The Holes in the Charitable Immunity Shield: Wolfe v. Budzyna, 102 Mass. App. Ct., 1116 (2023)

May 2023 • Source: Melick & Porter

The Charitable Immunity Statute in Massachusetts is not a blanket shield to officers of non-profit organizations. In Wolfe v. Budzyna, 102 Mass. App. Ct., 1116 (2023), the Massachusetts Appeals Court affirmed the denial of the employer’s motion for summary judgment in favor of the employees in a case alleging unpaid wages under the Massachusetts Wage Act. The employees of a nonprofit organization filed suit under the Massachusetts Wage Act alleging that the nonprofit’s officers intentionally harmed the employees by promising wages while directing the organization’s funds to third party vendors, despite knowing that the organization was on the verge of bankruptcy.

In most unpaid wage claims, the Massachusetts Wage Act imposes liability for unpaid wages on the employer and their officers. However, there is an applicable defense if the organization is a nonprofit. The Charitable Immunity Statute protects uncompensated officers of a nonprofit organization from any liability arising from civil suits “as a result of any acts or omissions related solely to the performance of his duties as an officer.” In other words, individuals are shielded from the Massachusetts Wage Act if (1) they are officers of a nonprofit organization; (2) they are not compensated for their service; and (3) the officers withheld wages while executing their official duties.

The Charitable Immunity Statute might seem encompassing, but there are exceptions to the rule. Any acts or omissions by officers “intentionally designed to harm” or are “grossly negligent . . . which result in harm to the person” are precluded from the statute’s protection. 

Here, the defendants easily satisfied the elements of the Charitable Immunity Statute: (1) they were treasurers of a nonprofit organization, the Boston Children’s Theater; (2) they were not compensated for their services; and (3) they directed company funds to third party vendors instead of the employees as part of their official duties. However, the Massachusetts Appeals Court ruled that the statute was inapplicable to the defendants because their actions constituted “an intentional design to harm employees.”

The court reached this conclusion by comparing this case to Lynch v. Crawford, where the court found the president’s actions constituted “an intentional design to harm employees by failing to pay them the wages they were due.” 483 Mass. 631, 644 (2019). In both cases, the officers (1) personally promised employees that they would be paid; (2) knew that the organization would not make payroll; and (3) chose to direct funds to outside vendors instead of to employees. As such, the court followed the precedent and affirmed the denial of the defendants’ motion for summary judgment.

This decision underscores the desire of the court to provide and protect employees’ ability to collect wages ahead of corporate interests such as paying third party vendors.  If you have questions about these issues, Melick & Porter’s team of experienced employment law attorneys are always available to help. 

Exclusive: How AmTrust Uses Performance Data to Select Panel Counsel in 2023

May 2023 • Source: Litify

How can your firm stand out among the competition? Verifiable performance data.

In this exclusive executive interview, AmTrust Assistant Vice President of Litigation Dan Jacobs shares how panel counsel is evaluated, selected — and rewarded with more files — using the firm’s key performance metrics. From shared dashboards to a custom-built tool that auto-ranks panel counsel, see how AmTrust is using Litify to blaze a new trail for the future of claims technology. [Watch On-Demand Now]

Melick & Porter Achieves Appellate Victory On Multimillion-Dollar Contractual Indemnification Claim

May 2023 • Source: Melick & Porter

In an appeal handled by the appellate team of michael Byrne, Bob Powers, & Michael Mazurczak of Melick & Porter, the Massachusetts Appeals Court recognized that a literal interpretation of an overly broad contractual indemnification provision would lead to “absurd results,” and ruled that a business consultant who provided financial and marketing services to the owner of a parking garage was not obligated to indemnify the owner for a multimillion-dollar verdict arising out of negligent security.  In K.W. v. LAZ Parking Limited, LLC, 102 Mass. App. Ct. 1115 (2023), the Court affirmed a judgment holding that the parties could not have intended for the indemnification provision to apply, notwithstanding its expansive language.

The case arose out of a rape which occurred in a downtown Boston parking garage adjacent to a hotel.  The plaintiff, K.W., filed a negligent security action against the entities which owned and managed the garage, as well as LAZ Parking, which acted as a consultant to the garage manager (JPA I).  After a trial, the jury found the owner and manager liable and awarded the plaintiff $4 million in damages.  LAZ was not found to have been negligent.

Under their agreement, LAZ provided JPA I with advice on financial issues, staffing, equipment and pricing, but was not involved in the day-to-day operations of the garage.  Both LAZ and JPA I agreed that LAZ played no role in security matters.  Nevertheless, the contract included an indemnification provision which called for LAZ to indemnify JPA I for “any and all liability … arising from … injuries to persons … that arise from the conduct or actions of the servants, agents or employees of any person.”  Claiming that the provision broadly applied to any liability connected to the operation of the garage, JPA I sought indemnity from LAZ.  The Superior Court ruled that the provision could not plausibly be interpreted to apply as written, and concluded that the parties did not intend for it to apply to a claim arising out of garage security.  JPA I appealed, and the Appeals Court affirmed. 

Noting that a literal reading of the provision “would require LAZ to indemnify JPA I for losses having nothing to do with the garage whatsoever,” and that such a sweeping obligation could not be reconciled with the limited consulting services LAZ provided to assist JPA I in the management of the garage, the Appeals Court ruled that the agreement was ambiguous.  Thus, the Court looked to the context of the contract as a whole, the history of the relationship, and the testimony of the parties to determine their shared intent.  Based on this evidence – including the fact that JPA I had never sought indemnity from LAZ for any prior claim, and had not even notified LAZ of a prior sexual assault committed in the garage by the same assailant twelve days before the attack on K.W. – the Court concluded that the contractual indemnification provision was not intended to apply.

The decision demonstrates that the language of a contract cannot always be taken at face value, and underscores the importance of carefully drafted risk-shifting provisions.  If you have questions about contractual indemnification issues or negligent security liability, Melick & Porter’s experienced attorneys are always available to help.

Court Reinstates Independent Contractor Exception for Uber Drivers

May 2023 • Source: John H. Shaffery, Poole Shaffery

Proposition 22 was approved by voters in California in November 2020. It exempted app-based drivers from a 2019 state law known as AB5 that makes it difficult to classify workers as independent contractors rather than employees. It allows app-based transportation services to classify drivers as independent contractors as long as they are paid a minimum wage while transporting passengers and receive expense reimbursements and healthcare subsidies. For hundreds of thousands of drivers, Proposition 22 awarded independent contractor status but took away protections requiring gig workers across many industries to be classified as employees with stronger benefits such as a minimum wage, overtime and workers’ compensation in case of injury.

On March 13, 2023, the California Court of Appeals reversed a 2021 lower court ruling that struck down Proposition 22 on the basis that it violated the state constitution because it limited the legislature's power to include gig drivers within the scope of California workers' compensation law. The appeals court disagreed with that opinion and mostly upheld the provisions of Proposition 22, except for a provision enabling gig workers to join unions. The appeals court severed provisions of Proposition 22 restricting the California Legislature’s ability to authorize collective bargaining over drivers’ compensation, benefits, or working conditions and create rules singling out or otherwise putting unequal regulatory burdens upon app-based drivers.

Proposition 22 has remained in effect throughout the appeals process, and ride-sharing apps, including Uber and Lyft, can continue to treat their drivers as independent contractors. This represents a major victory for such companies because independent contractors do not receive the same legal protections as employees and can be up to 30% cheaper. Immediately after the Court of Appeals decision upholding Proposition 22, shares of Uber and Lyft rose by nearly 5%. However, the ruling is expected to be appealed to the California Supreme Court, so it remains to be seen how the ongoing Proposition 22 saga will develop.