Mass-Peculiarities: An Employers Guide to Wage & Hour Law in the Bay State 2022 Edition

146 | Massachusetts Wage & Hour Peculiarities, 2022 ed. © 2022 Seyfarth Shaw LLP a company that contracts with another entity for services “would not be liable for misclassification of third-party workers.” 857 However, the SJC has identified three exceptions to this general rule: (1) when the two entities are alter egos; (2) when the relationship between the two entities is a scheme to do an end-run around wage law obligations; and (3) when the two entites are joint employers. 858 As discussed in Sections XVII and XVIII, the Office of Massachusetts Attorney General enforces the wage and hour laws of Massachusetts. The office investigates employee misclassification complaints and may issue fines for violations. 859 The Attorney General’s advisory on the Independent Contractor Statute (148B Advisory) warns companies of the risks of civil and criminal charges if they are targeted for an investigation of their independent contractor classifications, including insurance fraud, violation of minimum wage and overtime laws, and failure to keep full and accurate payroll records. 860 While a company may challenge the Attorney General’s position in court and the Attorney General’s opinions do not have the force of law, litigating these cases is expensive and the Attorney General’s opinion is entitled to some deference. 861 Companies doing business in 857 Jinks v. Credico (USA) LLC , SJC-13106, 2021 WL 5872357, *3 (Dec. 13, 2021). 858 Id. at *4-5. Alter ego status is based on the doct rine of corporate disregard by which court s may ignore corporate formalities. To establish alter ego status, a plaint iff must show the following factors: (1) common ownership; (2) pervasive cont rol; (3) intermingling of business asset s; (4) thin capitalizat ion; (5) nonobservance of corporate formalities; (6) absence of corporate records; (7) no payment of dividends; (8) insolvency at the t ime of the lit igated t ransact ion; (9) siphoning away of corporat e funds by dominant shareholder; (10 non-funct ioning of officers and directors; (11) use of the corporat ion for t ransactions of the dominant shareholders; and (12) use of the corporat ion in promoting fraud. An “end-run” relat ionship can occur when the putat ive employer designed and implemented the framework under which another ent ity’s workers are misclassified as independent cont ractors specifically to evade the obligat ions under the wage laws. Id . at *4. Joint employment is discussed in Sect ion XIV. 859 Penalt ies for violat ions of Massachuset t s wage and hour laws are discussed further in Sect ion XVIII. 860 Massachuset t s At torney General Advisory 2008/1, at 1, 4. The At torney General most closely scrut inizes situat ions in which the following factors are present : • Individuals are providing services for an employer that are not reflected on the employer’s business records • Individuals are providing services who are paid “off the books,” “under the table,” in cash, or provided no document s reflect ing payment • Insufficient or no workers’ compensat ion coverage exist s • Individuals are providing services who are not provided 1099s or W-2s by any ent ity • The cont ract ing ent ity provides equipment , tools, and supplies to individuals or requires the purchase of such mat erials direct ly from the cont ract ing ent ity • Alleged independent cont ractors do not pay income taxes or employer contribut ions to the Division of Unemployment Assistance Massachuset t s At torney General Advisory 2008/1, at 5-6. 861 Smith v. Winter Place LLC , 447 Mass. 363 (2006) (At torney General’s interpretations of the wage and hour statutes are ent it led to substant ial deference so long as they are not inconsistent with the plain language of the statutes, but they do not have the force of law). As noted above, the Department of Revenue has not adopted the test set forth in Sect ion 148B.