Massachusetts Appeals Court explains Who’s The Boss under the Wage Act

It’s not as easy as it used to be to answer the question of who’s the boss.  Many employees survive on a patchwork of part-time jobs; the gig economy is growing fast enough to double in the next few years.  Indeed, a recent study released by  Upwork and the Freelancers Union predicts that most workers will be freelancers by the years 2020.  As facts in the workplace evolve, so must the law.

That’s exactly what happened last fall in  Gallagher v. Chambers, a case decided by the Massachusetts Appeals Court.  There, the Court clarified the test for identifying an employer under the Massachusetts Wage Act.  Previously, courts had applied a common-law set of factors that led to inconsistent results in lower courts, which in some cases dismissed corporate defendants even though those entities benefitted from a plaintiff’s work.  In Gallagher, a home health aide sued to recover for unpaid overtime wages.  She named as defendants both her former customer – who had overseen her work on a daily basis – and the agency that had helped her find the placement and processed her paychecks.  That raised the question of whether both were really her “employers” for purposes of the Wage Act.   The Appeals Court took the opportunity to refine the rule for answering that question.

As the Court explained, the statute, not a set of common-law factors, defined who is an employer under the Wage Act; in the Court’s words, “G. L. c. 149, § 148B . . . defines the over-all employer-employee relationship for all cases arising under G. L. c. 149 and G. L. c. 151.”  That provision is sometimes referred to as the “independent contractor” test, but the Court explained that it applies to a much broader set of cases.  So, anytime the question of who exactly employs a person comes up in a Wage Act case, according to Gallagher, the answer lies in the “two-step inquiry” laid out in section 148B: First, a plaintiff must establish that she “provided services” to a defendant; second, the defendant may then rebut that showing with evidence that the plaintiff was (a) controlled by another entity, (b) working outside the defendant’s usual course of business, and (c)  truly “independent,” meaning she could perform services for anyone she chose.  The Court made clear that multiple entities could be on the hook for a wage violation as long as each qualified as an employer under the test.

That’s good news for workers in increasingly informal employment situations. Gallagher suggests that big companies cannot hide behind their subsidiaries when it comes to wage and hour law, nor can they distance themselves from their legal obligations through an attenuated chain of contracts between them and the people who generate their profits on the ground.  A month after Gallagher was decided, a judge in the Superior Court applied the case to a different set of facts.  In Malenbreche v. Colonial  Automotive Group, Justice Janet Sanders of the Massachusetts Superior Court held that, under Gallagher, a parent company could be liable under the Wage Act, even though employees’ only direct relationship was with a franchisee of that company. There, a group of salesmen at a “family of car dealerships” sued their dealerships as well as the parent company that managed and controlled each of the dealerships named. The Superior Court held that plaintiffs provided services to all the defendants by selling cars under the dealership and parent company’s name. In December, in Cerulo v. Chambers, another Superior Court Justice Thomas P. Billings of the Middlesex Superior Court, came to a different conclusion while analyzing similar facts.  There, a group of salesmen sued dealerships and a parent company for unpaid wages.  The Superior Court held that the connection between salesmen and the parent company was too remote to make the dealership an “employer.”  That case did not apply Gallagher correctly and is currently on appeal.  But even if the full reach of Gallagher will depend on how lower courts apply it to different factual circumstances over time, one thing is clear: Any time an employee has not gotten paid in full, she can sue anyone that qualifies as an employer under G. L. c. 149, § 148B – and, if she meets her burden, that can include multiple entities to whom she provided services.

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