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Wage Act Lawsuit Against Corporation and Subsidiary Can Proceed

Published:  November 20, 2017

A Massachusetts Superior Court Judge recently allowed a lawsuit filed by a former employee against his former employer to proceed.  The lawsuit is based upon allegations of failure to pay wages under the Massachusetts Wage Act.  The Plaintiff was an employee of a car dealership, and filed suit against both the corporate entity that operated the car dealership and its parent corporation.  The parent corporation owns several subsidiary corporations, including the subject car dealership.  The parent corporation filed a motion to dismiss the lawsuit, arguing that the Plaintiff was the employee of the car dealership, which is a separate corporation, and, therefore, the parent corporation could be not held liable as an employer under the Wage Act.  The Judge denied the motion to dismiss filed by the parent corporation, reasoning that the definition of “employer” under the Wage Act is a fact intensive inquiry and that there were too many factual issues present to dismiss the case.

The corporate set-up utilized by the employer in this case, namely a parent corporation with several subsidiary corporations, is common.  One of the primary purposes of utilizing that corporate set-up is to limit liability.  Employers will therefore need to take note of this ruling.  While the ruling does not mean that the parent corporation is responsible for the employee’s claim, it provides notice that the courts will not necessarily dismiss such a claim based upon corporate structure and, instead, will look at the facts of each case to determine whether an entity is an “employer” under the Wage Act.

If you have any questions about the Massachusetts Wage Act, please contact the attorneys at Royal, P.C.

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