Massachusetts Court Gives Strict Interpretation to Independent Contractor Law

The Massachusetts Supreme Judicial Court has eliminated one of the few remaining defenses available to employers for violations of the Commonwealth’s strict liability law governing independent contractors.  In Somers v. Converged Access, Inc., (August 21, 2009 SJC Docket-10347), the court found that the employer has misclassified the plaintiff as an independent contractor. The court rejected the employer’s defense that the plaintiff suffered no damages because the employer paid the plaintiff more as independent contractor than it would have paid him, had it hired him as an employee.
 
The plaintiff twice filed an application for employment with CAI, neither of which resulted in employment. CAI did, however, offer him a temporary position, testing CAI’s software products first for a sixty day period and then for a 90 day extension, as an independent contractor.  As an independent contractor, Somers was not entitled to any benefits the company offered to its employees, including vacation pay, participation in insurance plans, or retirement benefits.  When the company informed him that it would not renew his contract again and then did not consider his application for an open position, Somers filed suit, alleging, among other claims, misclassification as an independent contractor in violation of the Massachusetts wage and hour and independent contractor laws.
 
In its defense, the company argued, and the lower court agreed, that because the $65 per hour wage it paid Somers was substantially more than it would have paid him as an employee, he did not suffer any damages.  The SJC, however, made it quite clear that this position offered no defense to Somers’ claims.  In essence, the SJC reason that, because CAI misclassified him as an independent contractor, the money it paid to him for that period was his salary.  It rejected CAI’s claims that it should be allowed an “offset” for the salary it would have paid had it hired him as an employee against the larger sum it paid him as an independent contractor. The court reasoned that there are no offset provisions in  Mass Gen. L ch 149, section 148 (the Wage and Hour Act) of Mass. Gen. l Ch. 149, section 148B (the Independent Contractor Law).
 
Under Massachusetts’ Wage and Hours laws, a successful plaintiff may recover an award of treble damages, plus costs and reasonable attorney’s fees from the employer. The court remanded the case to the trial court for determination the extent of the damages due to the plaintiff.
 
This case serves as yet another reminder to employers of the facts that they must properly classify their employees and that an independent contractor is a rarity in Massachusetts employment relationships. Mistakes of this type are extremely costly to employers who do not follow the law.

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If you have any questions or concerns about this area of the law, please feel free to contact me.

Massachusetts Increases Fines for Wage and Hour Violations

An amendment to the Massachusetts Wage Act has businesses–and their lawyers–calling the changes unfair and punitive. What’s the change? Under the amendment passed in April 2008 by the legislature, which went to effect on July 13, 2008, the civil punishment for wage and hour violations is now treble damages, regardless of whether the violation was intentional or not.

Of course every business needs to pay their workers in accordance with the law, which means, among other things, overtime for weeks of over forty hours, with mandatory overtime on Sundays and certain holidays in retail establishments, and vacation and commissions policies that conform with the law. The law already provided for strict damages, including back wages, attorneys’ fees, and sometimes multiple damages for intentional violations. Egregious violations of the law may also lead to criminal penalties.

But multiple damage awards used to vary depending on the culpability of the business. Some violations might result from errors at a payroll processing company or misunderstandings of the law, and a company had the right to plead a good faith defense to charges of violations. The state and federal departments of labor were usually forgiving in such circumstances, giving employers a second chance to mend their ways.

Unfortunately, the law of the land means that every violation will now be treated as a triple damages case.

The lesson for businesses: Time to take a close look at your employment practices. Double check your controls to make sure the wage and hour laws are being followed to the letter! This means double check with payroll companies too.

Contact me if you need to review your compliance with the wage and hour laws.  This is a very important area for all employers, and it is wise to invest in prevention to avoid potentially serious fines down the road.