Supreme Judicial Court Issues Two Decisions Regarding the Massachusetts Payment of Wages Act

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Yesterday, the Massachusetts Supreme Judicial Court issued two decisions clarifying the scope of the Payment of Wages Act. First, in Awuah v. Coverall North America, Inc., the Court held that a company which had misclassified employees as franchisees was not permitted to withhold payment of wages until it received payments from customers. Second, in Rosnov v. Molloy, the Court held that the July 12, 2008 amendment to the statute, which made treble damages mandatory, was not retroactive.

Awuah v. Coverall North America, Inc.

In Awuah, the plaintiffs sued Coverall in federal court, alleging that they were misclassified as franchisees rather than employees, and that they were owed wages. One of the plaintiffs had a franchise agreement that provided for “account receivable financing,” meaning that the plaintiff was paid for his work only after the customer had paid Coverall for his services, except where Coverall paid interest-free advances. If the plaintiff received advance payment but the customer did not pay, Coverall had the right under the agreement to recapture the advance. Further, the plaintiffs were required to pay for their own workers’ compensation insurance and had to pay a franchise fee and monthly management fees.

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