Opinion
No. 15–P–779.
07-14-2016
Kenneth W. ROSENTHAL v. ROMANO GROUP, INC., & another.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
Romano Group, Inc. (Romano Group), and Terry Romano (collectively, defendants) appeal from a Superior Court judge's allowance of the plaintiff, Kenneth Rosenthal's, motion for summary judgment, on his claim that he was misclassified as an independent contractor rather than as an employee, as defined in G.L. c. 149, § 148B(a). We affirm.
Background. We recite the facts from the summary judgment record, in the light most favorable to the defendants, reserving some facts for later discussion.
At all relevant times, Romano served as the owner, president, and director of Romano Group. The business of Romano Group was to sell advertising and content for publications and Web sites of ThomasNet, for which Romano Group held a license. Prior to December, 2009, ThomasNet required Romano Group to maintain an employee-based sales force, and reimbursed Romano Group for its employee-related expenses. In December, 2009, however, ThomasNet advised Romano Group that it would no longer require it to maintain an employee-based sales force, and that it would no longer reimburse Romano Group for its employee-related expenses.
From November, 2007, through December, 2009, the plaintiff worked in a sales capacity as an at-will employee at Romano Group, during which he earned a salary, commissions, had various employment benefits, and received a W–2 form. The plaintiff's job was to sell advertising and content for publications and Web sites of ThomasNet. Toward the end of 2009, Romano informed the plaintiff that his status as an at-will employee would cease, and offered the plaintiff the opportunity to work as an independent contractor and be compensated on a commission-only basis. The plaintiff agreed, and entered into a written licensing agreement with Romano Group, which memorialized that he would continue to engage in the same type of activities on behalf of ThomasNet and sell the exact same products, but now as an independent contractor. The licensing agreement provided, inter alia, that the plaintiff “is an independent contractor for all purposes of this agreement. This [a]greement does not create an employment relationship.” The licensing agreement further provided that the plaintiff “may engage in any other work, business, occupation or other employment he or she desires while this [a]greement is in effect.” The plaintiff worked in this capacity from January, 2010, until December 16, 2010, when Romano gave notice that he was terminating the licensing agreement.
After the plaintiff failed to receive payment from Romano Group for commissions purportedly earned in 2010, and owed to him after his termination, this lawsuit ensued. The plaintiff filed a motion for summary judgment on all three of his claims and the defendants' counterclaim. On May 21, 2014, the motion judge issued a memorandum and order allowing summary judgment as to the plaintiff's misclassification claim (count I) and awarding the plaintiff treble damages in the amount of $201,150. The judge also granted summary judgment for the plaintiff as to the defendants' counterclaim, which was dismissed. The defendants now appeal.
The plaintiff's complaint alleged violations of: G.L. c. 149 and 151, for misclassifying the plaintiff as an independent contractor and not an employee (count I); G.L. c. 149, § 148, for failing to pay the plaintiff a commission earned in 2010 (count II); and 29 U.S.C. §§ 206(a) and 207(a), for failing to pay the plaintiff minimum and overtime wages in accordance with the Fair Labor Standards Act (count III). The defendants brought a single counterclaim for breach of the licensing agreement.
On August 1, 2014, the judge awarded the plaintiff $28,700 in attorney's fees and $1,159.61 in costs, which brought the total judgment on count I to $231,009.61.
The defendants do not appeal the disposition of counts II and III.
Discussion. On appeal, “[w]e review a grant of summary judgment de novo to determine whether, viewing the evidence in the light most favorable to the nonmoving party, all material facts have been established and the moving party is entitled to judgment as a matter of law.” Galenski v. Erving, 471 Mass. 305, 307 (2015).
General Laws c. 149, § 148B, was passed to “protect employees from being deprived of the benefits enjoyed by employees through their misclassification as independent contractors.” Somers v. Converged Access, Inc., 454 Mass. 582, 592 (2009). It created a rebuttable presumption that a worker is an employee unless an employer can establish each of the following three prongs: “(1) the individual is free from control and direction in connection with the performance of the service ...; (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.” G.L. c. 149, § 148B, as appearing in St.2004, c. 193, § 26. See Sebago v. Boston Cab Dispatch, Inc., 471 Mass. 321, 327 (2015). “The failure of the employer to prove all three criteria set forth above suffices to establish that the individual in question is an employee .” Somers, supra at 589.
We first turn to the second prong, and determine whether the plaintiff's sales activities as of 2010 were outside of the usual course of Romano Group's business. The defendants contend that, at the end of 2009, Romano Group fundamentally altered its operations and transitioned from an entity “in the business of making sales,” to a “clearing house” that was “in a completely different business of providing administrative services to independent contractors [including the plaintiff].” Evidence of this shift included the closing of Romano Group's physical office; the express language of the licensing agreement denoting the plaintiff's status as an independent contractor in 2010; the plaintiff's contractual freedom to work independently and pursue other work or business; and Romano's repeated contention that he and Romano Group were “no longer in the business” of selling ThomasNet products. The defendants claim that such evidence raises genuine issues of material fact as to (1) the exact nature of the Romano Group's new business, and (2) whether the plaintiff's services were necessary to the Romano Group's new business.
The defendants' argument misses the mark. We focus our analysis on the “realities of [Romano Group's] actual business operations,” Sebago, supra at 335, and not just the employer's description of the business, see Athol Daily News v. Board of Review of the Div. of Employment & Training, 439 Mass. 171, 179 (2003). We also consider “whether the service the individual is performing is necessary to the business of the employing unit or merely incidental .” Sebago, supra at 333, quoting from Advisory 2008/1, Attorney General's fair labor and business division. Despite the defendants' emphasis on the peripheral changes to its business in 2010, the undisputed facts reveal that the core of the business remained the same. There is no dispute that, in 2010, Romano Group continued to: sell the same line of ThomasNet products; receive a percentage commission of all sales completed by the independent contractors; and pay the same commission to the sales professionals upon processing their completed sales. Furthermore, Romano himself continued to sell the same line of ThomasNet products, and process documentation of sales made by sales persons, in the same fashion as he had prior to 2010. The undisputed evidence demonstrates that the structure of the relationship between the defendants and ThomasNet effectively remained unchanged. Moreover, the actual business operations of Romano Group remained largely unchanged, see ibid., and continued to be “directly dependent on the success of the [plaintiff's and other sales persons'] endeavors.” Id. at 334. Indeed, as an employee of Romano Group, the plaintiff's job was to sell advertising and content for publications and Web sites of ThomasNet; as a purported independent contractor, the plaintiff's job still was to sell advertising and content for publications and Web sites of ThomasNet. Put simply, the work performed by the plaintiff was necessary to Romano Group's business operations. Accordingly, we conclude that the defendants cannot demonstrate that the plaintiff's sales activities beginning in 2010 were outside of the usual course of Romano Group's business. No genuine issue of material fact exists as to the second prong of the statute.
The defendants offer the final policy argument that they were “simply trying to provide [the plaintiff] with an opportunity to earn a living through the Romano Group's new relationship with ThomasNet and avoid [the plaintiff] from being unemployed.” They contend that G.L. c. 149, § 148B, was not designed to punish an employer for being “helpful and altruistic” towards individuals like the plaintiff. For the reasons stated by the Supreme Judicial Court in an analogous context, the argument is unavailing. See Somers, 454 Mass. at 591 (“None of the statutory criteria speaks of the employer's intent; rather, all speak of the nature of the service provided. To this extent, § 148B is a strict liability statute, as is the wage act. Good faith or bad, if an employer misclassifies an employee as an independent contractor, the employer must suffer the consequences”). ,
Where the defendants' argument fails on the second prong of the statute, we need not analyze the first or third prongs.
As the defendants concede that their counterclaim necessarily relies upon the plaintiff's proper classification as an independent contractor, and the summary judgment record demonstrates that the defendants improperly classified the plaintiff as an independent contractor, we conclude that summary judgment was also properly granted as to the defendants' counterclaim.
Judgment affirmed.