From JDSupra, Barry Miller, Molly Mooney, and Alison Silveira discuss a bill in the Massachusetts legislature that might have draconian effects on Massachusetts employers. The bill would increase an employer’s liability for allegations of wage theft, expands an employer’s liaibility for employees of subcontractors and partners, and creates a private enforcement mechanism. Barry, Molly and Alison write:
In 2008, the Massachusetts legislature cracked down on employers who violate the Commonwealth’s wage laws by imposing mandatory treble damages and attorneys’ fees for any violation, with no leniency for good faith errors. Earlier this month, the SJC doubled down on this enforcement regime, finding that such treble damages and fees apply even where the violation is remediated voluntarily by the employer, without the need for litigation. To date, no other state in the country has adopted such a stringent approach to enforcement of wage and hour laws. But the Massachusetts legislature is not content to stop there.
In January 2021, the House introduced a Bill entitled An Act to Prevent Wage Theft, Promote Employer Accountability, and Enhance Public Enforcement (House 1959). The Bill was referred to the Committee on Labor & Workforce Development. Following a public hearing last summer, the Committee favorably reported the Bill on April 4, 2022. The revised bill (House 4681) is now pending before the Committee on House Ways & Means. Absent significant alterations, its potential impact on employers and businesses across the Commonwealth cannot be understated.
Wage Theft and “Employer” Accountability. . .
The primary focus of the pending Bill is to define any violation of the Commonwealth’s wage payment laws (including the Prevailing Wage Statute, the Wage Act, the Independent Contractor Statute, the Tip Statute, and the Minimum Fair Wage Law) as “Wage Theft,” and expand liability for such Wage Theft well beyond direct employers. Under the Bill, once Wage Theft has occurred, not only the employer will be liable for the unpaid wages (inclusive of treble damages and attorneys’ fees), but so might any other entity to which that employer provides labor or services, irrespective of their involvement in, knowledge of, or control over the employer’s wage payment practices. In effect, the Bill could create a statutory definition of joint employer that plaintiffs may attempt to use to circumvent the economic realities test for joint employer status announced by the SJC in Jinks v. Credico.
Monetary liability would not be the only enforcement mechanism for Wage Theft. The Bill also provides a powerful new enforcement mechanism to the Attorney General’s office. If the Attorney General finds evidence of wage theft, the Bill authorizes it to issue a Stop Work Order requiring cessation of all business operations at the specific place of employment where the violation occurred on just 5 days’ notice. The Bill contains an avenue for a business to appeal from the Stop Work Order, but the business must act promptly to appeal in order to avoid a facility shut down. In the event that a Stop Work Order takes effect, impacted workers must be paid (even though they are performing no work) at their regular rate for the period of the Stop Work Order or first 10 business days when they would have been scheduled to work, whichever is less.
While there is no good news in this Bill for businesses that rely on partners or subcontractors to supply labor or services, vicarious liability for wage violations created by such business partners is limited to a period of 120 days (as opposed to 3 years for direct liability under the Wage Act). Further, a prompt investigation and response may alleviate those businesses of the added burdens of treble damages and attorneys’ fees. But this is hardly a consolation prize, given the number of entities that will be on the hook for wage payment violations of their business partners if the Bill passes.
. . . Enhanced Public Enforceability and Private Attorneys General . . .
The Bill would also amend the Massachusetts Wage Act to add a public enforcement provision, similar to California’s Private Attorney General’s Act. As currently drafted, the Bill would permit not only an “aggrieved person” but also a “relator” (defined to include not just current and former employees, but any vendor or client of the employer-defendant with knowledge of the alleged violations) to bring an enforcement action relating to any alleged violation of the Commonwealth’s wage laws. Unlike in California, the Bill proposes that a “relator” can bring an action, even if he or she has not personally suffered from any violation of the wage laws, and may recover his or her attorneys’ fees, in full, for doing so.
Under the proposed Bill, any “aggrieved person” or “relator” must first give 60 days’ notice to the Attorney General of their intent to file a public enforcement action, before he or she may institute such a claim. If successful, the defendant-employer would be required to pay the full treble damages provided under the wage laws, to be distributed 1/3 to any aggrieved person (i.e., the amount of any wages due), 1/3 to a state Community Outreach and Labor Education Fund, and 1/3 to the Attorney General’s Office.
Notably, the Bill’s public enforcement actions are expressly excepted from the stringent rules for certification of a class action under Rule 23 of the Massachusetts Rules of Civil Procedure, potentially exposing employers to large-scale wage disputes without the due process protections that typically apply in such actions. Finally, the proposed Bill contains a prohibition against “special contracts” that would prohibit an individual from bringing a public enforcement action, which raises questions about how the law may impact settlement agreements or the enforceability of an arbitration agreement.
. . . And More.
As if the proposed changes to scope and enforceability of the Commonwealth’s wage statutes were not enough, the proposed Bill also contains two additional proposed edits to the Wage Act. First, it proposes to amend the Wage Act’s anti-retaliation provision to include a rebuttable presumption of prohibited retaliation any time an employer takes any adverse action against an individual who has complained of retaliation within the preceding 90 days. An employer would only be allowed to rebut that presumption with a showing of “clear and convincing evidence that the action was taken for a permissible purpose and that it would have been taken in the absence of the protected activity.”
Finally, the Bill proposes to revise the scope of individual liability under the Wage Act, to make clear an employing entity’s President and Treasurer are only personally liable for Wage Act violations if they “have knowledge or should have knowledge of general operations” of the business that lead to the violation. This is a relaxation of the existing standard under the Wage Act, which makes such officers liable for wage violations by virtue of their title alone.
As discussed above, the proposed Bill is pending before the House Committee on Ways and Means, and still faces several rounds of debate and potential revisions before it is presented to the Governor for enactment. However, employers across the Commonwealth should track this important legislation, as its potential impact to employers’ operations and potential liability would be difficult to overstate.