Tips To Make Sure You Are Complying With Massachusetts Wage Laws: How to Avoid Being the Target of the Next Attorney General Investigation

In the Press · June 30, 2011

Attorney General Martha Coakley
recently issued the following press releases concerning construction companies
that were found to have violated state wage laws:

  • Fitchburg Construction Companies Required to Pay Over
    $200,000 for Not Properly Paying Employees
  • New Bedford Drywall Contractor and Company Debarred for
    10 Years for Wage Violations
  • Dedham Construction Company Ordered to Pay Over
    $100,000 in Restitution and Penalties for Improperly Classifying Workers
    as Independent Contractors and Other Wage and Hour Violations

While the laws regulating
compensation and benefits cover all industries, these recent headlines confirm
that construction companies are likely targets for AG investigations.
Violations are most commonly found in the following three areas:

  1. Misclassifying workers as independent contractors instead
    of employees
  2. Failing to pay required minimum or prevailing wages
  3. Failing to keep accurate payroll records

The consequences of non-compliance
can be substantial, including civil penalties, fines, and debarment from public
works projects. Workers who prevail on lawsuits can recover triple damages and
attorneys’ fees.

What You Need to Know
to Stay Out of Trouble

Employers must make sure that they
are complying with Massachusetts law to avoid
being the subject of the Attorney
General’s next headline. Keep in mind the following:

Employee or
Independent Contractor?

In Massachusetts, there is a
presumption that anyone providing services to your company is an employee and
not an independent contractor. To overcome that presumption, the worker must
(a) be free from your company’s direction and control, (b) be performing a
service that is outside of your company’s usual course of business, and (c) be
engaged in his or her own independent trade, occupation, profession or
business, which must be of the same nature as that involved in the services
provided.

This is a strict test and one that
can be met in only limited circumstances. If you are employing any
"independent contractors" you are at risk and should review the
arrangements to make sure that you are in compliance with Massachusetts law.
You should also be aware that Massachusetts applies a different (and stricter)
standard than the federal government in assessing tax compliance. As a result,
even if a worker is properly considered a "1099" independent contractor
for tax purposes, that person may still be considered an employee under
Massachusetts law, requiring you, among other obligations, to provide for
workers’ compensation and unemployment insurance.

Minimum or Prevailing
Wage Laws

All employers need to pay at least
minimum wage, which is currently $8 per hour in Massachusetts. This sounds
easy, but can be tricky in practice. Are you properly counting all time
"worked"? Some time away from the job may be compensable. Are you
using unpaid student interns? There are only limited circumstances in which
this might be acceptable. These are just a few of the recurring issues that
trip up employers. Construction companies working on public works projects must
pay "prevailing wages," i.e., the minimum hourly rates set by the
Department of Labor and Workforce Development, Division of Occupational Safety.

Accurate Record
Keeping

Employers are obligated to keep
accurate payroll records for their employees. These records must include name,
address, occupation, amount paid, and hours worked per pay period for every
employee. Employers need to keep these records for at least two years and they
must be available to the Attorney General on request. Employers that are
subject to the prevailing wage laws must also certify and sign their payroll
records under the pains and penalties of perjury, and provide these records to
the awarding authorities on a weekly basis.

As some employers have learned, at
great cost, there is an epidemic of wage and hour class action litigation
alleging that workers have not been paid for all hours worked or for overtime.
Therefore, we recommend that all employers conduct an internal audit of their
employee classifications, policies and procedures to avoid finding themselves embroiled
in the next wage and hour lawsuit – or the unfortunate subject of an AG
investigation.

If you would like help auditing your
employment practices or defending against a claim, please contact Daniel
S. Tarlow
, chair of Prince Lobel’s Employment
Practice Group
. You can reach Dan at 617 456 8013 or dtarlow@princelobel.com.