In a decision issued earlier this month, the Massachusetts Supreme Judicial Court (SJC) held that Massachusetts independent contractor, wage and overtime statutes may, in certain circumstances, apply to out-of-state workers of Massachusetts-based companies.
In Taylor v. Eastern Connection Operating, Inc., Eastern, headquartered in Woburn, Massachusetts and in the business of delivering packages in various states along the East Coast, sought to dismiss claims brought against it by the plaintiffs, three individuals hired by Eastern as couriers to pick up and deliver packages on its behalf in the state of New York. The contracts between the plaintiffs and Eastern classified the plaintiffs as “independent contractors” and included the following language: “This Contract and all rights and obligations of the parties shall be construed in accordance with the laws where [Eastern] is headquartered and any action shall be commenced in that jurisdiction in the closest [S]tate court.”
In 2010, the plaintiffs brought their suit in the Superior Court alleging that (1) Eastern had misclassified them as independent contractors rather than as employees, in violation of the Massachusetts independent contractor statute, and (2) Eastern failed to pay them wages and overtime, in violation of the Massachusetts wage and overtime statutes. Eastern moved to dismiss the claims on the separate but related grounds that the Massachusetts independent contractor statute did not apply to out-of-state workers, which plaintiffs were, and that the Massachusetts wage and overtime statutes did not apply to independent contractors, which Eastern alleged plaintiffs were. The Superior Court dismissed the plaintiffs’ claims and plaintiffs appealed.
The SJC disagreed with the Superior Court. First, the SJC observed that, in light of the clear forum selection clause in the plaintiffs’ contracts with Eastern, the plaintiffs properly brought their claims in the Superior Court, thereby rejecting Eastern’s argument to the contrary. Next, the SJC addressed plaintiffs’ misclassification claim. After looking at the express language of the contract and finding that (1) the state of Massachusetts had a “substantial relationship” to the transaction, as Eastern is headquartered in Massachusetts, and (2) even though the relevant Massachusetts and New York laws are different in some ways, both purport to protect workers by classifying them as employees, and thereby grant them the benefits and rights of employment when circumstances indicate that they are, in fact, employees. Therefore, the application of Massachusetts law would not be contrary to a fundamental policy of New York. Accordingly, the SJC upheld the express choice of Massachusetts law in the contract. The Court also noted the lack of geographical limitation in the Massachusetts independent contractor statute and, as a result, held that the statute applied to the plaintiffs’ misclassification claim.
Finally, the SJC turned to the plaintiffs’ second claim regarding wages and overtime. As the determination of the misclassification claim would govern the plaintiffs’ wage and overtime claims, which are predicated on the assertion that they were employees, the Court did not come to a conclusion on that claim but instead vacated the dismissal of both claims and remanded the case back down to the Superior Court.
This case provides an example of those circumstances in which Massachusetts statutory remedies are available to workers who do not live or work in Massachusetts. Employers should remember this case when including Massachusetts choice-of-law provisions in contracts with employees and contractors.