Massachusetts courts have been busy in the employment arena lately. In Summer 2009, they issued at least three substantive decisions that may force employers to take quick action on policy manuals, arbitration agreements and wage payment policies.
Though none of the decisions change the law outright, each is employee friendly and stretches employer duties to new lengths. The cases make it easer for workers to use employment manuals as binding contracts, harder for employers to force arbitration in discrimination cases, and more likely that employees will win big damage awards plus legal fees in disputed wage cases.
Employment Manuals In a June 2009 opinion, the district court’s appellate decision affirmed a $42,000 jury verdict for a worker who claimed his company’s employment manual was breached when he was fired. The court relied heavily on the worker’s testimony that he regarded the manual as binding and honored a non-compete clause contained within it. The court also cited to the employer’s request that the employee acknowledge receiving it.
The case is a broad warning that employers must take care what they put in their manuals and how they use them at work. It seems to expand employee rights to sue in contract based on company policies, though it should be noted that the appellate division from which it issued governs only cases in the district court, which generally cannot handle matters where damages exceed $25,000. The manual here had the usual contractual disclaimer, which proved meaningless in the context of the employer’s apparent breach of its own rules and insistence that its workers follow them. It’s always good policy for employers to honor the terms of their employment manuals regardless whether they are legally binding as a matter of law.
Arbitration In July 2009, the state’s highest court ruled that an arbitration agreement won’t bind workers in discrimination cases unless it’s specific. It must clearly reference a waiver of worker rights to sue at the MCAD or in superior court.
The decision was surprising because arbitration clauses are broadly enforceable and the one at issue seemed to cover all possible employment disputes. The court, however, found that special attention is required for sexual harassment and other discrimination matters, whose normal remedies cannot be so easily waived.
The use of arbitration clauses is common among employers. All should now review their agreements to be sure they adequately address claims for sexual harassment and other types of discrimination. Failure to do so may lead to more jury trials and more cases being heard at the Massachusetts Commission Against Discrimination, fates most employers would prefer to avoid. In addition to the potential risk of adverse judgments in either venue, both courts and the MCAD are time consuming and expensive.
Wage Payment In June 2009, a superior court read the wage act broadly, leading her to categorize what seemed to be an exempt referral fee as a commission that must be paid under the Wage Act. The result was a $519,000 judgment based on an oral agreement. This case continues what appears to be a general trend in wage cases, which are among the most common in the employment arena due to high potential damages and the guarantee of reimbursed legal fees for winning employees.
The warning here is clear: do not assume that using terms like bonus or referral fee circumvent the Wage Act. How payment is earned is what matters, since a commission by any other name is still a commission. This has long been the rule in Massachusetts, much to the surprise of some employers who have litigated a contrary position. Courts will look to how money is earned, not what an employer calls the pay. If a worker gets paid, say, as a percentage of a sale, the money is probably a commission and must be promptly paid under the Wage Act. Company policies that say, for example, the worker must be employed on a date certain to “earn” the funds may not be helpful. Employers cannot defer earned wages or commissions under the Wage Act. Because any violation of the law means automatic triple damages and legal fees for the employee, employers must be very careful in this area.