Employees can sue car dealerships collectively

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Sales employees can collectively sue a family of car dealerships and their parent company for allegedly violating state wage and overtime laws, a Superior Court judge has decided.

Defendant Colonial Automotive Group, or CAG, and its subsidiary Gordon Chevrolet pointed out that the plaintiff salespeople worked at other subsidiary dealerships under the CAG umbrella. Thus, the defendants argued, they were not the plaintiffs’ employers and could not be held liable for the alleged violations of the Wage Act, G.L.c. 149.

But Judge Janet L. Sanders disagreed, finding that the employees pleaded sufficient facts to allege that both CAG and Gordon Chevrolet could be considered their “employers” under the test articulated in Gallagher v. Cerebral Palsy of Mass. Inc., an Appeals Court decision issued earlier this year.

With respect to CAG, Sanders observed that the parent company held itself out on a common website as a single dealership with more than 600 employers, managed employment matters for all dealerships, and required the plaintiffs to comply with CAG’s policies and procedures.

“Assuming these facts to be true, CAG thus receives the ‘services’ of the plaintiffs” as laid out in Gallagher, Sanders said.

As for Gordon Chevrolet, the judge noted that at least two plaintiffs signed employment agreements with entities using the Gordon Chevrolet name.

“This suggests that they do provide services to Gordon Chevrolet or alternatively, that Gordon Chevrolet maintains some control over the terms and conditions of their employment,” Sanders said.

The seven-page decision is Malebranche, et al. v. Colonial Automotive Group, Inc., et al., Lawyers Weekly No. 12-134-17. The full text of the ruling can be ordered here.

Indirect employment

Plaintiffs’ counsel Brook S. Lane of Boston said the decision enables employees to pursue wage claims against any company that is responsible for creating or implementing illegal compensation practices, regardless of whether the employees work directly for the company that caused the wage violation. That will deter employers from avoiding their state law wage obligations, he said.

Elizabeth Ryan, a Boston attorney who represents plaintiffs in wage-and-hour class actions, hailed the ruling for highlighting the types of factual allegations that are relevant when employees bring claims against a multi-location business.

“In my view, the court’s decision emphasizes that, in Massachusetts, the question of who is an employer for purposes of the Wage Act is, first and foremost, a question of fact, not a question of corporate formalities,” Ryan said. “Who sets policies regarding employment, wages and overtime? Who is the employee performing services for? And in this case, how does the business hold itself out to the public? One business? Or many?”

Those will be the determinative factors, she added, unless there is an intervening scheme — like the one in Gallagher, in which MassHealth regulations governed the work of home health aides paid for under MassHealth.

Paul M. Harris of Boston, one of the attorneys for the defendants, said while he and his clients respected the ruling, they were confident that when the evidence was vetted, the plaintiffs would not be able to establish that there was joint employment.

Meanwhile, Nathan L. Kaitz, a management-side employment attorney in Boston, said the ruling sends a message to employers that they need to be careful about how they brand themselves on their websites.

“Make sure, if you want each corporation to be a separate and distinct corporation and employer, that you’re not doing any branding on your website that’s inconsistent with that,” he said.

Here, he said, CAG seemed to be trying to have its cake and eat it too.

“Certainly from the standpoint of a motion to dismiss, when it’s pretty clear under the case law that [a defendant’s status as an employer] is a factual question and not a question of law, it’s going to be pretty hard to [win] a motion to dismiss if you’re branding yourself [as CAG did],” he said.

“Make sure, if you want each corporation to be a separate and distinct corporation and employer, that you’re not doing any branding on your website that’s inconsistent with that.”

— Nathan L. Kaitz, Boston

Alleged violations

CAG is the parent company to 16 separately incorporated car dealerships, including defendants Gordon Chevrolet, Colonial Nissan, Colonial Dodge and Gordon Volkswagen.

In 2016, plaintiffs Djhon Malebranche, Wiskinda Lamanider, Nicholas Pezzano and Christopher Farias all worked as inside car salesmen at various CAG dealerships, though apparently none worked directly for CAG or Gordon Chevrolet.

The plaintiffs filed a class action in Superior Court alleging that they and other similarly situated sales employees frequently worked more than 40 hours a week and on Sundays without receiving overtime compensation as required by the Wage Act.

The plaintiffs also maintained that CAG and the defendant dealerships were aware of the situation, which they described in their complaint as “companywide practice and policy.”

According to the plaintiffs, CAG and its subsidiaries all conducted business under the CAG umbrella. The plaintiffs also alleged that CAG oversaw all business and employment operations for the dealerships, including hiring and firing of employees, creating and implementing payroll policies, overseeing performance of employees, maintaining personnel records, and controlling employee work schedules.

CAG’s website also apparently represented the group as a single “dealership” actively employing more than 600 people.

CAG and Gordon Chevrolet moved to dismiss the plaintiffs’ claims, contending that they were not employers of any of the plaintiffs within the meaning of the Wage Act and thus could not be held liable for any violations.

Joint employment

In addressing the defendants’ motion, Sanders applied two tests articulated by the Appeals Court in Gallagher for determining whether a Wage Act defendant is, in fact, the plaintiff’s employer.

The first was a statutory test focusing on whether the plaintiff provides services to the defendant.

Because the complaint alleged that all the defendants, including CAG, sell cars to the public through salespeople like the plaintiffs, the facts — if true — indicated that CAG indeed received the “services” of the plaintiffs, Sanders said.

Applying a second test, which focuses on the issue of control, Sanders found it significant that CAG marketed itself on the internet as a single dealership with several hundred employees. Similarly, she noted the plaintiffs’ allegations that CAG controlled and managed employment matters for all the dealerships, which implemented CAG policies and procedures, including those pertaining to wages and overtime pay.

The judge also pointed to agreements the plaintiffs signed with CAG stating that failure to comply with CAG’s information security policies and procedures could result in their termination from CAG.

“Although these documents are not specifically referenced in the Complaint and thus should not be considered on this [Rule] 12(b)(6) motion [to dismiss], they do indicate that if discovery were allowed to proceed, there may be further information that would support plaintiffs’ claim that they were employed by CAG,” Sanders said

As to Gordon Chevrolet, Sanders called the sufficiency of the plaintiffs’ allegations of an employment relationship “a closer call” but pointed to agreements that at least two of the plaintiffs apparently executed, acknowledging their employment with “Gordon Chevrolet Geo dba Gordon Chevrolet” and “Gordon Chevrolet Geo dba Colonial Nissan.”

The judge said that suggested both that the plaintiffs did provide services to Gordon Chevrolet and that it maintained some control over the terms of their employment.

“In short, whether Gordon Chevrolet or CAG should remain in the case is best decided after plaintiffs have had an opportunity to explore these issues in discovery,” Sanders concluded, denying the defendants’ motion to dismiss.

Malebranche, et al. v. Colonial Automotive Group, Inc., et al.

THE ISSUE: Could sales employees collectively sue a family of car dealerships and their parent company for alleged violations of state wage and overtime provisions?

THE DECISION: Yes (Suffolk Superior Court)

LAWYERS: Stephen S. Churchill and Brook S. Lane, of Fair Work, Boston (plaintiffs)

Paul M. Harris and Andrea L. Martin, of Burns & Levinson, Boston (defense)