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Legal Updates

Massachusetts Wage Act May Extend To Out-Of-State Employees, Rules Superior Court

The Massachusetts Superior Court has ruled that the Massachusetts Wage Act (“Wage Act”) may protect out-of-state employees.  In Dow v. Casale, Superior Court Judge Peter A. Lauriat granted summary judgment for the out-of-state employee, a Florida resident who reported directly to his Massachusetts employer from a home office, rejecting the employer’s argument that the Wage Act extends only to employees who are physically based in the Commonwealth.

Factual Background

Plaintiff Russell Dow (“Dow”) was the sole salesperson for Starbak Communications, Inc. (“Starbak”), a small Massachusetts company that produced videoconferencing technology.  His title was director of sales.

Dow was a Florida resident during his employment with Starbak, working from a home office.  Dow had customers in more than 30 states, including Massachusetts, and traveled to at least 20 of those states in the course of his work.  Dow traveled to Massachusetts to visit customers approximately 20 times in 2008 and 2009.

Dow’s business card identified Starbak’s Massachusetts address, telephone number and fax number as Dow’s contact information.  All paperwork related to Dow’s sales was generated and processed by the Starbak office in Massachusetts.  Dow’s customers likewise sent payments directly to Starbak’s Massachusetts office.

Dow was employed by Starbak from March 2007 to February 2010, when Starbak ceased operations and discharged all employees.  Dow claimed that he was owed more than $138,000 in commissions, expenses and accrued vacation time at the time of his discharge.

Dow commenced a civil action in the Massachusetts Superior Court against Starback’s chief executive officer, Starbak’s chief operating officer, and an individual who held the combined position of president, chairman, secretary and treasurer.  In this lawsuit, Dow sought to recover damages under the Wage Act.

Superior Court’s Ruling

The Court ruled that the Wage Act does in fact apply to Dow.  The Court first noted that the text of the Wage Act neither restricts its coverage to employees who live or work in Massachusetts nor specifies whether it is the location of the employer, the employee, or the work performed that determines whether the Wage Act applies.  In this regard, the Court stated:  “Even assuming that the applicability of the Wage Act turns on the situs of the work rather than on that of the employer, the Court could conclude that Dow worked in any or all of the states, including Massachusetts and Florida, where his customers were located and where he visited.  If the court were to consider applying the wage acts of all those jurisdictions, the result would be not only impractical but virtually impossible.”

The Court similarly reasoned: “[I]n this age of the ubiquitous Blackberry, iPad and smart phone, any person can work in any location that has internet access.  Were the court to adopt [the defendant’s] argument, the Wage Act would afford no protection to an employee who conducted the employer’s business anywhere but in Massachusetts.  This is hardly consonant with the purpose of the Wage Act, since an employer could escape potential liability simply by requiring an employee to work, for example, across the border in New Hampshire.”

In the absence of any guidance on this issue from the Massachusetts appellate courts, the court decided to “fall back” on a personal jurisdiction analysis.  The test for whether a Court may assert personal jurisdiction over an individual turns on whether the individual had sufficient contacts with the state so as to reasonably expect to be subject to a lawsuit there.  Applying this concept to Dow’s situation, the Court concluded that Dow “had more than sufficient contacts with Massachusetts to afford him the protection of the Wage Act.”

Significantly, the Court noted that “if Dow should assert a claim under Florida law, there is no evidence in the record that would support a Florida court’s exercise of personal jurisdiction over the defendants.”  This, together with the fact that Starbak had no assets in Florida that Dow could attach to secure a judgment, may have persuaded the Court that, absent the ability to sue the individual defendants under the Wage Act in Massachusetts, Dow may have been left without any avenue for relief.

Implications And Recommendations

It is difficult to draw a general conclusion about the implications of Dow for Massachusetts employers, particularly as Superior Court decisions are not binding (i.e., the various judges of the Superior Court are not required to follow each other’s decisions).  At a minimum, though, Dow suggests that Superior Court judges will consider extending the Wage Act to out-of-state employees on a case-by-case basis, particularly where, as here, the equities weigh in favor of the unpaid employee.  To the extent that Dow may be applied more broadly, a conservative approach for multi-state employers based in Massachusetts would be to conform their pay practices to the Wage Act in all states that have less-protective wage laws.

Under the Wage Act, awards of treble damages and reasonable attorneys’ fees are mandatory for prevailing plaintiffs.  Accordingly, Massachusetts employers should consult with experienced employment counsel to determine if the Wage Act may apply to any of their employees in any jurisdiction.  Key components of the Wage Act are as follows:

  • Non-exempt employees must be paid weekly or bi-weekly;
  • For most employees, wages must be paid within six days after the end of the pay period in which wages are earned;
  • Commissions are deemed to be wages when they are “definitely determined” and “due and payable”; and
  • Any employee who is discharged must be paid on the date of discharge for all earned wages and accrued but unused vacation time.

If you have questions about the potential implications of Dow for your business, or about the Wage Act generally, please do not hesitate to contact us, as understanding your organization’s compliance obligations under this statute is critical.