by Marylou Fabbo, JD of Skoler, Abbott & Presser, P.C.
Most employers take their obligation to properly pay their employees seriously. After all, under state and federal wage laws, an employer could be required to pay up to triple damages for wage violations. If you need additional urging to take a look at your wage practices, the Massachusetts Superior Court has just provided one.
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Employee hired and fired within 4 months
“Richard” was employed at John Dewar & Company until he allegedly was induced to leave his job to become the general manager of a new high-end craft beer and wine store being set up by Savin Hill Enterprises, Inc.
After beginning his employment with Savin Hill, he took steps to set up the retail store by securing the necessary permits and licenses, establishing its sales and management systems, and designing the store’s layout.
Richard, who was being paid under the table, demanded to be put on the payroll. When Savin Hill refused to put him on the payroll, he demanded a 1099 so he could pay his own taxes. According to him, Savin Hill then began to micromanage him, criticize him for trivial matters, and exclude him from managerial decisions. After fewer than 4 months on the job, Savin Hill terminated his employment.
Richard sued Savin Hill under many legal theories. The only claim that survived Savin Hill’s motion to dismiss stemmed from his assertion that he had been wrongfully discharged in violation of public policy. Specifically, he claimed that Savin Hill terminated him for asking to be paid “on the books” rather than “under the table.”
Wrongful discharge in violation of public policy vs. the Wage Act
Massachusetts recognizes a cause of action for employees who are terminated from their employment in violation of a recognized public policy. Employers are prohibited from terminating employees for asserting a legally guaranteed right, refusing to do what the law forbids, or reporting certain violations of the law. Generally, however, an employee may not pursue a wrongful discharge claim based on another claim for which there is a statutory remedy.
In fact, in a 2006 case, Scalli v. Citizens Financial Group, a Massachusetts federal district court held that terminated employees cannot assert a claim for wrongful discharge in violation of public policy when they claim to have been terminated in retaliation for complaining about wage violations.
In other words, the Massachusetts Wage Act preempts claims for wrongful discharge in violation of public policy if the employee’s wrongful discharge claim is based on violation of the Wage Act. The court touched on, but left open, the issue of whether an employee could sue for wrongful discharge in violation of public policy when his complaint involves the tax consequences of the employer’s compensation scheme.
Wrongful discharge claim proceeds
In Richard’s case, the trial court concluded, at least initially, that an employee who claims he was terminated in retaliation for his objections to being paid “under the table” can pursue a claim for wrongful discharge in violation of public policy when his complaint involved the tax implications of his employer’s noncompliance with the wage and hour laws. Although the two issues were intertwined, the court didn’t discuss Wage Act preemption of the retaliation claim because Richard framed his claim in terms of complaining about taxes, not wages.
The court refused to dismiss Richard’s claim, holding that by insisting on being placed on the company payroll so that proper and legally required deductions could be taken from his wages, he allegedly made an internal complaint about Savin Hill’s state and federal tax violations.
In other words, his complaint was that Savin Hill was violating the law by paying him under the table and that it was refusing to comply with the law by deducting taxes from his paycheck, both of which are viable claims for a public policy wrongful termination claim. Rodden v. Savin Hill Enterprises, LLC (Mass. Super., 2016).
Creative lawyering can pay off
Whether Savin Hill is ultimately found to have terminated Richard for his complaints about being paid off the books remains to be seen. However, this case demonstrates how creative pleadings can help an employee avoid the dismissal of his claims. Had Richard framed his complaint about being paid under the table as a violation of the Wage Act, it likely would have been dismissed because his remedy would be under the Wage Act itself.
Marylou Fabbo is a partner at the firm of Skoler, Abbott & Presser, P.C., and an editor of Massachusetts Employment Law Letter. She can be reached at 413-737-4753 or mfabbo@skoler-abbott.com.