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SJC Expands The Geographical Reach Of Laws Classifying Individuals As Independent Contractors To Individuals Working Outside The Commonwealth

Massachusetts employers beware: the Supreme Judicial Court has ruled that out-of-state individuals who live and work for a company headquartered in Massachusetts may bring an action in Massachusetts courts to enforce rights under Massachusetts independent contractor, wage and overtime statutes.

In Taylor, et al. v. Eastern Connection Operating, Inc. the Plaintiffs lived and worked in New York for a Massachusetts corporation. The Plaintiffs filed a civil action first claiming that they were misclassified as independent contractors rather then employees, which resulted in wage and overtime pay violations.

In Taylor, et al. v. Eastern Connection Operating, Inc. the Plaintiffs lived and worked in New York for a Massachusetts corporation. The Plaintiffs filed a civil action first claiming that they were misclassified as independent contractors rather then employees, which resulted in wage and overtime pay violations.

Mass. Gen. Laws. c. 149, s. 148B contains a three-prong test used by employers to determine if an individual may be classified as an independent contractor. Employers can be subject to civil and criminal penalties if an employer classifies or treats the individual other than as an employee although the worker does not meet each of the criteria in the three-prong test. The employer faces additional exposure if in receiving services from the individual, the employer violates Massachusetts laws on wages, overtime, payroll records, payroll taxes or worker's compensation.

In the Taylor case, the Defendant employer filed a motion to dismiss arguing that the Massachusetts independent contractor statute does not have the geographical reach to apply to the Plaintiffs because they live and work exclusively in New York regardless of the choice-of-law clause in the contract between the Plaintiffs and Defendant. The Plaintiffs argued that the choice-of-law clause in their contract with Defendant requires the application of the aws of Massachusetts to their claims.

Weighing these arguments, the SJC held:

The defendant contends that, regardless of choice-of-law principles, the Massachusetts independent contractor statute has no application to work performed outside of Massachusetts by non-Massachusetts residents, and that the choice-of-law clause cannot imbue the statute with extraterritorial effect it otherwise lacks. However, where no explicit limitation is placed on a statute's geographic reach, there is no presumption against its extraterritorial application in appropriate circumstances.

The Court further held "there is no express limitation on the territorial reach of the Massachusetts independent contractor statute, and that there is no apparent reason to disregard the parties' choice of law, we conclude that the Massachusetts independent contractor statute applies to the plaintiffs' misclassification claim." Therefore, the Court concluded that it was an error by the Superior Court Judge to dismiss the Plaintiffs' civil action, thus permitting the case to move forward.

As a result of this decision, companies headquartered in Massachusetts with individuals performing work outside the geographical confines of the Commonwealth labeled as independent contractors should take note of this ruling. It makes sense for these companies to review the classifications of these individuals and to confirm compliance with Mass. Gen. Laws. c. 149, s. 148B.

If you are an individual performing work outside of Massachusetts for a company headquartered in the Commonwealth as an independent contractor then recognize that you may have expanded rights pursuant to Massachusetts wage and overtime laws based on this ruling.

Employers and individuals with questions regarding Massachusetts independent contractor laws should contact Attorney Mucci an experienced employment law attorney.

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