Out-Of-State Companies that Have Massachusetts Employees Need a Special Choice of Law Provision to Avoid Penalties Under the Massachusetts Wage Act

Let’s be clear: the Massachusetts Wage Act is draconian. If you violate it, you are on the hook for triple damages and attorneys’ fees. The Massachusetts Supreme Judicial Court has confirmed that there are no good faith exceptions to the statute’s penalty provisions – no matter how benign or innocent the reason an employer failed to comply.

While a lot of out-of-state employers know this, and try to limit the risks associated with the Wage Act by including a choice of law provision calling for the application of their home state’s law to their employment agreements, as Evolve Cellular recently learned, simply including a standard, broad choice of law provision is not enough….

In 2016 Evolve Cellular hired Alan Berrey as an employee, and the parties entered into an Employment Agreement with the following choice of law provision:

This Agreement, and any contest, dispute, controversy or claim arising hereunder or related hereto … shall be governed by and construed in accordance with the internal laws of the State of Texas applicable to agreements made and to be performed in that state, without reference to its principles of conflicts of law that would apply the laws of another jurisdiction.

In 2023, Berrey filed suit against Evolve Cellular in Massachusetts, and his Complaint contained six counts, including two alleging violations of the Wage Act. Evolve Cellular sought to dismiss the Complaint, arguing, in part, that the Wage Act claims were not viable under Texas law. As an initial matter, Judge Sorokin, of the District of Massachusetts, acknowledged that courts usually construe choice of law provisions as being applicable to most claims, and he expressly ruled that Texas law applied to Berrey’s non-Wage Act claims.

With respect to the Wage Act claims, however, Judge Sorokin noted that because they are grounded in a statute, and the choice of law provision did not specifically reference any statutory causes of action, the choice of law provision was not dispositive as to what law applied to the those particular claims. As such, Judge Sorokin applied Massachusetts’ 12-factor “most significant relationship test” to determine whether Texas or Massachusetts law should govern the Wage Act claims. Unfortunately for Evolve Cellular, Judge Sorokin then found that Massachusetts law should apply to the Wage Act claims, and he refused to dismiss them.

Plainly, unless the domestic law of an out-of-state company with employees in Massachusetts is worse for employers than is Massachusetts law, in-house counsel of such companies should consider including a choice of law provision in their employment agreements such as the following:

This Agreement, and any claims, disputes or controversies arising hereunder or related hereto, including but not limited to any statutory claims that Employee may desire to assert pursuant to M.G.L. Chapter 149 or any other Massachusetts statute, shall be governed by and construed in accordance with the internal laws of the State of ______, without reference to its principles of conflicts of law that could result in the application of the laws of another jurisdiction.

Failing to include such detail in a choice of law provision could put a company at risk for being subjected to the same types of Wage Act claims (and the related penalties) that Evolve Cellular now faces.