Archives for February 2014

SJC to Decide Key Cost-Shifting Questions under the Massachusetts Wage Act

Expressing uncertainty whether a company’s shifting of business expenses to its employees is actionable under the Wage Act, a federal court judge is asking the Massachusetts Supreme Judicial Court (SJC) to answer three questions:

  1. Does the independent contractor/employee test under the Act determine a worker’s status for workers compensation insurance purposes? The SJC has already held that employers cannot shift this cost to its employees, but the question what constitutes an “employee” for workers compensation purposes is unsettled.
  2. Can an employer contractually bind its employees to pay for equipment such as uniforms and package scanners that are necessary for the performance of their job duties? Indications are that the answer to this question is likely “no,” but the federal court sees tension between two prior Massachusetts cases.
  3. Does the Wage Act ban an agreement under which employees pay a third party vendor for work related vehicle expenses such as maintenance and operation? There is little question that reimbursement for work-related miles must be reimbursed in most or all cases, but there appears to be no statement of law that addresses this particular question.

The SJC’s answers to these questions, which may issue this Spring, are likely to have a significant impact on the employer/employee relationship in Massachusetts. The Wage Act provides for automatic triple damages and the imposition of legal fees against offending employers, so the stakes are high. Some cases now plainly support the notion that the foisting of business expenses such as insurance and automobile costs violates the Act. Under the federal court’s readings of Massachusetts case law, however, answers to the three questions are unclear. Employment attorneys – along with any employer who may now be shifting expenses like those identified above to their workers – will be watching closely for the SJC’s reply to the federal court.

Misuse of Trade Secrets by Independent Contractors Tougher to Deal With

The pitfalls of classifying workers as independent contractors should be evident to employers at this point. Those who did not previously recognize this important point should consider a recent superior court decision indicating that it may be much harder to protect important trade information from improper use by independent contractors than by employees.

That’s at least one interpretation of the message delivered by the judgment against a company that sued its former contractor for stealing trade secrets. Despite concluding that the company properly identified stolen material that, if used by others in the marketplace, could damage its interests, a superior court judge granted summary judgment to the former contractor. In doing so, the court apparently discounted employee testimony to the effect that ‘all knew’ customer lists were confidential and should not be removed from the company’s offices. More important, in the court’s view, was the company’s failure to require the contractor to sign a confidentiality agreement before trade secrets were disclosed to him.

The decision does not seem to suggest that contractors can never be responsible for misusing trade secrets. In fact, Massachusetts law provides remedies against doing so under some circumstances, and a strong policy regarding confidential information and better communication with the contractor might have led to a different result in C.R.T.R. v. Lao. Still, protecting secrets against misuse by independent contractors is tougher than protecting them against employees. As all should know by now, workers should always be treated as employees if there exists any doubt as to their status under the state’s independent contractor law. For the few who may truly be contractors, it’s imperative to ensure a written confidentiality agreement is signed.

Noncompetition Agreement Case in Massachusetts

Our client was a former sales representative who resigned her job to work for a competitor in a neighboring state. Though she had signed a noncompetition agreement some years earlier, the client did not believe it was relevant to her plans because she did not plan to solicit the same customers and possessed no information that might be unfairly used in the marketplace. She therefore accepted her new position and provided details about it to her soon-to-be former employer. To her surprise, the client’s resignation was met with immediate threats and, within days, a lawsuit that sought to block her from working in her industry for a year. Her new employer was also a defendant in the lawsuit. Two hearings were held regarding the former company’s request for an injunction to keep the new employer from hiring our client.

Result: We argued that the noncompetition agreement could not be used to prevent our client from working and persuaded the court to deny the injunction request. Upon issuance of the court’s decision, an agreement was reached among all parties to dismiss the lawsuit. Our client’s start of work was delayed, but she soon began her new job as a sales person.