Misclassification of Employees Not Excused Based on Technicalities

When tasked with interpreting the Massachusetts Wage Act, the Supreme Judicial Court of Massachusetts (“SJC”) has consistently construed the words of the statute to fit within the broader purpose of the law. This method has, in effect, steadily expanded liability of employers. With its decision in Giovani Depianti v. Jan-Pro Franchising International Inc. in the summer 2013, the Court ruled that employers could be liable for misclassification of workers as independent contractors, even if there was no direct contractual relationship between the employer and the so-called independent contractor.

Defendant Jan-Pro Inc. is cleaning and maintenance company in Massachusetts that sold rights to use the Jan-Pro brand to “regional master franchises.” These regional masters would then, in turn, sell those rights to “unit franchises.” The Jan-Pro unit franchises provided the actual cleaning services to customers and were given customer accounts through the regional masters. They were, however, able to solicit their own business. Each of these customer accounts became the property of the regional master franchises once obtained. During the final steps, regional masters received payments for services from the customers directly. They would then deduct certain fees, return the remaining balance to the unit franchises, and send royalty payments back to Jan-Pro Inc.

The plaintiff in the case contracted with a regional master franchisee within the Jan-Pro structure. In 2008, he filed a lawsuit against Jan-Pro that sought to hold Jan-Pro Inc. directly liable for misclassification under the Massachusetts Wage Act. The lawsuit stated that Jan-Pro was liable for misclassifying the plaintiff as a franchisee, or independent contractor, rather than an employee. Jan-Pro was able to do so, the plaintiff alleged, by imposing a multi-tiered franchise structure whereby Jan-Pro maintained control over its franchises, but from a distance.

Defendant Jan-Pro Inc. responded that, given the language of the statute, it could not be held liable. Jan-Pro Inc. argued that the independent contractor provision of the law states that an independent contractor “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.” Jan- Pro contended that the very language of the statute requires a contractual relationship between the plaintiff and defendant as a prerequisite for liability. Since there was no contract between Jan-Pro itself and the plaintiff, it argued it was not liable for misclassification.

The SJC was faced this question: Was it necessary for there to be a contract between plaintiff and defendant in order to hold an employer liable for misclassification under the Wage Act? After reflecting on the actual intent of the legislature in drafting the Wage Act, the Court ruled in the plaintiff’s favor. The Court stated that the overall purpose of the law was to protect workers by classifying them as employees, and to grant them the benefits and rights of employment. Under the independent contractor provision, a worker is presumed to be an employee, unless the employer is able to rebut this presumption by satisfying three criteria, all of which indicate the worker is an independent contractor.

The Court noted that if a contractual relationship had to exist before an employer could be liable for employee misclassification under the Wage Act, employers in the future would find crafty ways around liability, playing with corporate structures and other devices obscuring the truth of the relationships. Essentially, Jan-Pro’s imposition of an intermediary between it and the workers would allow it to escape its obligations as an employer to pay lawful wages. This situation, the Court stated, would frustrate the overall purpose of the law. Therefore, employers like Jan-Pro Inc. can be sued directly for misclassification under the Wage Act, even if no employment contract is in place.