By Shehzad Rajwani and Lucia Passanisi
In our practice representing both businesses and employees, we regularly see reoccurring issues when it comes to wage and hour violations. Often well-meaning employers find themselves defending a lawsuit with the potential for hefty damages, including mandatory treble damages, for matters that could have been avoided. While this blog cannot address all such wage and hour issues, it will discuss some of the obligations of Massachusetts employers.
1. Employers Cannot Decide Which Employees Receive Overtime Compensation
While it may be convenient to pay employees on a salary basis with the belief that such employees will be exempt from overtime compensation, it is not always appropriate to compensate employees using this structure. Both Massachusetts and federal law outline which type of employees are considered exempt from overtime pay. Most employees must be paid one and one-half times their regular hourly rate for every hour that they work over 40 each week. Massachusetts and federal law carve out specific exempt categories of employees – primarily employees who fall under the professional, executive, or administrative umbrellas. In addition, Massachusetts lists roughly twenty other exempt professions which do not have to be paid overtime.
Employers and employees also cannot form private contracts whereby an employee agrees that he or she is salaried and thus exempt from overtime. Sometimes whether an individual is a exempt from overtime pay is not clear cut. When evaluating whether an employee meets the standards set forth in these categories it is important not to simply rely on job titles but rather to focus on the tasks that the employee is performing on behalf of the employer. When in doubt, the safer practice is to classify an employee as an hourly employee and pay overtime. Even if an employee is exempt from overtime and paid on a salary basis, it may serve employers to have these exempt employees keep track of their time by submitting time cards or time sheets.
Furthermore, salaried employees should be treated as salaried – meaning that employers should not make deductions for a salaried employee being tardy or taking a longer lunch break. Employers cannot require a salaried employee to “make up” for such lost time. In addition, employers need to take care not to take adverse actions or retaliate against employees who raise formal or informal complaints with regards to whether they should be entitled to overtime as employers may find themselves subject to the anti-retaliation provisions of Massachusetts and federal law. It is important to remember that even if you think you have properly classified an employee as exempt from overtime, this does not prevent such employee from bringing suit against you for overtime violations.
2. Misclassifying an Individual as an Independent Contractor instead of an Employee Can Have Serious Repercussions
It is also important for employers who regularly hire or engage independent contractors to ensure that they are properly classifying these individuals. Under Massachusetts law in order to qualify as an independent contractor (1) the individual must be “free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact”; (2) the service must be “performed outside the usual course of the business of the employer”; and (3) the individual must be “customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.” See MASS. GEN. LAWS c. 149, § 148B. When analyzing whether an individual is an independent contractor, it does not matter if the employer has failed to withhold taxes, pay unemployment compensation contributions, or workers compensation premiums. Misclassifying an individual as an independent contractor instead of as an employee could result in the Massachusetts Attorney General levying criminal and civil penalties, as well as a private action for damages.
3. Other Rights and Best Practices
In addition, employers should be aware that employees have a right to discuss their working conditions with each other. Employers should also maintain individual personnel files for each employee. Under the law, employers are required to provide copies of personnel files within five days of an employee’s (or former employee’s) request. Employers should also be aware that accrued vacation time constitutes wages and any unused accrued vacation time should be paid upon the termination of an employment relationship in accordance with company policy.
While not required, employers may want to consider implementing an employee handbook. Employers should regularly review their handbooks to ensure that they understand all of its provisions and that they comply with any changes in the law.
Furthermore, employers should also keep in mind that the Massachusetts Earned Sick Time Law has taken effect. As such, employers should review their sick time policies to ensure that they are in compliance with the new law. Employers should be cognizant of the number of employees they have and whether adding new employees will require them to provide paid sick time.
In addition, employers should remember that, as of January 1, 2016, the minimum wage for Massachusetts has increased to $10.00 per hour.
