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December 19, 2011

Employees who reside in other states may well be covered by the Massachusetts Wage Act, if they have sufficient work connections to Massachusetts.

In Dow v. Casale, et al., the Business Litigation Session of the Massachusetts Superior Court found that Russell Dow, a former salesman for a Massachusetts company who resides in Florida, was entitled to triple damages for unpaid wages due at the time of his separation from employment.

Mr. Dow was let go when the company, Starbak Communications, Inc., was placed into involuntary bankruptcy and closed its doors in February 2010.  In April, Mr. Dow sued several officers and directors of Starbak for violations of the Massachusetts Wage Act, claiming that the company failed to pay him more than $100,000 in unpaid commissions and other wages.  He sought treble damages and attorneys' fees.

The defendants moved for summary judgment, arguing that the Wage Act does not apply outside of Massachusetts and, therefore, did not cover Mr. Dow, who resides in Florida.  The Court did not agree.  Rather, the Court held that the Wage Act may apply if the employee had sufficient contacts with the Commonwealth, and Mr. Dow had plenty:

  • He had customers in at least 30 states, including between eleven and nineteen in Massachusetts, whom he visited approximately 20 times between 2008 and 2009.
  • Although he worked from home in Florida, the Court found he conducted his business largely via the internet, which was paid for by Starbak.
  • Although he did not have a dedicated cubicle at Starbak's Massachusetts office, he used the same cubicle each time he was there.
  • His business card identified a Massachusetts work address, and included Massachusetts telephone and fax numbers.  All paperwork related to his sales was processed in Massachusetts, including customer purchase orders, company invoices, and payments resulting from his sales.
  • He spoke several times a week with the CEO in Massachusetts, with whom he communicated by email almost daily with respect to new products, product changes, sales promotions and trade shows, customer sales forecasts and complaints, and other subjects related to the sale of Starbak products.

The Court concluded that Mr. Dow had "more than sufficient contacts with Massachusetts to afford him the protection of the Wage Act," and that the Act was "designed to regulate the actions of Massachusetts employers, regardless of where their employees work."  In a salient footnote, Judge Peter M. Lauriat stated: "In this age of the ubiquitous Blackberry, iPad and smartphone, any person can work in any location that has internet access.  Were the court to accept [defendants'] argument, the Wage Act would afford no protection to an employee who conducted the employer's business anywhere but in Massachusetts.  This is hardly consonant with the purpose of the Wage Act, since an employer could escape potential liability simply by requiring an employee to work, for example, across the border in New Hampshire . . . ."

The decision in Dow is significant because it is the first decision to squarely address the question of whether an employee who works out of state is covered by the Massachusetts Wage Act.  It is important to note, however, that this case comes out of the Business Litigation Session of the Superior Court.  While the Business Litigation Session is highly regarded as a trial court, it is not an appellate court.  Its decisions, therefore, are not considered precedent setting.  That said, we view the decision as a sound indicator of how other trial court judges would likely rule until the issue is addressed by one of the Commonwealth's appellate courts.  The case is also a good reminder that the Act requires the award of mandatory treble damages and attorneys' fees and costs to a prevailing party.

Employers with out-of-state employees are well advised to carefully review their employment policies and practices concerning out-of-state employees to make sure they comply with Massachusetts law.

Labor, Employment and Employee Benefits Group

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This client alert is intended to inform you of developments in the law and to provide information of general interest.  It is not intended to constitute legal advice regarding a client's specific legal issues and should not be relied upon as such.  This client alert may be considered advertising under the rules of the Massachusetts Supreme Judicial Court.