Foreign-based worker can sue under state wage act

A federal court has allowed a Ukraine-based worker to move forward with claims under the Massachusetts Wage Act, finding that the statute applied even though most of his work occurred abroad.

A Massachusetts software company hired the worker in 2016 under a consulting agreement that labeled him an independent contractor. He later also signed a separate employment contract with the company’s Ukrainian subsidiary.

When the worker’s employment ended in 2022, he claimed he was owed unpaid salary, a bonus, unused vacation time, and more than $450,000 in unreimbursed travel expenses. He sued the Massachusetts parent company and its CEO under the state’s Wage Act.

The employer asked the court to dismiss the case, arguing that the Wage Act did not apply because the employee’s “operative contract” was the Ukrainian subsidiary and because the employee lived in Ukraine, performed his work there, and had virtually no interactions in Massachusetts.

Why the court sided with the worker

The court cited several reasons for siding with the worker:

• Choice of law did not block the claim: Although the subsidiary’s employment contract referenced Ukrainian law, the worker brought his claims under the Massachusetts consulting agreement and against the Massachusetts parent company, so the Ukrainian provision did not control.
• Massachusetts had the closest connection: The judge found that the Wage Act could apply extraterritorially because the parent company was based in Massachusetts, issued tax forms and payment from Massachusetts, and directed the worker’s activities from its Massachusetts management team.
• Misclassification was a key factor: The court ruled that the worker had been misclassified as an independent contractor. “Throughout the relationship, he reported to [parent company’s] management team located in Massachusetts [and] performed significant services for [them],” the judge said. Duties included operational support, client consults, coordination with legal counsel, and product development. In the court’s opinion, this fit the profile of an employee, bringing the plaintiff under Wage Act protections.

The court allowed the worker to move forward on his Wage Act claims for certain unreimbursed travel expenses and unused vacation time. It dismissed other portions, including his claim for a $100,000 bonus, due to lack of evidentiary support.

What the case means

Even when work happens overseas, Massachusetts-based employers can still face Wage Act liability, especially if they direct the work from Massachusetts and rely on contractor labels that don’t match the realities of the job.

It’s important to remember that misclassification risks remain high. Labeling someone as a contractor does not override how the work is actually performed. And ordinary business expenses cannot be shifted onto employees, even for out-of-state or international workers.