Effective January 1, 2017, the minimum wage for Massachusetts workers rose from $10 to $11 per hour. The new rate applies to almost all employees. For employees who regularly receive tips as part of their pay, the minimum rate is $3.75/hour. Those workers’ total compensation with tips included must be at least $11/hour. All categories of workers remain eligible for overtime pay at 1.5 times their normal rates of pay for hours worked above 40 in a workweek. Some workers are exempt from overtime requirements based on job classifications and administrative requirements.
Legislator will Try Again to Impose Liability on Companies for Wage Violations by Entities they Contract With
After failing to pass what’s referred to as a wage theft bill in the recently ended legislative session, the bill’s sponsor is not giving up. According to published reports, Sen. Sal DiDomenico will reintroduce the controversial measure when legislators go back into session in January.
The proposal would make employers that contract with third parties to have labor performed or services provided to them guarantors of the payment of wages earned by the employees of those third parties. It appears to make such employers, in effect, co-employers of the third party’s employees. If, then, the third party doesn’t pay its workers, the company that received the benefit of the workers’ services would be liable. The proposal does not make an exception for companies that pay whatever is due under their third-party contracts. The effect could be, it seems, that company A pays for labor provided to it by company B and is nonetheless liable directly to the company B’s employees because it failed to remit wages earned by them. This could mean company A pays the same penalties — triple damages and legal fees — as it would if it failed to pay its own employees for work performed.
The statute is apparently aimed at upending a practice under which large companies hire third parties to be employers of workers who actually perform services for them directly. Whether it will ever becomes law remains to be seen.
In a recent decision that some plaintiff-side employment lawyers found surprising and perhaps troubling, a judge of the superior court held that an employer does not need to pay for all hours that its employees work. The employer did not violate the Massachusetts Wage Act, Justice Robert Gordon found on February 5, because it honored agreements it entered with its workers and did not transgress minimum wage or overtime laws. He wrote,
“[A]n employer and employee who agree at the outset of their contract that the employee will be paid at an hourly rate for selected tasks, but not for all work, are plainly not violating the Wage Act when the employee is paid in accordance with this agreed understanding. To the contrary, an employer who pays an employee as he has agreed to be compensated—provided (as here) that it complies with all applicable minimum wage and overtime laws—has fulfilled the core aspiration of this statute.”
The facts of the case are important. The plaintiff sought to represent a class of auto mechanics who work on a rate pay basis — that is, they are paid specific hours at agreed rates for work they perform on automobiles. While this arrangement resulted in wages in excess of minimum requirements, it also caused the mechanics to necessarily perform daily task for which they were not paid, such as filing paperwork and cleaning their work stations. They also received no pay for down time despite being required to be present for certain hours each day. Because the employer and employee agreed to this arrangement and did not violate other laws, the court found that it did not violate the Wage Act.
The decision may be an important one for employers who do not pay their workers on either hourly or salary bases, such as those that pay only sales commissions or base employee pay on deliveries of good or services. It addresses a previously open question for those employers that is likely to be revisited by appellate courts in the future. The case is Salerno v. Baystate Ford and is pending in Middlesex Superior Court.
In apparent anticipation of proposed changes the state legislature is now considering making to the Massachusetts Equal Pay Act – or, perhaps, in an effort to help determine whether and what changes may make sense – the Massachusetts Attorney General is reportedly using its general records inspection authority to demand a wide range of new employee data.
A recent article by Massachusetts Lawyers Weekly reports that the requests differ from those normally sent by the AG. They seek more demographic data and job details with an apparent focus on whether pay disparities based on gender and/or race exist. The requests ask for information such as employee names, genders, ethnicities, job titles, pay, and job descriptions.
The AG has general authority to seek certain payroll and related information from Massachusetts employers. It typically does so as parts of audits or investigations that may be initiated by specific employee complaints about pay practices. Employers from whom such information is sought are generally required by statute to provide it, and it therefore behooves them to ensure that the full and complete records required by law are properly maintained. Penalties and other damages can flow from failures to do so.
A local grocer is learning the hard way how important it is not only to properly pay employees under state wage laws but to keep good records demonstrating that it did so. Following an investigation by the Massachusetts Attorney General’s wage and hour office, the employer was compelled to pay $84,000 in back wages and $21,000 more in penalties. As if that’s not enough, the store and its owner also had their names posted on the Attorney General’s web site so that all could read about their violations of state laws.
The case illustrates the importance of understanding and complying with Massachusetts laws that cover the payment of wages. They include the state’s Wage Act, which requires that employees receive pay for all hours — and minutes — they work and provides mandatory triple damages and legal fees against employers who fail to comply. Massachusetts also has its own overtime and minimum wage statutes, each of which provides broader benefits to employees than do federal counterparts. The state mandates that all employers keep accurate records of hours worked by and payments made to their employees, among other things, and generally requires that workers be treated as employees and not independent contractors. The mandatory triple damage and legal fee rules normally apply to legal transgressions in any of these areas.
A bill to replace Massachusetts’ aging equal pay law is making progress in the state legislature and may be heading for final approval. Late last week, a Senate committee produced a revised version of the pending legislation and recommended that it be passed.
The existing law, known as the Massachusetts Equal Pay Act (MEPA), was enacted in 1945. It generally prohibits employers from paying women less than men for comparable work. Because court interpretations of what’s required to demonstrate violations of the law have made enforcement difficult — women’s pay continues to lag behind men’s pay in the Commonwealth — a revised MEPA was proposed and is broadly supported in both branches of the state legislature. It would, among other things:
- Make enforcement easier by eliminating the requirement that plaintiffs prove that the substantive content — that is, the specific job duties — are “comparable;”
- Extend the statute of limits on comparable work claims to three years;
- Invalidate certain defenses and the requirement of filing with the Massachusetts Commission Against Discrimination (MCAD) as a prerequisite to suit; and
- Make employer rules against employees discussing their pay with each other illegal.
Employers that, within the 3 years that precede a claim, complete a pay practices self-evaluation and demonstrate reasonable progress in eliminating pay differentials based on gender may escape liability under the bill. Successful plaintiffs will be entitled to double damages and legal fees under the proposed new law, just as they currently are. Agreements to avoid equal pay will not be enforceable. The new law will, of course, be effective to protect both men and women against unequal pay for comparable work.
Effective January 1, 2016, the Massachusetts minimum wage was increased to $10/hour. The increase is part two of a three-part process that will increase the minimum wage to $11/hour on January 1, 2017. The state’s minimum for tipped employees — those who regularly receive tips as part of their wages, such as waiters and waitresses — is now $3.35/hour. The total hourly rate for tipped employees must be no less than the state’s minimum of $10/hour, inclusive of tips actually received, and employers must make up any hourly shortfall. Due to strong penalties contained in the Massachusetts Wage Act, all employers should be certain that minimum wages and all other amounts due to employees for work performed are paid in full.
Employers need to be careful about a number of issues when dealing with their employees. Communicating policies clearly, enforcing rules consistently, and applying anti-discrimination rules appropriately are all on the list. While all are important, a seemingly fundamental but often overlooked issue is the one that most often gets employers into trouble – the regular payment of earned wages. Mistakes in this area can lead to automatic tripling of amounts owed and the payment by employers of hefty legal fees incurred by both sides to a legal dispute. Obviously, then, understanding and properly applying wage payment rules is essential for all employers.
Even when employees are properly paid all they may be owed under Massachusetts law, the automatic penalties embedded in the state’s Wage Act can apply. Federal court decisions in Massachusetts confirm the long reach of the Act. For example, where overtime wages are not owed under Massachusetts law (Mass. Gen. L. ch. 151, §1A) but are due but unpaid under its federal counterpart, the Fair Labor Standards Act, amounts owed to a former employee may be tripled under the Wage Act. The rule is consistent with the broad interpretation given to the Wage Act by other decisions at both the state and federal levels.
To avoid the quicksand-like experience that employers often face in Wage Act cases, a conservative approach to paying employees is essential. When in doubt, employers are normally better served to pay workers what they might be owed than to take a hard stance – regardless of the emotions that may be involved in relationships with former employees. Large damages can result from failures to pay minimum wages, withholding commissions and bonuses, improperly deducting money from pay, and misclassifying workers as independent contractors. Obtaining a clear understanding of what’s required in these and other wage payment areas should be an essential element of all employee management plans.
Starting a business brings many challenges. Among them is the often overlooked need to create and retain records of employee hours and pay. Many small companies have found out the hard way that failing to do so can lead to severe penalties.
In Massachusetts, employers need to maintain records that include employee names, addresses and occupations, amounts paid each week, and hours worked daily and weekly. All of this is open to inspection by state and federal wage authorities, and fines can be levied for a failure to properly keep records. Often even worse than this are wage-related damages an employer can face if records are not available to defend against claims brought by former employees or the government. Because employers are obligated to keep pay records, those who don’t do so face the prospect of having a court accept as true whatever claims employees may make about the number of hours they worked and the amount of pay they received for that work. That can lead to the triple damage and legal fee awards against them.
The Massachusetts Attorney General aggressively pursues claims brought by former employees. The AG can audit records for individual employees or entire staffs, with major financial implications. In one recent case, an employer paid $300,000 in back wages and penalties as the result of an AG audit. Employers faced with these sorts of inquiries normally have little flexibility when transgressions of the law are identified. They either settle with the government, normally at a substantial cost, or face enforcement action that can lead to far higher penalties. In some cases, employees bring class action claims that can be financially devastating if not settled quickly.
The federal court system in Massachusetts is taking a bite out of the state’s independent contractor statute. Beginning last Fall and continuing through last month, three otherwise valid class action suits seeking to apply the law to courier drivers have turned in favor of the courier companies involved. The most recent decision involves a courier association’s contention that one of three prongs of the independent contractor statute is preempted as applied to its industry by federal law. Though things went poorly for that argument early on, the tide recently turned in a big way.
On July 8, the court in Mass. Delivery Assoc. v. Healy issued a ruling after a remand by the First Circuit Court of Appeals. Following its instructions, the U.S. District Court issued judgment in favor of the delivery association. It concluded that a key component of the independent contractor law, Mass. Gen. L. ch. 149, §148B, was preempted as applied to courier drivers by the Federal Aviation Administration Authorization Act (FAAAA). That law bars application of any state law that affects the prices, routes or services of motor carriers involved in interstate commerce.
Though the import of the decision is unmistakable, it may not fully foreclose the application of the independent contractor statute to couriers and other motor carriers. Class action lawyers argue that, even if one of the three prongs of the law cannot be applied, courier drivers still must be treated as employees, not contractors, because the two remaining elements of the statute require it. In a separate U.S. District Court decision earlier this year, that argument was rejected. Though the court’s logic seems sound – it makes no sense to separate one prong of the Ch. 149, §148B test from the other two, since the conflict with federal law will remain – counsel have not given up. FAAAA issues have yet to play out in the state court system.
The preemption question is a huge one for motor carriers. Numerous courier companies have been hit with class action suits in recent years, and many have paid substantial settlements because meeting the rigid requirements of the independent contractor law is virtually impossible. Courier companies generally use an independent contractor model under which drivers are paid for deliveries, receive no benefits, and are considered independent contractors, not employees. When those drivers are found to have been misclassified under Mass. Gen. L. ch. 149, §148B, the law’s mandatory triple damage and legal fee awards frequently means that damages in class action suits rise into the multi-millions.