May Massachusetts employment laws be applied outside the state?

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The Supreme Judicial Court recently held that a Massachusetts company could be sued by non- Massachusetts residents for conduct that occurred outside of Massachusetts. In Taylor v. Eastern Connection Operating, Inc., 465 Mass. 191 (2013), employees of a Massachusetts company who worked and lived in New York sued their employer under several Massachusetts statutes (specifically, those that govern the classification of workers as employees or independent contractors and the payment of wages and overtime compensation), claiming – among other things – that their employer had improperly classified them as independent contractors. Notwithstanding the fact that their written contracts with the employer contained “choice-of-law” provisions specifying Massachusetts state court as the jurisdiction where suit could be brought, the employer moved to dismiss the plaintiffs’ claims, claiming lack of subject matter jurisdiction.

Considering first the plaintiffs’ misclassification claims, the Court held that the choice-of-law provision in the contract was enforceable. Performing an analysis pursuant to Massachusetts ‘functional’ choice-of-law principles and §187 of the (Second) Restatement of Conflict of Laws (1971), it noted that the issue was not one that the parties could have resolved with an explicit provision in the contract; in other words, even if the contracts specified that the plaintiffs were independent contractors, a court could find that they were actually employees. Next, the Court held that – because the company was based in Massachusetts – Massachusetts had a “substantial relationship” to the transaction. Finally, it concluded that Massachusetts and New York laws regarding the classification of workers are “roughly equivalent” and, therefore, the application of the Massachusetts law would not be contrary to a fundamental policy of New York. Thus, the Court concluded, there was no reason to ignore the parties’ choice of Massachusetts law.

The company also contended that the Massachusetts statute had no application to work performed outside of Massachusetts by non-Massachusetts residents. However, the Court pointed out that, where there is no explicit limit in the statute itself on whether it can be applied outside the state, there is “no presumption against extraterritorial application in appropriate circumstances.” Applying ‘functional’ choice-of-law principles again, the Court concluded that there was “no apparent reason” not to enforce the choice-of-law in the parties’ contracts and permit the plaintiffs to pursue their misclassification claims (and, if it was decided that they were employees, their wage claims) in Massachusetts courts.

Massachusetts companies who employ workers outside of the Commonwealth and whose contracts contain choice-of-law provisions should keep this case in mind and be aware doing so may result in Massachusetts law being used to determine whether their non-Massachusetts workers are employees and, therefore, entitled to the protection of Massachusetts employment laws.

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