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.)
Search results for “Wage Act”
With the new year, taking the time to review the status of your independent contractors may create valuable savings. Independent contractors, when properly classified, can often be a valuable and efficient means for both businesses and individuals to conduct business. Many businesses engage workers on an independent contractor basis as means of avoiding rigorous requirements associated with an employment relationship, including payment of minimum wages and overtime; provision of benefits, workers’ compensation insurance and unemployment benefits; and protections under discrimination and safety laws – all of which may result in significant costs to the operation of a business. If employees are misclassified as independent contractors, however, the company risks the potentially hefty damages resulting from a misclassification.
The downturn in the economy has changed the face of independent contractor arrangements for a variety of reasons. For workers, being classified as employees often means that they receive benefits, including paid vacation time, subsidized health insurance, workers compensation insurance benefits and unemployment benefits. For many government agencies, classifying workers as employees often generates greater revenue from employment taxes that should have been paid, plus penalties and interest. According to the National Employment Law Project’s Summary of Independent Contractor Reforms, New State … Keep reading
After putting all of the specific deal points into a new contract, you are just about finished. All you have to do now is add in the “Miscellaneous” section with all of your boilerplate provisions like force majeure, choice of law and a few others. You have drafted so many contracts for so many years that you do not even know where some of these boilerplate provisions came from, let alone remember all of the implications of each. Even more dangerous, there may be some boilerplate provisions on which you rely that may not be as enforceable as you think. Take, for example, a standard clause appearing in many contracts stating the following: “Nothing in this Agreement is intended to create any enforceable right in favor of any non-party to this Agreement.”
For sure there is no downside to including such a clause in a contract. Indeed, Professor Corbin, one of the preeminent authorities on contract law has said, “If two contracting parties expressly provide that some third party who will be benefited by performance shall have no legally enforceable right, the courts should effectuate the expressed intent by denying the party any direct remedy.” (Corbin on … 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.
In my previous post, I shared three best practices for preparing for a potential employee termination. Here are two additional steps to consider in the termination process:
1. Prepare for possible exit interview scenarios.
Terminations are never easy and often become very personal. In most situations, the key is to conduct the termination meeting as respectfully as possible. In order to do so, it is advisable to have a plan addressing the following points:
a. Who will be at the meeting? Whenever possible, have two company representatives present, even if one is simply there to take notes. Consider security outside the room in those situations where the employee may become volatile.
b. What security measures will be taken while the employee is in the termination meeting? Consider placing limitations on or completely shutting off access to company e-mail, company credit cards and company computer systems. If the termination will not occur until a few weeks later, or transition is required from the employee, then completely shutting off access may not be the best course. Limiting access to certain areas of the computer systems may be appropriate.
c. What will be said? Have a very short introduction, convey the … Keep reading
Not spelling out in your agreements, even in informal agreements, where disputes can be resolved and what law will govern them can lead to some unhappy results. That is exactly the position that United Excel Corporation and its president, Ky Hornbaker, now find themselves.… Keep reading
Executives in this market are moving in and out of companies with greater frequency. With the myriad legal claims that an executive could assert against an employer, whether meritorious or not, more companies are opting to give executives some compensation or other benefits on the way out the door in exchange for a release and other post-employment obligations to ensure that the executive will be a “good leaver.” While the concept of a separation agreement is pretty straightforward, multiple devils can lurk in the details. Here are the first five of my top 10 often overlooked terms in executive separation agreements.… Keep reading
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
Most employment claims can be avoided by simply being aware of what the law requires. Here are three recurring issues which plaintiffs’ class action attorneys and government agencies are targeting across the country and which can be easily avoided by taking action now.
1. Misclassification of Workers as Independent Contractors
The Internal Revenue Service (IRS) and US Department of Labor (US DOL) have been increasingly cracking down on independent contractor misclassification. Last year, Massachusetts, along with several other states, signed a Memorandum of Understanding (MOU) with the IRS and DOL, formally agreeing to cooperate in investigating independent contractor misclassifications. If a violation occurs, the government agency investigating the matter is obligated to report it to the other state and federal agencies which may be affected by the misclassification, potentially opening up the company to an audit by the IRS or the US DOL.
Massachusetts has one of the toughest tests to be met in order to classify someone as an independent contractor, and the penalties for misclassifying vary with the legal requirement which was not met as a result of the misclassification. For example, if a worker was not paid accrued wages or vacation time upon termination, the … Keep reading
Many states are now enacting laws to further promote pay transparency, and if you have employees in those jurisdictions, you need to take note. Not surprisingly, California’s Pay Transparency Act is a leading example of this and has a number of important and new requirements.
First, California employers with 15 or more employees will be required to include pay scales in new job postings. This obligation extends to employers engaging in a third party for recruiting (e.g., job posting boards). Employers, therefore, should ensure that contracts with third parties include this requirement and appropriate indemnification clauses.
Second, California now – like Massachusetts (see M.G.L. c. 149 § 105A(c)(2)) – prohibits employers from asking about an applicant’s salary history or using salary history as a factor in a hiring decision. However, if an applicant voluntarily discloses salary information, employers may consider that information in determining the salary for that applicant. Further, employers may ask about an applicant’s salary expectations – which is a great way to engage in a conversation that might yield information helpful to hiring without risking a statutory violation.
Third, California now requires employers to disclose a position’s pay scale to an applicant … Keep reading