U.S. Court of Appeals Offers Guidance on Applicability of Massachusetts Wage and Hour Laws to Out-of-State Workers

From JDSupra, Stephen Melnick discuss a recent case in which the First Circuit Court of Appeals said that the Massachusetts Wage Act did not apply to a person who mostly lived and worked in Florida. This is particularly important for companies located in Massachusetts that engage with independent contractors who are outside of Massachusetts. Stephen writes:

The U.S. Court of Appeals for the First Circuit recently affirmed a district court finding that the Massachusetts Wage Act did not apply to a person who mostly lived and worked in Florida. While the court’s decision in Viscito v. National Planning Corp. suggests that this is a fact-specific question, it offers guidance for employers trying to determine what law applies to their out-of-state employees or “wandering workers.”

Background

The plaintiff in this case was a financial advisor who had a business (and staff of his own) in Springfield, Massachusetts.  In 2013, plaintiff signed an agreement to be affiliated with National Planning Corporation (NPC), a California-based financial services company.  In December 2014, he became a resident of Florida and thereafter spent more than half his time working from Florida.

In 2017, plaintiff’s relationship with NPC ended.  He then filed a lawsuit against NPC, claiming that he had been misclassified as an independent contractor under Massachusetts law and was owed wages under the Massachusetts Wage Act.

The Court’s Decision

The district court sided with NPC. The First Circuit agreed, finding the plaintiff could not sustain his claim because Massachusetts law did not apply to him.  The appellate court first observed that, when determining what law applied, it had to determine which state “has the more significant relationship to the transaction” between the parties.  This test looks at all the circumstances of the parties’ relationship.

Applying that (somewhat vague) test, the First Circuit found that Massachusetts law did not govern.  The court noted that NPC had its headquarters in California and had no employees in Massachusetts.  Almost all the services between NPC and the plaintiff were provided in Florida, where the plaintiff spent more than half his time, not in Massachusetts.  The parties’ agreement expressly called for application of California law.

The plaintiff argued that he had a business and employees in Massachusetts; kept his clients’ files in Massachusetts; and that most of his clients were in Massachusetts, which generated fees there for NPC.  The Court of Appeals was not swayed by these facts.  In particular, it noted that the income the plaintiff generated went to NPC in California, not in Massachusetts, and any payments to the plaintiff from NPC came from California.  The court thus concluded since California had the more significant relationship to the parties’ relationship, Massachusetts law did not apply. It therefore affirmed dismissal of the plaintiff’s claim.

A Fact-Intensive Inquiry

Demonstrating how fact-specific this “more significant relationship” test is, the First Circuit (like the district court) contrasted the circumstances in Viscito with the facts present in an earlier Massachusetts state-court decision, which held that Massachusetts law applied to a worker who lived in Florida. Dow v. Casale, 989 N.E.2d 909 (Mass. App. Ct. 2013). In that case, the employer was headquartered in Massachusetts; the employee worked in Massachusetts several times each year; the employee’s work benefitted the company in Massachusetts; the employee’s business cards listed a Massachusetts address; his paychecks came from Massachusetts; and his employment agreement provided that it was governed by Massachusetts law.  Given this background, and the fact that the employee traveled around the country for work, the Massachusetts court held that employee could state a claim under Massachusetts law. While the plaintiff in Viscito relied heavily on Dow to support his position, the court was not persuaded that the cases were sufficiently analogous for him to prevail.

Conclusion

Given the rise of remote work since the pandemic, determining what state’s laws apply to an employee has never been more critical – or more complicated.  While this analysis is often conducted on a case-by-case basis, the First Circuit’s decision does offer employers some guidelines to consider in making this determination.

Source: U.S. Court of Appeals Offers Guidance on Applicability of Massachusetts Wage and Hour Laws to Out-of-State Workers | Littler – JDSupra

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