Employ Globally, Comply Locally: Cross-border employment and the Massachusetts Wage Act

A recent Massachusetts federal court decision should serve as an important reminder to employers that the Massachusetts Wage Act can apply even to an individual residing and working in another country, as long as there are sufficient connections to Massachusetts.

In determining whether there are sufficient connections, courts emphasize the day-to-day realities of the working relationship between the employee and employer.

Work without borders

George Serebrennikov sued his former employer, Proxet Group LLC, claiming that the company owed him nearly $600,000 in unpaid salary, bonus, vacation, and unreimbursed business expenses. Under the treble damages and attorneys’ fees provisions of the Massachusetts Wage Act, Mr. Serebrennikov’s potential recovery approached $2 million.

Both parties filed motions for summary judgment, and the key points of contention were whether Mr. Serebrennikov was (1) an employee of the company and (2) was covered by the Massachusetts Wage Act.

The relationship between the parties was complex. Mr. Serebrennikov, who initially resided in Florida, began performing services for Proxet in 2016 as an independent contractor, under written agreements specifying Massachusetts law as controlling. In late 2017, he established a Ukrainian subsidiary of Proxnet, in which he took a 25% stake. He also became an employee of the subsidiary, began to work mostly in Ukraine and received a modest salary under an employment agreement with the subsidiary, which provided that his employment was governed by Ukraine law.

At the same time, Mr. Serebrennikov continued to work as Proxet’s Chief Operating Officer, reported to the Chief Executive Officer and worked with its in-house counsel in Massachusetts, and received monthly compensation from the Massachusetts-based entity, payments that greatly overshadowed his Ukrainian wages.

And, as if the above were not complicated enough, after the war in Ukraine, which began in February 2022, he worked at times in Turkey, Poland, and the United States (but not physically in Massachusetts).

The Commonwealth controls

Sifting through these intricate facts, and noting that Mr. Serebrennikov’s claims were against the U.S. entity and not the Ukrainian subsidiary, U.S. District Court Judge Indira Talwani determined that the Massachusetts Wage Act applied. According to Judge Talwani, Massachusetts had the most significant connection to the parties’ relationship, and Mr. Serebrennikov was an employee of the U.S. entity rather than an independent contractor. She emphasized, for example, that Mr. Serebrennikov was the COO for the U.S. company, reported to its Massachusetts-based CEO, and received the vast majority of his compensation from the Massachusetts location.

A developing trend

The outcome in this case might not surprise those who have followed Massachusetts courts’ Wage Act decisions in other cases brought by non-resident plaintiffs over the last dozen years. For example, in both Dow v. Casale, a 2013 Massachusetts state Court of Appeals case involving a Florida-based executive working remotely for a Massachusetts employer, and the recent case of Dubois v. Staples, involving a Rhode Island resident with Massachusetts-based work, which we wrote about here, the courts held that the Wage Act applied.

In contrast to those cases, however, Mr. Serebrennikov was employed by a foreign subsidiary and performed substantial work outside the United States. This fact, along with the plaintiff’s nominal engagement as an “independent contractor” of the U.S. entity, may have led the employer to believe that the Massachusetts Wage Act would not apply. Indeed, some recent decisions (here and here) have gone the other way, declining to apply the Wage Act where the facts indicated that a different state had the greater connection to the employment relationship.

Employer considerations

Ultimately, what these cases demonstrate is the importance that the courts place on the realities of each working arrangement. Employers with operations in Massachusetts should be mindful that courts will ask questions such as the following:

• Where does the employee perform the work?
• Who is the employee’s supervisor or issues the employee’s assignments, and where is that person located?
• How often is the employee present in the Commonwealth versus other locations?
• From where is the employee’s pay issued?
• Where are employment decisions about this employee made?
• If there is an employment agreement or other agreement, what does it say about applicable law?
• Where is the company registered to do business?
• Where is the company’s headquarters?

Given that application of the Massachusetts Wage Act can have significant consequences, businesses that engage workers or otherwise operate in the Commonwealth should carefully consider the facts of their working arrangements with out-of-state, remote, and even foreign workers to determine whether compliance with the Wage Act is necessary.