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Two Court Cases Set Boundaries of Wage-and-Hour Laws

January 28, 2020
 
Two recent court cases establish that there are clear limits to when the Massachusetts wage-and- hour law should apply in response to employees claims of nonpayment of wages.
 
The first case involved two employees from the commonwealth who filed a lawsuit in Massachusetts claiming that they were owed money for work done over a few weeks in the Bahamas. The court ruled that the work was beyond the bounds Massachusetts law.
In the second case, the court ruled that an employer from another state was subject to the Massachusetts wage-and-hour law because of its activities within the Commonwealth.
 
Bahamas – Nice to visit; leave Massachusetts laws behind
 
It is unsurprising to find employees arguing that Massachusetts law should apply to a foreign country for purposes of determining whether or not wage liability was incurred – after all, the commonwealth’s wage-and-hour laws are generally much more generous than those of other states for the employee if an employer is found to be liable for unpaid wages. Treble damages and attorney fees apply if the employee prevails.
 
This case involving the Bahamas follows another recent case involving in allegation of nonpayment of wages for work performed by Massachusetts employees in Africa.
 
The Massachusetts Superior Court determined in the Bahamas case that it should not apply state wage-and-hour laws to employment that takes place exclusively within a foreign country. Just as no foreign country can impose its laws governing the terms and conditions of employment in the United States, Massachusetts does not have the power to legislate the terms and conditions of employment that occurs exclusively within a foreign country.
 
Doing business in Massachusetts? If so, don’t forget to check the local laws
 
The second case involves a former employee of a Texas-based employer seeking unpaid wages and expense reimbursements pursuant to the Fair Labor Standards Act (FLSA), the Massachusetts Wage Act and contract law.
 
The Massachusetts-based employee sued his former company claiming that it was subject to Massachusetts law and that therefore the employee should be entitled to the benefits and protections established in Massachusetts law - including the treble damages and attorney fees noted above.
 
The court determined that the out-of-state employer is subject to Massachusetts law because of the following:
  • the company recruited and employed the worker in Massachusetts; 
  • the company sent representatives to Massachusetts to assist him in soliciting business on at least two occasions; 
  • the company negotiated an employment contract with the Massachusetts resident that allowed him to work in Massachusetts; and 
  • the company complied with Massachusetts payroll and Workers Compensation Insurance laws. 
While the Texas Corporation claimed that it merely agreed to the employee’s request to work remotely, the court concluded that the out-of-state employer “purposefully and intentionally” engaged with the employee in Massachusetts through a variety of activities including:
  • recruiting him; 
  • negotiating his employment contract; and
  • withholding state income taxes from his salary and soliciting business with his assistance in Massachusetts on at least two occasions.
Texas Hold’em
 
While the Texas employer alleged that the claim should be addressed in Texas courts, the Massachusetts court emphatically disagreed. One of the court’s key reasons for doing so was that the employment agreement between the parties was silent as to which state law applies. While the offer letter mentioned Texas law would apply the final employment agreement did not include that same provision, significantly weakening the company’s argument.
 
Among the other factors that were important in the court’s eyes were that during his employment with the company, the employee travelled to Texas only twice. Furthermore, the employee did not reside in Texas nor pay taxes in Texas nor was he afforded any employee protections established under Texas law. 
 
Any time a Massachusetts-based employer employs someone either outside the borders of Massachusetts or a non-Massachusetts employer operates in Massachusetts, is important to understand the scope and breadth of the local laws to determine whether or not they will impact your operation when employment is fired or the employee resigns.
 
AIM members interested in learning more about this or other wage-and-hour issues may call the AIM Employer Hotline at 800-470-6277. 
 
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