Many employers find they have employees now residing in other states and working remotely.  Those employers may want to pay attention to a recent  federal appellate court ruling affirmed that the Massachusetts Wage Act (M.G.L. ch. 149, §148) and the Massachusetts Independent Contractor Law (M.G.L. ch. 149, §148B) do not apply to an employee of a California company who moved his residence from Massachusetts to Florida.

The plaintiff in this case was a financial advisor who had his own business and staff in Springfield.  He entered into a 2013 agreement to become affiliated with a California company, and soon thereafter became a Florida resident.  He spent more than half of his time working in Florida but maintained a business address in Springfield.  When his agreement with the company ended in 2017, the financial advisor filed a claim under the Massachusetts Wage Act, alleging that he was misclassified as an independent contractor and was owed wages under the Wage Act.

The First Circuit Court of Appeals analyzed the connections that the employee and the employer had to Massachusetts to determine whether the Massachusetts Wage Act and Independent Contractor Law governed the relationship between the two.

The employer was headquartered in California, had no employees in Massachusetts, and registered in Massachusetts as a broker-dealer for regulatory purposes only. Its agreement with the employee provided that it would be subject to California law.

The employee used his Springfield office as his business address and had employees at this address yet spent more than half of his time working in Florida. He became a Florida resident, as evidenced by his Florida voter registration, Florida driver’s license, and his (dual residency) securities license.

The First Circuit followed “choice-of-law” precedent in deciding whether Massachusetts law applies.  The longstanding Massachusetts choice-of-law rule is that a court “may not apply the local law of its own state to determine a particular issue unless such application of this law would be reasonable in light of the relationship of the state and of other states to the person, thing or occurrence involved.”

The court found that the relationship between the employer and the employee had only a “tenuous connection” to Massachusetts, and that California and Florida had more significant ties to the parties and their dealings.  Therefore, the employee could not invoke Massachusetts law to recover damages for misclassification as an independent contractor.

Massachusetts employers with remote workers out of state should be aware that there may be circumstances in which Massachusetts law will apply to the employment relationship.  Claims for workers’ compensation and unemployment insurance will be processed in the state in which contributions are made.

Some remote workers will qualify for Massachusetts Paid Family and Medical Leave benefits if they meet the law’s financial eligibility requirements (currently requiring earnings of $5700 working in Massachusetts in the last four calendar quarters).  There will be state tax implications for employees living and working in another state. Employers also need to consider what impact, if any, the presence of a remote employee in a new state has on the employer from business taxation and licensing perspectives.

If you have questions about how remote out-of-state work may impact your employees, please call the AIM Employer Hotline at (800) 470-6277.