U.S. Supreme Court Delays Hearing on Cases that may Decide whether Class Action Rights can be Waived

The U.S. Supreme Court may have accepted a group of cases that will determine whether companies can require their workers to waive class action rights, but that doesn’t mean it’ll be deciding this important question anytime soon. After accepting the cases for review in January, the Court announced that it will not hold oral arguments this term. The cases will be argued in Fall 2017 and decided some time thereafter, perhaps well into 2018.

The significance of this is patent. First, it suggests that the Court may be divided on the class action waiver question and requires a deciding voter. The Court now has only 8 justices in the wake of the Republicans’ 2016 refusal to consider President Obama’s nominee to the bench. They won’t do the same with their own party’s nominee(s), and the Court will surely have 9 members soon. Second, the delay means that uncertainty over class action waivers in employment agreements will remain for some time. This will likely encourage litigation in lower courts over the issue and may cause decisions to be delayed.

It is common today for companies to have their workers sign agreements that include arbitration provisions requiring lawsuits to be pursued individually. This is sometimes impractical due to the small size of a claim, and an employee or independent contractor therefore may seek to bring suit on behalf of others. The Supreme Court has previously found that mandatory arbitration agreements are generally enforceable. It’s now being asked to resolve lower court disagreement about whether federal law allows companies to avoid class action lawsuits through arbitration clauses.

EEOC Working on New Anti-Harassment Guidance

The Equal Employment Opportunity Commission (EEOC) is currently working on new guidance to help analyze and decide claims involving harassment in the workplace. The new rules promise to bolster enforcement against harassers as it follows a task force finding that the issue remains a serious problem in the American workplace. The new guidance will explain the law as interpreted by courts and serve as a reference for EEOC enforcement staff and other federal officials. It is likely to be used by courts and litigants as well.

The guidance will likely deal with harassment based on race, color, religion, sex, national origin, disability, age and genetic information. There is no current timetable for its release. The EEOC recently extended the time period for comments on it March 21, 2017. A copy of the proposal can be found at www.regulations.gov/document?D=EEOC-2016-0009-0001.

Minimum Wage Now at $11 Per Hour

Effective January 1, 2017, the minimum wage for Massachusetts workers rose from $10 to $11 per hour. The new rate applies to almost all employees. For employees who regularly receive tips as part of their pay, the minimum rate is $3.75/hour. Those workers’ total compensation with tips included must be at least $11/hour. All categories of workers remain eligible for overtime pay at 1.5 times their normal rates of pay for hours worked above 40 in a workweek. Some workers are exempt from overtime requirements based on job classifications and administrative requirements.

SJC Holds that Second Element of Independent Contractor Test is Preempted by Federal Law

The Massachusetts Supreme Judicial Court today weighed in on the hot topic whether and to what extent the state’s Independent Contractor Statute is exempted as applied to courier drivers and the companies they work for. Like a federal court that ruled on the same question last year, the SJC concluded that the second of the law’s three elements is preempted by the Federal Aviation Administration Authorization Act (FAAAA).

Legal battle over the applicability of Mass. Gen. L. ch. 149, §148B has raged for years, with courier companies seeking to avoid application of what’s referred to as Prong B of the statute – the requirement that all individuals who perform services within a company’s regular course of business be classified as employees. The companies rely on the FAAAA’s restriction against state laws that impact the prices, routes or services of covered businesses. Because Prong B is so broad, they contend, it effectively bars all uses of contractors to make deliveries. This, in turn, forces courier companies to eliminate services, increase costs, alter routes, and make other business changes.

Though two state judges had previously ruled that the entire Independent Contractor Statute was preempted by the FAAAA, the SJC rejected this approach. The law’s first and third elements thus remain intact. In order to avoid classifying their drivers as employees, courier companies must demonstrate that they do not control the performance of their work and that the drivers are customarily engaged in an independent business. There are currently several active cases on this topic, including two class action suits being handled by my office.

Legislators Work to Revive Noncompetition Law

Recent reports suggest that Massachusetts legislators are continuing to work on a compromise noncompetition law that will garner enough support to become law. Earlier this year, both the House and Senate passed versions of a proposed statute that would have imposed rules on noncompetition agreements, which are currently governed by judges without direction from a formal statute. Because the House and Senate could not reach a compromise over differences in the bills each passed, the proposed statute died with the end of the legislative session on July 31, 2016.

Indications are that, this and other failures notwithstanding, Massachusetts will soon enact a law to govern the uses of noncompetition agreements. Among the provisions now being discussed are ones that would require advance notice to employees, limit the duration and applicability of restrictive covenants, and require employers to continue to pay some portion of a former employee’s salary as a condition to enforcement. If no deal is reached informally this month, legislation will almost certainly be reintroduced when the House and Senate reconvene in January 2017. Any bill they pass must, of course, be signed by the governor.

New Overtime Rule Blocked by Federal Judge

In a surprising decision, a judge in the U.S. District Court for Texas not only granted an injunction to 21 plaintiff states that sued to block the U.S. Department of Labor’s overtime updates set to take effect December 1, 2016, he applied his ruling to all 50 states. The result is that, at least for now, employers in Massachusetts need not update pay scales. As long as executive, administrative or professional employees make at least $455/week — the minimum pay requirement now in effect — they will remain exempt from overtime pay requirements.

Judge Amos Mazzant reasoned that the Department of Labor (DOL) could not update the minimum salaries for executives, et. al., because Congress clearly intended the exemption to turn on a duties and not a salary test. Each of the three affected categories or workers carries with it specific criteria for determining applicability, commonly referred to as duties tests. While Judge Mazzant called the Congressional intent in this regard to be so clear that it blocks the DOL from increasing the minimum salary requirement, he did not address the question why or how a DOL regulation has, apparently properly, for years included a minimum salary component for executive, administrative and professional worker overtime exemptions. Indeed, the new DOL rule that was to take effect December 1 seeks to update the minimum salary from $455 to $913 weekly and to implement an automatic pay adjustment mechanism going forward. The court’s November 21, 2016 decision in State of Nevada v. U.S. Department of Labor leaves the old threshold in place.

Aggressive Noncompetition Suit in Massachusetts

Our client was a salesperson who was forced to defend herself against an aggressive noncompetition suit brought by her former employer, from which she resigned after many years due to work rule changes that made it impossible for her to perform her job effectively. During the course of her work, our client signed several iterations of the company’s restrictive covenants. Though the most recent was about six years old and numerous job changes had occurred since it was signed, the employer filed a suit to enforce the form agreement. It accused our client not only of soliciting its customers but of stealing its confidential information. The company sought an emergency injunction in the superior court to block our client from performing work for her new employer.

Result:  We persuaded the court to reject the injunction, and the plaintiff quickly dismissed its lawsuit voluntarily. We worked closely with counsel for our client’s new employer to present a clear and concise factual record demonstrating that she had neither taken confidential information nor interfered with her former employer’s business contracts. Advance planning was critical to our defense – we had our client turn over to us for safe keeping cell phones and other electronic devices to ensure the plaintiff could not effectively argue she retained copies of customer data on them.

Legislator will Try Again to Impose Liability on Companies for Wage Violations by Entities they Contract With

After failing to pass what’s referred to as a wage theft bill in the recently ended legislative session, the bill’s sponsor is not giving up. According to published reports, Sen. Sal DiDomenico will reintroduce the controversial measure when legislators go back into session in January.

The proposal would make employers that contract with third parties to have labor performed or services provided to them guarantors of the payment of wages earned by the employees of those third parties. It appears to make such employers, in effect, co-employers of the third party’s employees. If, then, the third party doesn’t pay its workers, the company that received the benefit of the workers’ services would be liable. The proposal does not make an exception for companies that pay whatever is due under their third-party contracts. The effect could be, it seems, that company A pays for labor provided to it by company B and is nonetheless liable directly to the company B’s employees because it failed to remit wages earned by them. This could mean company A pays the same penalties — triple damages and legal fees — as it would if it failed to pay its own employees for work performed.

The statute is apparently aimed at upending a practice under which large companies hire third parties to be employers of workers who actually perform services for them directly. Whether it will ever becomes law remains to be seen.

Good Faith Interactive Process is Key to Properly Handling Accommodation Issues

Most employers know (though some, incredibly, still do not) that they are obligated by law to reasonably accommodate disabled employees. After that, there are several areas of knowledge breakdown that form a theme for cases in litigation. Among them is a rule that is commonly overlooked: the requirement that employers engage in good faith interactions with disabled employees to find reasonable accommodations that will allow them to perform their jobs. Doing so is critical to effectively preventing or defending against handicap discrimination lawsuits.

After acknowledging an employee’s handicap, a process that is not always as simple as it may seem, employers on notice that an accommodation is needed have the duty to figure out what can be done. Commonly, they treat it as a one way street along which they alone consider potential work changes and decide whether they can be implemented. This approach can work as long a reasonable accommodation is identified, accepted by the employee involved, and implemented. When this  doesn’t happen for one reason or another, employers need to be sure they turn to the employee for and engage in a good faith interaction aimed at exploring accommodation options and finding one that will work. This normally involves a review of medical information, meeting with the employee, considering which job duties are essential, and exploring all reasonable options for helping the employee perform them. Employers should be careful that, while working with employees in this area, they are not counter-acting that effort by disciplining or mistreating them actions that somehow relate to the disability in question.

Not so Fast, Department of Labor — Here come the Republicans (Again)

In a move that once again smacks of partisan politics, Texas and Nevada are leading a 21-state challenge to the U.S. Department of Labor’s recent update to overtime regulations for white collar workers. Not surprisingly, 20 are led by Republican governors. The suit claims that President Obama’s Department of Labor exceeded its authority in enacting the regulatory updates, which are scheduled to take effect December 1, 2016. Its focus appears to be the procedure employed to make the changes, though Republican leaders are plainly more concerned with the new rule’s substance.

The Department announced earlier this year that, after lengthy study that included the review of almost 300,000 comments to the proposed regulatory updates, the following changes would take effect later this year:

  1. An increase in the minimum salary that must be paid to white collar workers who otherwise are exempt from overtime pay requirements, from $455/week to $913/week ($47,476 per year). Workers who make less than this amount must receive overtime, regardless of other factors;
  2. An increase in the ‘highly paid’ employee exemption for white collar workers from $100,000/year to $134,004/year. Workers whose earnings exceed this amount will be exempt from overtime pay; and
  3. A mechanism for automatically adjusting the minimum and highly paid thresholds to keep up with inflation.

Opponents of the changes are concerned with their effect on business; they predict dire consequences if the rules are implemented. Joining the 21 states in suing to block the new regulations is a coalition of 50 businesses led by the U.S. Chamber of Commerce. Not surprisingly, both suits were filed in Texas for the obvious reason that the litigants hope to again find a sympathetic ear in a court that has previously shown its predilection against President Obama’s initiatives.