The Massachusetts Wage Act (MGL ch. 149, § 148) has increasingly been invoked in litigation brought by remote employees residing in Massachusetts but working in various states throughout the country, due to its treble damages provision.  A recent Massachusetts federal court case found that a Texas employer had sufficient connections to Massachusetts that the Wage Act applies to the unpaid wage claim of an executive who worked from his home in Massachusetts. 

The employee was the founder of a Massachusetts-based wireless communication company.  When the Texas company acquired his business in 2016, he signed an employment contract to serve as the company’s Executive Vice President of Business Development.  The contract expired in 2017, and he thereafter remained in his role as an at-will employee. The contract and a confidentiality agreement that the employee signed at the time of hire indicated that they would be governed by Texas law.  The employee at all times worked from his home in Massachusetts. 

In March of 2020, the employer notified the employee that 50% of his pay would be deferred on a temporary basis because of financial insecurity brought on by the pandemic.  The employee accepted the deferral in an email titled “temporary payroll adjustments.”  However, the deferral of the pay was repeatedly extended for years.   

By February 2023, the company had deferred more than $260,000 of the employee’s pay. When the employee emailed the employer seeking the back pay, the CEO of the company responded by reducing his pay “effective immediately.” The employee then filed claims in Massachusetts state court against the company and the CEO individually for 1) failure to pay wages under the Wage Act, 2) retaliation in violation of the Wage Act, 3) breach of contract, 4) breach of the covenant of good faith and fair dealing, 5) unjust enrichment, and 6) negligent and intentional misrepresentation. 

The company and the CEO filed claims in Texas state court, seeking injunctive relief related to the employee’s confidentiality agreement.  They also removed the employee’s Massachusetts claims to federal court in Massachusetts, a common strategy based on “diversity jurisdiction,” i.e., the federal court’s jurisdiction arises from the fact that the parties reside in different states.  In federal court, the employer and the CEO filed motions to dismiss for lack of personal jurisdiction, and/or transfer of the case to a Texas federal court. 

The question presented at this stage related to the jurisdiction of the Massachusetts federal court over the claims.  When a federal court presides over a case with diversity jurisdiction, it operates as a state court and applies the laws of the state.  Massachusetts has a “long-arm” statute, which allows it to exercise jurisdiction over a person who transacts business in the commonwealth when the “harm” arises from that business.  The court found that the CEO falls within this jurisdiction as he negotiated the terms of the employment in Massachusetts, offered the job while in Massachusetts, and the employee reported directly to the CEO from Massachusetts. 

In addition to the long-arm statute, the court also applied the constitutional theory of due process.  To establish specific jurisdiction over the defendant CEO, the court considered whether the claim 1) arose from the defendant’s activities in the state, 2) whether the defendant’s activities were a “purposeful availment of the privileges of conducting activities in the forum state,” and 3) whether the exercise of jurisdiction is reasonable.  The court found that the CEO’s activities satisfied these requirements. 

Next, the court looked at the defendants’ contention that Texas law must be applied to the claims because of the choice-of-law provisions in the agreements. Here the court agreed that all but the first two claims, for failure to pay wages and retaliation under the Wage Act, were to be governed by Texas law.  Under Massachusetts law, where a choice-of-law provision does not make clear reference to statutory causes of action, the provision is not dispositive with respect to Wage Act claims.   

The Wage Act will govern the claims if Massachusetts has the most “significant relationship” to the matter at issue.  The court ruled that this was established, as Massachusetts was where the contract was made, and the work was performed. And, most importantly, Massachusetts has a “fundamental policy interest in enforcing the Massachusetts Wage Act” for employees who work in Massachusetts.   

The court further refused to transfer the case to a Texas federal court.  There is a presumption that the plaintiff’s choice of forum will stand.  The defendants in this case have greater financial resources than the plaintiff, and the balancing of convenience to the parties favored the employee’s choice of Massachusetts as the appropriate forum.  

This case is a strong reminder that the Massachusetts Wage Act, with its severe penalties, has a broad reach.  Earlier this year, for example, a Virginia-based remote employee succeeded with a Wage Act claim against his Massachusetts employer.   

AIM members with questions about payment of wages or any human resources matters may call the AIM HR Helpline at 800-470-6277.