Massachusetts Agents or Brokers – Do you own your own Massachusetts insurance agency? If so, take heed when contracting with a producer for your agency. While labor and wage disputes are an unfortunate part of running any business, producer commission disputes, more than any other labor dispute can become a nightmare for agents and agencies who are not careful. This is especially so where you believe that the producer is an independent contractor and the producer considers himself under the Massachusetts commission wage statute.
In particular, agents and agencies should be aware of the myriad of laws in Massachusetts regarding disputes . Moreover, agents also should be wary of modifying agreed-to commission terms in response to an employee’s or independent broker’s actions. A dispute of commissions can easily escalate into a lawsuit with the risk of a producer obtaining treble damages and attorney’s fees. In addition, under Massachusetts law, the officers of a company (or agency) may be held personally liable and thus are responsible for any monetary damages awarded a producer.
As such, an agent should be generally knowledgeable about certain intricacies of these laws. In order to help agents, Agency Checklists reviewed the Attorney General’s Advisory Opinion on this issue in addition to the pertinent Massachusetts Laws to compile this alert list of the fundamentals that all agents should know about this issue:
- M.G.L. c. 149 §148B is the law concerning the Massachusetts Independent Contractor Law or the Massachusetts Misclassification Law.
- In enacting this law, the Legislature established that notwithstanding that a working relationship could be considered to be one of independent contractor under common law, the worker may stilled be deemed in employment for the purposes of the Law.
- If a worker in your office files a complaint with the Attorney General’s office, it is likely that pursuant to M.G.L. c. 149 § 148B the Court will use a three part test to determine whether to classify a person as an employee.
- As the Attorney General’s advisory opinion explains and outlined in M.G.L. c.149 §148B the burden of proof is on the employer, and the inability of an employer to prove any one of the prongs is sufficient to conclude that the individual in question is an employee. The three prong test is as follows:
- Whether “…the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of the service and in fact”
- Whether “the service is performed outside the usual course of business of the employer;” and,
- Whether “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”
- Note that an agent or agency’s failure or decision not to withhold the individual’s taxes or to contribute to their unemployment compensation or to provide worker’s compensation are ignored by the Court when it is determining whether an individual has been properly classified as an independent contractor or employee. As the Attorney General points out, “Hence, an employer’s belief that a worker should be an independent contractor has no relevance in determining whether there has been a violation of the Law.”
- A fired employee or independent contractor who feels that their employer has violated Massachusetts employment laws can file a complaint with the Attorney General.
- The law states that “… so far as apt, to the payment of commissions when the amount of such commissions, less allowable or authorized deductions, has been definitely determined and has become due and payable to such employee, and commissions so determined and due such employees shall be subject to the provisions of section one hundred and fifty.”
- Under M.G.L. 149 §150 provides that “an employee claiming to be aggrieved by a violation of sections 33E, 148, 148A, 148B, 150C, 152, 152A or 159C or section 19 of chapter 151 may, 90 days after the filing of a complaint with the attorney general, or sooner if the attorney general assents in writing, and within 3 years after the violation, institute and prosecute in his own name and on his own behalf, or for himself and for others similarly situated, a civil action for injunctive relief, for any damages incurred, and for any lost wages and other benefits. An employee so aggrieved who prevails in such an action shall be awarded treble damages, as liquidated damages, for any lost wages and other benefits and shall also be awarded the costs of the litigation and reasonable attorneys’ fees.”
- Upon examination of the circumstances of a labor or wage dispute, the Attorney General can issue a citation fine to an employer, officer, agent or employee. If it has been determined that there has been a willful violation, penalties could reach as high as $25,000 depending on the violation.
- M.G.L. c.149 §148A states that “any employer who discharges or in any other manner discriminates against any employee because such employee has made a complaint to the attorney general or any other person, or assists the attorney general in any investigation under this chapter, or has instituted, or caused to be instituted any proceeding under or related to this chapter, or has testified or is about to testify in any such proceedings, shall have violated this section and shall be punished or shall be subject to a civil citation or order as provided in section 27C.”
Strict agency guidelines regarding commission agreements and employment classification can help to avoid problems such as these. Also, it may be best when producer commission disputes do arise to hire a lawyer to mediate this issue. It may very well be the more economical option in the end, rather than attempting to take matters in your hands and ending up in court with the prospect of being held personally liable for an award of treble damages.
For more information regarding this issue, interested individuals should read the Attorney General of Massachusetts’ information on workplace rights or to read the pertinent Massachusetts Laws. If you are an agent that requires legal assistance or advice, you may contact the attorneys at ForbesGallagher who specialize in insurance law and are the lawyers who bring you Agency Checklists.
