Monell v. Bos. Pads, LLC

• Citation: 31 N.E.3d 60,471 Mass. 566
• Decision Date: 03 June 2015
• Docket Number: SJC–11661.
• Court: United States State Supreme Judicial Court of Massachusetts
• Parties: Nesto MONELL & others v. BOSTON PADS, LLC, & others.

471 Mass. 566

31 N.E.3d 60

Nesto MONELL & others¹

v.BOSTON PADS, LLC, & others.²

SJC–11661.

Supreme Judicial Court of Massachusetts, Suffolk.

Submitted Dec. 2, 2014.

Decided June 3, 2015.

Hillary Schwab (Brant Casavant with her), Boston, for the plaintiffs.

Stephen M. Perry (Robert S. Kutner with him), Boston, for the defendants.

Ian O. Russell & Nicole Horberg Decter, Boston, for Massachusetts Employment Lawyers Association & another, amici curiae, submitted a brief.

Philip S. Lapatin & Nathaniel F. Hulme, Boston, for Massachusetts Association of Realtors & another, amici curiae, submitted a brief.

Present: SPINA, CORDY, BOTSFORD, DUFFLY, LENK, & HINES, JJ.

Opinion

HINES

, J.

We granted the plaintiffs' application for direct appellate review to determine whether the independent contractor statute, G.L. c. 149, § 148B

, which makes it a violation of the statute to fail “to properly classify an individual as an employee,” applies to real estate salespersons licensed under, and affiliated with and working for a licensed brokerage firm pursuant to G.L. c. 112, § 87RR

. A Superior Court judge concluded that the independent contractor statute did not apply in these circumstances to the salespersons in this industry. We affirm.

1. Background. We summarize the material undisputed facts. The defendants Jacob Realty, LLC (Jacob Realty); NextGen Realty, Inc. (NextGen); and RentMyUnit.Com, Inc., doing business as Boardwalk Properties (Boardwalk Properties) (collectively, business entities), are licensed Massachusetts real estate brokerage firms that are in the business of renting and selling real estate in Massachusetts.³ The defendants Demetrios Salpoglou and Yuan Huang are members of Jacob Realty and shareholders of NextGen and Boardwalk Properties, and are involved in the operations of these business entities. Salpoglou serves as the broker of record for the business entities.

The plaintiffs Nesto Monell, Jonathan Gibson, Rachael Butcher, and Lindsey Burnes were licensed real estate salespersons who worked for Jacob Realty under its real estate broker's license. The plaintiff Ann McGovern was a licensed real estate salesperson who worked for NextGen under its real estate broker's license. The plaintiff Benjamin Smith was a licensed real estate salesperson who worked for Boardwalk Properties under its real estate broker's license.

Throughout the course of their relationship, the defendant business entities classified the plaintiffs as independent contractors.⁴ The defendant entities required the plaintiffs to work sixty

“front desk hours” during training⁵ and, thereafter, in some cases complete monthly “office hours” duty, which involved answering telephone calls from, and greeting, prospective clients.⁶ The salespersons were able to select the “office hours” that they wished to work. The business entities, however, allowed salespersons only one shift change every two months.

At the commencement of their relationship with the business entities, the plaintiffs signed nondisclosure, nonsolicitation, and noncompete agreements⁷ and were required to undergo a training program. The business entities encouraged the plaintiffs to purchase a day planner and required them to obtain a cellular telephone with a “617” area code,⁸ to adhere to a dress code, and to submit to various disciplinary actions if they did not meet their productivity goals.

The defendant entities compensate their salespersons pursuant to a commission policy. Under the policy salespersons are paid on a “commission-only basis” and expressly will not be treated as employees “with respect to compensation for taxes or any other purpose.” A commission is earned on completion by the salesperson of a rental or sales transaction involving a client's real estate. The commission due to the salesperson usually amounts to a percentage (typically fifty per cent) of a transaction's gross commission, less any applicable deductions.⁹ The business entities receive the balance as their portion of the fee charged to the

client. Commissions are paid “only when a transaction is completed in its entirety” as defined by the policy. Pursuant to the policy, the business entities “will issue [a] Form 1099–MISC” to each salesperson and each salesperson “agrees to provide [the business entities] with a signed W–9 [form].” Thus, the plaintiffs were responsible for paying their own taxes.

In 2011, the plaintiffs filed a complaint against the defendants in the Superior Court. As relevant here, the plaintiffs alleged that the defendants violated the independent contractor statute by misclassifying them as independent contractors when they actually were employees.¹⁰ On this count of the complaint, the plaintiffs moved for partial summary judgment, which the judge denied. The judge then granted partial summary judgment in favor of the defendants.¹¹ The judge determined that there is a conflict between the independent contractor and real estate licensing statutes insofar as a real estate salesperson would not be able to satisfy all three indicia of an independent contractor relationship while simultaneously complying with the real estate licensing statute. Based on his determination that the real estate licensing statute was more recently amended and is more specific than the independent contractor statute, the judge concluded that, pursuant to statutory construction principles, the independent contractor statute did not control, meaning that the defendants did not fail properly to classify the plaintiffs as employees and therefore could not be liable for a violation of G.L. c. 149, § 148B

.

2. Standard of review. Summary judgment is appropriate where there are no genuine issues of material fact in dispute and the moving party is entitled to judgment as a matter of law. See Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716, 575 N.E.2d 734 (1991)

; Mass. R. Civ. P. 56(c), as amended, 436 Mass. 1404 (2002). Moreover, “[w]e exercise de novo review over questions

of statutory construction.” Atlanticare Med. Ctr. v. Commissioner of the Div. of Med. Assistance, 439 Mass. 1, 6, 785 N.E.2d 346 (2003)

. Because the issue before us is one of statutory construction, we begin by providing an overview of the relevant statutes.

3. Statutory overview. a. Independent contractor statute. The Commonwealth's wage laws are set forth in provisions in G.L. c. 149 (Wage Act). Within the Wage Act is the independent contractor statute. G.L. c. 149, § 148B

. Effective July 19, 2004, the Legislature amended § 148B by striking out its language and replacing it in its entirety. See St. 2004, c. 193, § 26. The statute has not since been amended.

The independent contractor statute, states, in relevant part:

“(a ) For the purpose of this chapter and chapter 151 ^{[ 12 ]} an individual performing any service, except as authorized under this chapter, shall be considered to be an employee under those chapters unless:—

“(1) the individual is 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; and

“(2) the service is performed outside the usual course of the business of the employer; and,

“(3) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.

“(b ) The failure to withhold federal or state income taxes ... shall not be considered in making a determination under this section.

“...

“(d ) Whoever fails to properly classify an individual as an employee according to this section and in so doing fails to comply, in any respect, with [G.L. c. 149], or [G.L. c. 151, § 1

, 1A, 1B, 2B, 15, or 19 ], or [G.L. c. 62B],^[

¹³

] shall be punished and shall be subject to all of the criminal and civil remedies, including debarment [from public bidding], as provided in [§ 27C] of this chapter. Whoever fails to properly classify an individual as an employee according to this section and in so doing violates [G.L. c. 152] ^[

¹⁴

] shall be punished as provided in [G.L. c. 152, § 14,] and shall be subject to all of the civil remedies, including debarment [from public bidding], provided in [§ 27C] of this chapter....”

G.L. c. 149, § 148B

.

As noted above, the independent contractor statute was adopted as part of St. 2004, c. 193, which is entitled, “An Act further regulating public construction in the Commonwealth.” The act's emergency preamble states the purpose of the act is “to regulate further public construction in the commonwealth.” Id. Although the statute was part of legislation making changes to the public construction industry, the Legislature kept it in c. 149, thus leaving it applicable to a wide range of industries. See Lipsitt v. Plaud, 466 Mass. 240, 245, 994 N.E.2d 777 (2013)

(since enactment of Wage Act in 1886, Legislature has broadened scope of employees covered).¹⁵

We have stated that the purpose of the independent contractor statute is “to protect workers by classifying them as employees, and thereby grant them the benefits and rights of employment, where the circumstances indicate that they are, in fact, employees.” Depianti v. Jan–Pro Franchising Int'l, Inc., 465 Mass. 607, 620, 990 N.E.2d 1054 (2013)

, quoting Taylor v. Eastern Connection Operating, Inc., 465 Mass. 191, 198, 988 N.E.2d 408 (2013). See Cumpata v. Blue Cross Blue Shield of Mass., Inc., 113 F.Supp.2d 164, 168 (D.Mass.2000) ( “Wage Act is meant to protect employees from the dictates and whims of shrewd employers”). Indeed,

“[m]isclassification not only hurts the individual employee; it also imposes significant financial burdens on the Federal government and the Commonwealth in lost tax and insurance revenues. Moreover, it gives an employer who misclassifies employees as independent contractors an unfair competitive advantage over employers who correctly classify their employees and bear the concomitant financial burden.”

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