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August 21, 2014

Appeals Court Reinstates Employee's Age Discrimination Claim Against Employer

In June, the Massachusetts Appeals Court reinstated an age discrimination claim brought by a former employee against her former employer, the Massachusetts Department of Transitional Assistance (DTA), in which the employee claimed that she was demoted, and constructive terminated, as a result of age discrimination.

In Younker v. Department of Transitional Assistance, the employee claimed that her demotion and subsequent resignation from the DTA constituted a violation of M.G.L. c. 151B, § 4(1C). That statute provides that it is an unlawful discriminatory practice for "the commonwealth or any of its political subdivisions, by itself or its agent, because of the age of any individual, to refuse to hire or employ or to bar or discharge from employment such individual in compensation or in terms, conditions or privileges of employment unless pursuant to any other general or special law."

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August 5, 2014

Non-Compete Agreements Survive Another Legislative Session

Massachusetts legislators have once again declined to amend Massachusetts law relative to non-competition agreements, which operate to ban employees who sign them from working for competitors after they leave a company. According to the Boston Herald, the final version of a proposed Massachusetts economic development bill will not include language placing limitations on non-compete clauses, as many of those opposed to non-competes had hoped.

The legislation has been hotly debated for years. Most of those in favor of keeping non-compete agreements valid and enforceable are employers and owners of large organizations intent on protecting their business information and intellectual property. Earlier this year, as part of a larger economic development bill, Massachusetts Governor Deval Patrick proposed an outright ban on non-compete agreements. As a compromise, Governor Patrick later suggested that Massachusetts adopt the Uniform Trade Secrets Act, a federal act currently in use by 46 states as well as Washington, DC. The Uniform Trade Secrets Act aims to protect employers' intellectual property rights without necessarily limiting employees' ability to change jobs.

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April 24, 2014

City Employer Cannot Deny Retired Employee Value of Earned Compensatory Time

The Massachusetts Wage Act has teeth. Among other things, it helps ensure that employers timely pay employees all earned wages, as that term is broadly defined, under the threat of mandatory triple damages, attorney's fees, and costs of litigation for violation of the Act. Leaving little opportunity for employers to avoid their pay obligations to employees, the Act specifically prohibits an employer from entering into a contract with an employee that exempts the employer from his Wage Act obligations.

Earlier this month, the Massachusetts Appeals Court struck down two arguments advanced by an employer to justify the employer's non-payment of wages to an employee. In Plourde v. Police Dept. of Lawrence, the plaintiff had been a police officer with the Lawrence Police Department (LPD) for twenty-five years. Pursuant to the terms of his collective bargaining agreement (CBA), the plaintiff was permitted and elected to work additional shifts, separate from his salaried work. The CBA referred to these extra shifts as "overtime." The LPD's policies and practices permitted officers to elect to receive compensatory time in lieu of wages for the overtime shifts. Throughout his employment, the plaintiff often elected to take compensatory time.

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April 15, 2014

Proposed Legislation Threatens the Future Enforceability of Non-Compete Agreements

In the past, Massachusetts legislators have proposed legislation that would ban the enforcement of non-competition agreements in Massachusetts, but no such law has yet passed. Last week, Governor Deval Patrick announced that he would propose similar legislation as part of an economic growth bill, in an effort to remove the barriers that non-compete agreements create for workers in high-tech companies who wish to open their own competing business.

As we have previously discussed, Massachusetts law presently views non-competition agreements as valid and enforceable, if they are reasonable in duration, geographic scope, and restricted activities. These agreements have been essential to many Massachusetts employers to prevent employees from leaving the employer and taking with them the employer's valuable business information and trade secrets.

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March 27, 2014

Bonus Payment Excluded from Wage Act Claim

The Suffolk County Superior Court recently analyzed the Massachusetts Wage Act in a case involving the compensation package of a company's departing president. The case was complicated by the multiple and inconsistent compensation agreements the plaintiff and defendant company signed. At bottom, the court decided the issue of whether annual bonuses and vacation pay may be considered wages under the Wage Act. The court found that annual bonuses may not be considered wages under the Wage Act, but that vacation pay may be wages, provided that certain criteria are be met.

In Boesel v. Swaptree, Inc., the plaintiff brought claims the defendants under the Wage Act, for breached of fiduciary duties, and for interference with contractual relations. The plaintiff founded Swaptree, Inc. and served as its CEO until 2010. As part of an investment agreement, the plaintiff resigned as CEO, and accepted the position of president of the company. Upon accepting the position, the plaintiff entered into an employment agreement with the company that differed from the original agreement he had signed at the company's inception. The agreement provided that Boesel receive a certain salary, health and retirement benefits, paid vacations, and would receive compensation for unused vacation days. In addition, Boesel was to receive an annual bonus each year he worked for the defendant company, as well as a discretionary bonus based on his success as president. However, the company paid Boesel only his base salary, without bonuses or vacation time reimbursement.

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March 20, 2014

No Breach of Fiduciary Duty by Corporate Shareholder Who Opened Similar Business

In Ricci Consultants, Inc. v. Bournival, a case recently tried in the Norfolk Superior Court, it was determined that a defendant did not breach a fiduciary duty when she left employment with Ricci Consultants, Inc. (RCI), an actuarial consulting firm in which she was a shareholder with a one-third interest, to start her own actuarial consulting firm, KMS Actuaries, Inc. (KMS). Although both firms provided actuarial consulting services for clients, the types of clients each firm serviced differed: RCI specialized in private sector work, while KMS focused on the public sector. Following the defendant's departure from RCI, both parties filed suit against each other, both alleging intentional interference with contractual/advantageous relations with customers, and breaches of fiduciary duties. A jury returned verdicts in favor of the defendant and KMS on the intentional interference claims. The parties waived their right to have a jury decide the breach of fiduciary duty claim, which the judge considered.

RCI alleged that the defendant, through KMS, competed with RCI and thereby stole corporate opportunities from KMS, to which she owed fiduciary duties. In doing so, RCI alleged that the defendant breached her duty of loyalty owed to RCI.

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March 6, 2014

Court Stays Action Pending Arbitration

A recent order from a federal district court in Massachusetts sheds light on the analysis courts perform when addressing whether to stay a civil action pending arbitration. In MOCA Systems, Inc. v. Bernier and Penley Systems, LLC, the court considered the defendants' motion to stay an action pending arbitration. The defendants proffered only an unsigned employment agreement that included an arbitration clause, and testimony suggesting the agreement was valid. The court allowed the motion and stayed the litigation.

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August 26, 2013

SJC decides on Wage Act preemption concerns

The Supreme Judicial Court has shed some light on preemption issues concerning the Wage Act, G.L.c. 149, §§148, 150. The Court reversed a recent ruling in an employment contract case in which the lower court ruled that the Wage Act preempted common-law claims for employment-related compensation in Massachusetts. The SJC held that the Wage Act is not the exclusive remedy for recovery of unpaid wages, which opened the door for the employee to pursue his claim under established common-law principles
In the case, (Lipsitt v. Plaud), the employee brought claims for nonpayment of wages arising out of his employment relationship with his employer. The employer first hired the employee in 2004, after which the employer's business immediately began experiencing financial difficulties. As a result the employer failed to t pay the the employee ampunts alleged to be due under the parties' agreement. The employee's "Wage Act:" claims were barred by the applicable three-year statute of limitations, and ththe employer sought dismissal of the common law claims, (including contract, quantum meruit and promissory estoppel) based upon the employer's position that the Wage Act was the sole and exclusive remedy for wage violations.

The Superior Court dismissed the common law claims, having found "scant authority" on which to rely to suggest that common law claims could survive if based upon failure to pay wages.

On appeal however, the SJC held that that the common-law claims were viable and should not have been dismissed. In so holding, the Court stated"it is well established that 'an existing common law remedy is not to be taken away by statute unless by direct enactment or necessary implication'. The Court found neither to exist in review of the Wage Act history. The court reasoned that where the legislature did not explicitly limit common-law claims when enacting the Wage Act, the purpose of the Wage Act is not undermined by common-law claims and it is not inconsistent with public policy to allow common law claims. The court added, "[p]articularly where an employee's Wage Act claims are time barred, we see no good reason why, given the strong presumption against implied abrogation of the common law, that employee cannot seek to recover those unpaid wages by bringing a contract or quasi-contract claim."

If it was not clear from prior cases, the Lipsett case undoubtedly provides Massachusetts employees with another remedial tool for claims arising from non-payment of wages.


August 8, 2013

SJC Recognizes Associational Discrimination Claim

In a recent employment discrimination case, the Supreme Judicial Court recognized the plaintiff's claim of "associational discrimination" against an employer. Justice Margot Botsford wrote the opinion of the court, stating "a plaintiff, although not a member of a protected class himself or herself, is the victim of discriminatory animus directed toward a third person who is a member of the protected class and with whom the plaintiff associates."

The case, Flagg v. AliMed, Inc., involved a plaintiff bringing suit against his former employer, claiming he was terminated based on his spouse's handicap condition and the corresponding medical costs. The plaintiff's wife suffered from a serious medical condition and was covered under the employer's family health benefits. But, the defense argued that the handicap discrimination statute, G.L.c. 151B §4(16), "precludes the plaintiff from raising a claim of associational handicap discrimination because the handicapped person at issue is not the plaintiff--its employee--but the plaintiff's wife." Judge Botsford found this interpretation to be too narrow.

Judge Botsford asserted that the employer "terminated [the plaintiff's] employment premised on discriminatory animus directed toward his handicapped wife, that is, its desire to be free from its obligation to pay for the wife's costly medical treatment." Therefore, the court reasoned that the "hostility toward the handicapped condition of the employee's spouse, ... is treating the employee as if he were handicapped himself."

Consequently, the court found that these facts supported a valid discrimination claim based on the language of G.L.c. 151B §4(16), the handicap discrimination statute. The court stated that, the "plaintiff's complaint alleges that he was a qualified, adequately performing employee who was terminated... because his wife's total disability resulted in substantial medical expenses." Accordingly, the SJC overturned the dismissal of the case that occurred in the lower court and stated that associational discrimination is a valid claim for which relief can be granted in Massachusetts. The court did not limit the statute to only protect employees but, rather, extended the handicap discrimination claim to a family member - the plaintiff's spouse.

Finally, the court's ruling broadens an employee's protection against handicap discrimination as it considered the legislative intent of Massachusetts employment discrimination statutes and various other federal acts and interpretations. The court reasoned that protection from this type of discrimination is engrained in in the language and purpose of the statute.

Although, here, the court was careful to limit the decision to the facts of this case and the finding by the court that the "[plaintiff] was fired because of his association with his handicapped wife." This causal relationship will be an important consideration in future litigation involving associational discrimination.

June 11, 2013

Non-Solicitation Agreement Enforceable, Even If Clients Make First Contact

Non-solicitation agreements generally prevent employees from soliciting business from the employer's customers after the employee's employment has ended. In a recent decision from the Massachusetts federal district court, an ex-employee argued that he was not in violation of his non-solicitation agreement with his former employer if the former employer's clients were the parties to initiate the first contact with the ex-employee at his competing employer's company. Judge Woodlock rejected that argument.

In Corporate Technologies, Inc. v. Harnett, Harnett had worked as a salesman for Corporate Technologies, Inc. (CTI), an information technology solutions company, before leaving CTI to work for CTI's competitor, OnX USA, LLC (OnX). When Harnett first joined CTI, he signed a Non-Disclosure and Non-Solicitation Agreement in which he agreed to not divulge confidential information he learned while employed at CTI and to not solicit business from CTI's customers for one year following the termination of his employment with CTI. Specifically, Harnett was precluded from "directly or indirectly, alone or as a partner, officer, director, employee, independent contractor, [etc.] ..., solicit, divert or entice away existing customers or business of [CTI]."

On Harnett's first day at OnX, OnX sent an announcement about Harnett's new position to more than one hundred potential clients, which included Harnett's eight most active clients at CTI during the previous year. Four of those CTI clients responded to the announcement, and Harnett met with those clients to discuss and encourage their business with OnX. At least one of those four clients entered into an agreement with OnX for its services. Additionally, Harnett made efforts to secure a pricing discount arrangement with vendors in an effort to acquire the business of two more of those four clients.

CTI brought a lawsuit against Harnett and OnX, claiming that these actions were violations of Harnett's Non-Disclosure and Non-Solicitation Agreement, and sought a preliminary injunction to prevent Harnett from doing business with clients he had worked with at CTI. Harnett and OnX argued that, although Harnett had open business dealings with his former CTI clients, his interactions with those clients were not a violation of the agreement. They argued that, as long as the clients were the first to contact Harnett, the resulting business discussions could not constitute solicitation.

Judge Woodlock disagreed, labeling this argument as "an arbitrary distinction," and noting that Harnett's actions fell squarely within the agreement's description of prohibited activity. Judge Woodlock explained: "Since leaving CTI and joining OnX, [Harnett] has actively pursued business from these companies, seeking to convince them to do business with OnX. This necessarily involves solicitation - by encouraging the companies to purchase products and services through OnX - as well as enticement - by offering incentives to do so, such as better pricing, purportedly better products and services, and whatever other comparative advantage Harnett, as a salesman, would customarily use to attract clients to his new company. Neither the plain meaning of the word solicit, nor the plain meaning of the word entice requires some kind of first contact."

The court also pointed out that "Massachusetts courts do not draw a bright-line distinction between those actions following first contact by the client and those following first contact by the employee." It is true that a non-solicitation agreement will not prevent a company from receiving business initiated by the client, if there has been no direct or indirect participation in encouraging that business by the individual employee bound by the agreement. "However, this narrow carve-out from a non-solicitation agreement for receiving business does not allow a salesman to take active steps to persuade the client and actually solicit its business."

Here, as Judge Woodlock observed, Harnett and OnX together actively pursued Harnett's former clients at CSI, soliciting, encouraging, and attempting to persuade them to bring their business to OnX. This violated Harnett's agreement with CSI. Finding that CSI was likely to succeed on the merits of its claims against Harnett and OnX, and that CSI would suffer irreparable harm in the absence of injunctive relief, Judge Woodlock granted the injunction, enjoining Harnett from doing business with his former CSI clients for a period of one year, in accordance with the terms of his Non-Solicitation Agreement.

February 12, 2013

U.S. District Court Refuses to Enjoin Former Employees for Violation of Employment Agreements

The U.S. District Court for the District of Massachusetts recently denied a preliminary injunction to a pathology laboratory which had hoped to hold former employees to restrictions in their employment agreements.

Dr. Thomas Horn and Dr. Lisa Cohen owned and operated a dermatopathology laboratory called Metroplex Pathology Associates. In 2007, the two doctors sold the dermatopathology company for $80 million. As part of the sale, the two doctors agreed to several restrictive employment covenants, including a covenant not to compete directly with the buyers, a covenant to not disparage the buyers, and covenants to not solicit or hire former employees of the business. The doctors continued to work for the new buyers.

When the two doctors became disenchanted with how the new buyers were running the business, they left and began working for a pathology laboratory--MGPO Dermatopathology Associates--operated by a local hospital. MGPO offered the same specialized pathology laboratory services that the doctors' old dermatopathology company had, and was designed to compete directly with their old company. Once at MGPO, the doctors also hired three of their former employees to work with their new pathology company.

The buyers sued the two doctors for breach of their employment agreements. The buyers also sued MGPO for tortious interference, alleging that MGPO was using confidential information that Horn and Cohen covenanted to keep confidential. The buyers moved the U.S. District Court to enter a preliminary injunction enjoining the parties from using confidential information and competing with their company in violation of the doctors' employment agreements.

In denying the motion for a preliminary injunction, the court held that the buyers had failed to proffer sufficient evidence that the two doctors had violated any of the restrictive provisions in their employment contract. The buyers could not provide evidence of any occasions where the doctors had disclosed or used any confidential information from their previous business. Additionally, the buyers provided no evidence that the Horn and Cohen had disparaged their former company. Regarding MGPO, the court noted that the buyers again failed to show that the local hospital had intentionally interfered in any way with the buyer's contractual relationships with the physicians.

If you or a family member require legal advice on a business matter, please contact Parker | Scheer LLP for a free consultation with one of our experienced Business Law and Business Litigation Lawyers.

January 30, 2013

MCAD Awards $20K for Sexual Harassment and Unlawful Discharge

In a recent case, the Massachusetts Commission Against Discrimination (MCAD) awarded $20,000 to a female server who filed a complaint against her employer for sexual harassment and unlawful discharge.

Julie Coburn and Christopher Tilley were servers at Bella Notte, an upscale Massachusetts restaurant. Dmitri Vlasenko was a busboy.

During the more than six years Coburn worked at Bella Notte, Coburn alleged that Vlasenko called her "hot," made various sexual requests and sexual comments to her, and touched her body in an unwanted manner.

When Coburn complained to the restaurant owner, the owned seemed to dismiss the allegations as horseplay. When Coburn threatened to contact a lawyer if Vlasenko's behavior continued, the owner assured her that he would speak to Vlasenko and would terminate him if he made any more offensive comments.

About one month later, Vlasenko made additional sexual comments in Coburn's presence, causing her to become upset, begin to shake, cry, and be unable to perform her job the remainder of the evening. When she again complained to the restaurant owner, he responded that the sexual comment was not directed toward her, that he could not control what Vlasenko said while intoxicated, and that he could not fire Vlasenko before the busy Christmas season because he was a hard worker and would be difficult to replace. However, the owner assured Coburn that she would not have to work with Vlasenko again.

When Vlasenko was again present when Coburn arrived at work, Coburn again became physically and emotionally uncomfortable and complained. The owner fired Vlasenko. However, two years later, the owner rehired Vlasenko. When the owner refused to let Vlasenko go, Coburn quit and filed a complaint with the MCAD.

The MCAD hearing officer concluded that "the conduct of Vlasenko, including unwelcome touching and sexually offensive comments to Complainant that caused her to alter her route to avoid him at work, caused her to cry and to have difficulty performing her duties, such as carrying trays, created a hostile work environment for Complainant that interfered with her work performance. Since Vlasenko was not a supervisor, respondent, Bella Notte, is liable for his offensive conduct only if it knew or should have known of the harassment and failed to remedy the situation. ... In this case the credible evidence was that Respondent, through its owner ..., was aware of Vlasenko's conduct."

Additionally, the MCAD hearing officer found that Coburn was constructively discharged, "because the evidence proves that her working conditions were so intolerable that a reasonable person would have felt compelled to resign." M.C.A.D., et al. v. Cuca

If you or a family member require legal advice on a business matter, please contact Parker | Scheer LLP for a free consultation with one of our experienced Business Law and Business Litigation Lawyers.

May 3, 2012

Viability of Employee's Claim for Severance Pay Under Massachusetts Wage Act Uncertain

Generally, when an employee is entitled to severance payments under an employment contract, and the employer fails or refuses to make those payments following the employee's termination, the employee would have a claim against the employer for breach of the employment agreement.

Some Massachusetts employees have endeavored to take the employers' liability one step further - by coupling a claim for breach of the employment contract with a claim for violation of the Massachusetts Wage Act. Employers, on the other hand, have a significant interest in thwarting such endeavors. Who wins?

Under the Wage Act, any employee who is discharged from employment must be paid his or her earned wages (including holiday or vacation payments due) in full on the date of discharge. A violation of this provision subjects the employer to liability for treble damages, attorneys' fees, and litigation costs. A claim under the Wage Act, then, is attractive to employees who would otherwise be limited to only single damages in a successful breach of contract claim.

One Massachusetts superior court has held that an employer's failure to make severance payments may constitute a violation of the Wage Act, and allowed the claim. Recently, however, a different Massachusetts superior court disagreed, ruling that the Wage Act provides no protection for an employee's right to severance pay under an employment agreement, and dismissed that plaintiff-employee's Wage Act claim.

These contrasting results stem from the contested issue as to whether severance pay owed to an employee pursuant to an employment contract is part of the "earned wages" due to the employee on the date of discharge under the Wage Act.

Without a definitive decision from a higher court on this issue, confusion grows, leaving employers and employees only to guess at the future viability of a claim under the Wage Act for severance payments.