Massachusetts Court Provides Guidance on Joint Employer Liability and the Scope of the Outside Salesperson Exemption

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In Jinks v. Credico (USA) LLC (March 31, 2020), Judge Kenneth Salinger in the Business Litigation Session of the Massachusetts Superior Court provided guidance on two important wage and hour issues.  First, the court concluded that the “right-to-control” test was the appropriate method for determining whether two companies were “joint employers” for purposes of the Massachusetts wage and hour laws.  Second, the court held that the Massachusetts Overtime Law and Minimum Wage Law had two separate tests for determining whether an employee was exempt as an outside salesperson, with the Minimum Wage Law requiring that the employee not make daily reports or visits to the employer’s office or plant in order to be exempt.

Background

In this case, defendant Credico provided its clients with door-to-door sales services.  Credico subcontracted that work to other companies, including defendant DFW.  DFW engaged the plaintiffs to call on potential customers in person as door-to-door salespeople.  The plaintiffs subsequently sued both Credico and DFW, alleging that they were entitled to wages and overtime payments, as well as the mandatory awards of treble damages and attorneys’ fees available under the Massachusetts Minimum Wage Law and Overtime Law.

The Court Adopts the Right-to-Control Test

The first issue for the court was whether Credico could be held liable as the plaintiffs’ joint employer, along with DFW.  This was a significant threshold legal issue, given that the Massachusetts wage and hour laws neither define the term “employer” nor specify the circumstances in which two companies will constitute joint employers of the same employee.  Moreover, the Massachusetts appellate courts have not yet opined on this issue. 

The plaintiffs argued that the court should apply the three-part “ABC” test set forth in the Massachusetts Independent Contractor Statute.  The court rejected this argument, noting that the Massachusetts Supreme Judicial Court has made clear that ABC test does not apply where the parties have neither an independent contractor nor an employment relationship.  In this case, it was undisputed that the plaintiffs did not provide services directly to, or have any direct relationship with, Credico.  Therefore, the court declined to apply the ABC test.

Instead, the court applied the right-to-control test traditionally utilized under common law. The court applied case law under the federal Fair Labor Standards Act, which looks to the totality of the circumstances to determine whether an alleged employer has the right to control, including whether the alleged employer: (1) had the power to hire and fire the employee, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.

The court then applied those factors to the evidence.  According to the court, the record demonstrated that Credico had no power to hire or fire DFW’s workers, did not supervise or control their work schedules or other conditions of employment, did not and had no power to establish the rate or method for paying DFW’s workers, and did not maintain employment records for those workers.  Accordingly, the court held that the plaintiffs failed to demonstrate that Credico had the right to control them.  Therefore, Credico was not their employer for purposes of the Massachusetts wage and hour laws, and the court dismissed all claims against Credico.

The Court Discusses the Two Outside Salesperson Exemptions          

The court next considered DFW’s argument that the plaintiffs were not eligible for overtime because they were outside salespeople.  Massachusetts law is unusual in that it has two separate provisions for outside sales.  The Minimum Wage Law excludes from its coverage people engaged in “outside sales work regularly performed by outside salesmen who regularly sell a product or products away from the employer’s place of business and who do not make daily reports or visits to the office or plant of their employer.”  Yet the Overtime Law contains an exemption for “any employee who is employed … as an outside salesman or outside buyer,” without any reference to visits to the worksite.

The plaintiffs argued that the definitions of the term “outside salesperson” in the Overtime Law should be interpreted identically to the definition under the Minimum Wage Law.  The court rejected this argument, because it would have added language into the Overtime Law that the Legislature had not included.  Instead, the court found that these were two separate tests for determining whether a person is an exempt outside salesperson.  Applying these tests to the facts, the court dismissed the Overtime Law claim, because it was undisputed the plaintiffs were outside salespeople.  However, the court declined to dismiss the minimum wage claim, since whether the plaintiffs made “daily reports or visits” to DFW’s office was still under dispute. 

Conclusion

This decision offers direct guidance about joint employment issues under Massachusetts wage and hour law, as well as a clear explanation of the outside sales exemptions.  Although it was written by a respected judge, it is only a Superior Court decision, and therefore not binding precedent on other courts or agencies.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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