can Be Critical, Ensuring Your Dispute Is Resolved in the Forum You Want Is Not Always Easy, and Selection of Forum Other Than Massachusetts May Not Avoid Wage Act Enforcement, choice of law and forum selection provisions should be conscious decisions made in the context of each specific contract. If in-house counsel do not carefully draft these provisions in their independent contractor or consulting agreements, they may be overlooking a possible means of avoiding or minimizing liability in Massachusetts under the so-called Massachusetts Independent Contractor Law (M.G.L. c. 149, §148B), the Massachusetts Weekly Payment of Wages Act (M.G.L. c. 149, §148) and/or the Massachusetts minimum wage and overtime laws. Because these statutes do not contain any explicit geographic restriction on their application, their applicability to non-Massachusetts residents performing work outside of Massachusetts for Massachusetts companies has been unsettled. (I have previously posted here and here on the staggering ramifications of misclassifying a worker as an independent contractor in Massachusetts.)
In Taylor v. Eastern Connection Operating, Inc., the Massachusetts Supreme Judicial Court took up the issue of whether New York residents who perform … Keep reading
A favorite saying of my mentor and colleague in the Labor and Employment Group here at Burns & Levinson is “no good deed goes unpunished.” Over my years of practice, I have found that this phrase oft comes to mind when an employer just wants to “do the right thing” or wants to be generous to an employee by giving the employee money, or time off, to which the employee is not entitled. The phrase may be one that is recently being muttered around Malden City Hall, in light of the Massachusetts Supreme Judicial Court’s (SJC) recent decision in Dixon v. City of Malden. … Keep reading
Many are familiar with Juliet’s tribute to Romeo: “What’s in a name? that which we call a rose By any other name would smell as sweet.” In the context of employees and independent contractors, however, Juliet is quite wrong. As I discussed in a prior post, it can be perilous to misclassify workers as independent contractors, and, under the Massachusetts independent contractor law, workers are deemed employees unless all three of the following criteria, commonly known as the “ABC” Test, exist:
- the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and
- the service is performed outside the usual course of the business of the employer; and
- the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.
Further, misclassifying an employee as an independent contractor could trigger violations of other laws, with the Massachusetts Weekly Payment of Wages Act (“Wage Act”) (and its mandatory treble damages and attorneys’ fees) being the most treacherous.
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Before last week, a non-Massachusetts employer could insulate itself from employee claims under the Massachusetts Weekly Payment of Wages Act (“Wage Act”) simply by having its employees agree that all employment disputes be litigated in the employer’s home state. That all changed with the Massachusetts Supreme Judicial Court’s decision in Melia v. Zenhire, Inc.
In that case, plaintiff Edward Melia, who worked and lived in Massachusetts, challenged the validity of a forum selection clause contained in his employment agreement requiring that any disputes related to his employment be litigated in New York. Melia’s claims against Zenhire included claims for unpaid wages, unpaid vacation and sick day wages, severance pay and unreimbursed expenses. Melia argued that the forum selection clause was a “special contract” prohibited by the Wage Act and against Massachusetts public policy. The SJC disagreed, determining that, due to comity amongst state courts, and in light of most states’ choice of law rules, there is a presumption that other jurisdictions would apply laws such as the Wage Act. As such, there was no public policy reason to invalidate a forum selection clause in an employment agreement.
The SJC did leave one opening for employees in this regard, in … Keep reading