From case law interpreting one of, if not, the most employee-friendly independent contractor statute in the country to Beacon Hill’s efforts to pass non-competition agreement reform, Massachusetts is certainly no stranger to key developments in the labor and employment arena. This blog post highlights the 2016 case law and legislative efforts about which every Massachusetts employer should be aware, and provides insight over what to watch for as we move our way along through 2017 and beyond.
Passage of Pay Equity Act
On August, 1, 2016, well before the conclusion of the legislative session, Governor Baker signed the An Act to Establish Pay Equity (the “Pay Equity Act”), following a compromise between both chambers of the legislature. The law, which goes into effect on July 1, 2018, aims to close the gender pay gap between males and females in the workplace. The Pay Equity Act prohibits employers from discriminating in any way on the basis of gender in the payment of wages, including benefits or other compensation, subject to a number of exceptions. Most prominently, the Pay Equity Act bars employers from asking prospective employees about their salary history or from seeking salary history information from their current or former employers. For more detail about the Pay Equity Act, please see this blog entry co-authored with our affiliate government relations consulting group, ML Strategies.
While the Pay Equity Act does not go into effect until July 1, 2018, employers should update their job applications and train interviewers now, to avoid running afoul of this law and becoming the test case for its enforcement.
A Federal Law Preempts, in Part, Enforcement of Massachusetts’ Independent Contractor Statute Against Motor Carriers
Over the past few years, Massachusetts state and federal courts have been inundated with arguments from motor carriers that, by operation of federal law, they are immune from misclassification claims under the Massachusetts independent contractor statute, G.L. ch. 149, § 148B (“148B”). It is not uncommon for motor carriers, such as tow truck and package delivery companies, to classify their drivers as independent contractors. Under Massachusetts law, however, an individual is presumed to be an employee and an employer must satisfy a three-part test to correctly classify individuals as independent contractors. G.L. ch. 149, § 148B. In short: (1) the individual must be free from the employer’s control and direction in performing the service; (2) the individual must perform a service outside the employer’s “usual course of business;” and (3) the individual must perform work of a nature that is customarily treated as an established independent trade or occupation. Id. An employer must meet all three prongs.
In recent years, Massachusetts motor carriers, as well as others across the country, have put forth a federal statute, the Federal Aviation Administration Authorization Act of 1994 (“FAAAA”) to fend off class action misclassification claims. This statute has a preemption provision prohibiting the enforcement of state statutes having a significant impact on a motor carrier’s prices, routes, or services. 49 U.S.C. § 14501(c). The deregulatory purpose behind the FAAAA preemption provision led Massachusetts courts to dismiss these cases on preemption grounds, finding that enforcement of 148B’s second prong forced motor carriers to use employees, and not independent contractors, in providing services performed within their “usual course of business.” Appellate courts in 2016 reigned in the defense.
In February 2016, the United States Court of Appeals for the First Circuit held that the FAAAA preempts, in part, 148B misclassification claims. Schwann v. FedEx Ground Package Sys., 813 F.3d 429 (1st Cir. 2016). The First Circuit found that the FAAAA preempts 148B’s second prong but found the three prongs to be severable and did not, for various reasons, undergo a preemption analysis for 148B’s first and third prongs. In December 2016, the Massachusetts Supreme Judicial Court, the Commonwealth’s highest court, agreed with the First Circuit’s second prong preemption and severability finding, but also found that each of the other two prongs “contains only commonly used State and Federal tests of employment, indicating that it does not fall within the intended scope of the FAAAA’s preemption.” Chambers v. RDI Logistics, Inc., 476 Mass. 95, 106 (2016).
Notably then, motor carriers should be aware that, given these recent appellate court decisions, the FAAAA preemption provision is not a “get out of a jail free card” to independent contractor misclassification claims. Instead, motor carriers need to plan and be prepared to meet a relaxed burden, i.e. the first and third prongs of 148B, when defending against misclassification claims.
Status of Non-Competition Reform
The Massachusetts legislature failed to pass a law designed to reform Massachusetts law concerning non-competition agreements. Non-compete reform remains a hot topic in the Commonwealth and the subject of spirited debated between Massachusetts law makers, employees, employers, and the employment bar. In 2014, then Governor Patrick sought comprehensive reform of non-competition law (including proposing a blanket ban on all non-competition agreements), and both chambers of the legislature passed bills related to non-competition reform in the summer of 2016. This past legislative session, the Massachusetts House and Senate failed to reach a compromise on their respective versions of non-competition legislation; most notably, the chambers could not bridge the gap between the House version, which called for a twelve (12) month limit to non-competition terms (with a two-year carve-out for instances involving fiduciary breach or misappropriation of employer property), and the Senate version, which limited the duration of non-competition terms to just three (3) months. You can learn more about non-compete reform here.
Despite the failure of the most recent session to pass non-competition reform, this topic has not died on the vine. To the contrary, the legislature’s joint committee on labor and workforce development is currently reviewing the latest proposed legislation.
A Federal Court Holds that State Law’s Mandate of Automatic Treble Damages for Wage Claims Can Be Awarded for Violations of Only Federal Law
A Massachusetts federal court’s late 2015 holding in an unpaid wage matter created reverberations throughout 2016. Lambirth v. Advanced Auto, Inc., 140 F. Supp. 3d 108 (D. Mass. 2015). In Lambirth, a car mechanic brought suit for alleged unpaid overtime. He brought a claim under the federal statute guaranteeing overtime pay, the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. § 201 et seq., as well as the Massachusetts Payment of Wages Statute (“Wage Act”), G.L. ch. 149, § 148 et seq. He did not file a state law overtime claim, most likely because he falls within the law’s “garagemen” exemption. Unlike the FLSA, the Wage Act provides for an automatic award of treble damages for wage violations. The defendants argued that the employee could not avail himself of the state law treble damages provision while pursuing an overtime violation of only federal law. The court disagreed.
Judge Hillman found nothing in the Wage Act itself, or in its legislative intent, to support defendants’ position. Instead, recent case law “lead[s] to the conclusion that the [Wage Act] applies to the untimely payment of all wages to which an employee is entitled under either state or federal law.” 140 F. Supp. 3d at 108.
There are two takeaways for employers on this case. First, employers should take note that an employee’s exempt status under state law does not mean that the employee is similarly exempt under federal law, and vice versa. Employers therefore should carefully review and analyze classification decisions under both state and federal law. Second, employers should be aware of, and on the lookout for, employees pursuing state law treble damages for violations of only federal law.
Legalization of Marijuana
Massachusetts voters passed a ballot initiative in November, legalizing recreational marijuana in the Commonwealth. Three other states passed similar initiatives in November to join Washington, Oregon, Colorado and Alaska in legalizing recreational marijuana (marijuana is still illegal on the federal level). While marijuana may be legal in Massachusetts, the regulations regarding employers’ ability to test and discipline employees remain unchanged. Indeed, the Massachusetts law states that it “shall not require an employer to permit or accommodate conduct otherwise allowed by this chapter in the workplace and shall not affect the authority of employers to enact and enforce workplace policies restricting the consumption of marijuana by employees.” Thus Massachusetts employers are free to establish drug-free workplaces. The boundaries of this law for Massachusetts employers and employees are sure to be tested as the practical implications of legalized recreational marijuana develop in the Commonwealth.
A Massachusetts Superior Court Decision Makes Clear That Prevailing Wage Rate Determinations Can Be Made Through Opinion Letters By the State’s Labor Agency
Massachusetts contractors working on public construction projects are intimately familiar with the Commonwealth’s Prevailing Wage statute. G.L. ch. 149, §§ 26 to 27. The statute provides that the Commonwealth’s Department of Labor and Standards (“DLS”) sets the wage rates for those engaged in certain positions on public work projects. A recent Superior Court decision incentivizes contractors to work closely with the DLS to ensure that the proper wages are being paid. Sullivan v. Cora Operations, Inc., Case No. SUCV16-0283 BLS-2, 2016 Mass. Super. LEXIS 362 (Mass. Super. Ct. Sept. 8, 2016).
In Sullivan, a prevailing wage employee argued in a putative class action that the DLS could not, through opinion letters, revise previously made wage determinations appearing on wage sheets. The court rejected the argument and dismissed the case because the Prevailing Wage statute makes clear that the DLS has the “exclusive authority” to make prevailing wage determinations and, even though the DLS “generally” sets wages through wage sheets, there is “no reason why the DLS could not revisit a determination made in an earlier rate schedule [i.e. wage sheet] through advisory letters.” The case is on appeal but contractors should take notice of this opinion and aim to work closely with the DLS on any wage question or issue that it has on a project subject to the Prevailing Wage statute.