Employee Paid “Under the Table” Has Viable Wrongful Discharge Claim

by Marylou Fabbo

Massachusetts recognizes a cause of action for employees who are terminated from employment in violation of a recognized public policy.  Employers are prohibited from terminating an employee for asserting a legally guaranteed right, refusing to do what the law forbids, or reporting certain violations of the law.  Generally, however, an employee may not pursue a wrongful discharge claim arising out of a claim for which there is redress under a statute. And, in fact, in Scalli v. Citizens Fin’l Group (Case No. 03-12413-DPW, District of Mass., 2006), a Massachusetts federal district court held that a terminated employee cannot assert a claim for wrongful discharge in violation of public policy when the employee claims to have been terminated in retaliation for complaining about wage violations.  In other words, the Wage Act preempts claims for wrongful discharge in violation of  public policy where an employee’s claim of wrongful discharge is based upon violation of the Wage Act. The Scalli court touched on but left open the issue of whether an employee could sue for wrongful discharge in violation of public policy when the employee’s complaint is one of the tax consequences of the compensation scheme.

In an April 2016 decision, the Superior Court has, at least initially, concluded that an employee who is terminated in retaliation for his objections to being paid “under the table” can pursue a claim for wrongful discharge in violation of public policy when his complaint concerned the tax implications of failing to comply with wage and hour laws.  Savin Hill Enterprises, Inc. hired William Rodden as a General Manager of its new retail establishment, which sold high-end craft beer and wine.  According to Rodden, Savin Hill lured him away from his prior employment with full knowledge that once he set up the business for Savin Hill, they would terminate his employment and bring in someone they knew.  Rodden’s complaint set forth numerous causes of action against the company, but the court dismissed all except the wrongful discharge claim.

In support of his wrongful discharge claim, Rodden alleged that he was terminated for repeatedly demanding that he be placed on Savin Hill’s payroll (rather than being paid cash “under the table”) so that all required tax withholdings could be made.  There was no discussion of Wage Act preemption of the retaliation count because Rodden framed his claim in terms of complaining about taxes, not wages, although the two were intertwined.  The court refused to dismiss Rodden’s claim, holding that by insisting that he be placed on the company payroll so that proper and legally-required withholdings could be made, Rodden allegedly had made an internal complaint about Savin Hill’s state and federal tax violations, i.e. he complained about a refusal to accede to a violation of the law (under-the-table compensation) or a call to do what the law requires (pay taxes).  (Rodden v. Savin Hill Enterprises, LLC, 2016 WL 1688688 (Mass. Super. April, 2016))

Whether Savin Hill ultimately is found to have in fact terminated him for those alleged complaints remains to be seen.  What is interesting about this case is how creative pleadings can avoid dismissal of claims.  Had Rodden framed his complaint about being paid under the table as a violation of the Wage Act, it likely would have been dismissed, as his remedy would be under the Wage Act itself.

This entry was posted in Massachusetts Wage Act, Wage/Hour. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *