In May of 2013 the Massachusetts Supreme Judicial Court ruled in Taylor v. Eastern Connection Operating, Inc., that out-of-state independent contractors may bring suit against companies in the Commonwealth to enforce MA independent contractor, wage, and overtime pay statutes. The circumstances under which this may occur include a written contract between the parties containing an enforceable MA “choice-of-law provision” and when MA law is not contrary to the public policy of the state where the independent contractors live and work.
This case is of great significance because the independent contractor, wage, and hour statutes traditionally have not extended beyond state borders. Further, Massachusetts has more stringent criteria for utilizing independent contractors. This decision has the potential to expand the liability of Commonwealth companies by forcing litigation in MA for issues that traditionally have been considered out-of-state matters.
The Plaintiffs in Taylor lived in New York and worked as couriers for Eastern Connection Operation, Inc. The workers entered into identical contracts which labeled them as independent contractors and stated that they would perform pickup and delivery services exclusively in New York. The contract further stated that all work obligations would be in compliance with Massachusetts law and all legal action would be brought in the nearest state court in MA.
In 2010, the couriers brought suit in Massachusetts Superior Court alleging that Eastern misclassified the couriers as independent contractors, and failed to pay the couriers wages and over time in violation of MA law. In return, Eastern claimed that the MA independent contractor statute did not apply to out-of-state workers, and the wage and overtime statutes did not apply to independent contractors.
The court held that the “choice-of-law provision” in the contracts was fully enforceable. The court further noted that Massachusetts has a substantial relationship to the business transaction because the headquarters of the company is located in MA. Further, application of MA law was not contrary to public policy in NY. Therefore, MA wage and labor laws applied.
What Does this Mean for Employers?
Massachusetts companies are no longer exempt from claims under MA wage and hour statutes simply because their personnel live and work outside of the state. Employers should be especially cautious because the Massachusetts wage statutes provide for mandatory treble damages and attorneys fees to prevailing plaintiffs. With this in mind, employers should review contracts with independent contractors prudently and carefully craft choice-of-law provisions.