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.

Employers must Investigate Sexual Harassment Complaints to Reduce Risk of Punitive Damages

When in doubt, investigate – carefully and thoroughly. That’s the message again delivered to employers by a recent decision of Massachusetts’ highest court. When an employee complains about sexual mistreatment or other discrimination, it’s critical that he/she be taken seriously and that appropriate remedies be implemented to address any allegation that is borne out by a fair investigation.

Lexus of Watertown learned this lesson the hard way recently. After its former employee filed suit for sexual harassment, among other things, a jury awarded her $40,000 for emotional distress and another $500,000 in punitive damages. On appeal, the Supreme Judicial Court rejected Lexus’s argument that it did not act badly enough to justify a punitive damages award, which can be used to punish employers only in cases of outrageous or egregious misconduct.  Lexus, the court found, exposed itself to a punitive damages award because it did not adequately investigate its employee’s complaints after it learned about them. Those complaints were later proved true at trial, at least to some degree.

“Where the employer is aware of a sexually hostile or offensive work environment, the potential for punitive damages against the enterprise is triggered and an inquiry into the response by the employer is warranted….The failure to do so opens the door to the potential imposition of punitive damages if the jury conclude that the employer’s failure was sufficiently outrageous and egregious,” the SJC found.

Although Lexus of Watertown in fact conducted an investigation, the court found that it was inadequate. It was conducted by a supervisor who doubted the complainant from the outset, did not include interviews of all relevant personnel, and did not involve the complaining employee. Though the investigation did not corroborate any of the complaints, a former manager had previously circulated a memo regarding the harasser’s inappropriate behavior. At trial, many of the complaints were corroborated by testimony. Other employers should learn from this case. All complaints should be investigated fairly by an impartial person. Counsel should either guide the investigation or conduct it.

Court Rejects Another Expansion of At-Will Employment Rule

Yet another attempt to expand the public policy exception to the Massachusetts at-will employment rule has fallen by the wayside. This time, the court rejected a former employee’s challenge to his firing based on a concept termed, “honest, open and accountable government.”

“The question what exactly is required by the policy of open, honest and accountable government… is both difficult to define and open to debate,” the Appeals Court wrote on August 4, 2016. “The Supreme Judicial Court…has made clear that the public policy exception must be construed narrowly in order to avoid effectively imposing a just cause requirement for termination of at will employees….”

The at-will employment rule provides that either employees or their employers are free to end their working relationship at any time, for any reason, and either with or without cause. This means that employees generally have no recourse when fired except as may be provided by particular laws. The Massachusetts anti-discrimination law and anti-retaliation language in the state’s Wage Act are examples. Absent those legal protections, employees can challenge their firings only if they can identify an exception to the at-will rule.  Exceptions are few and far between.

In Tramontozzi v. Mass. Dept. of Transportation, a former employee of the Massachusetts Transportation Department claimed he was unfairly made a scapegoat after a light fixture fell from the Central Artery Tunnel in Boston. He accused the Department of unfairly blaming him for alleged delayed disclosure of the incident in order to provide cover for higher authorities. While the Appeals Court agreed that government should be open and honest, it declined to create a public policy exception to the at-will rule on this basis.

New Pay Equity Law Means Employers Must Prevent Gender-Based Wage Disparities

In the wake of passage of the new pay equity law in Massachusetts, employers again have work to do. To prevent getting caught up in what is certain to be another fertile area of employment litigation, both individually and on class-wide bases, employers must review current pay structures, implement new policies, and train anyone involved in the hiring process. Fortunately, they’ll have plenty of time to do so and those that comply may have an absolute defense to liability under the equal pay statute.

The law was passed at the end of the 2016 legislative session and signed into law by Gov. Baker. It replaces an existing law that, though it nominally banned pay discrimination based on sex, was a virtual nullity due to evidentiary hurdles set up by the Supreme Judicial Court. Under the new law, an employer that pays employees less based on gender will face liability for double the amount of any underpayments, plus plaintiffs’ legal fees and costs. Complaining employees of either gender will succeed if they prove that the work in question is comparable – that is, it “requires substantially similar skill, effort and responsibility and is performed under similar working conditions.” Job titles are irrelevant. Where workers of different genders perform jobs that satisfy these criteria and one is paid less than the other, employers will be exposed to lawsuits.

Fortunately for employers, the statute won’t take effect until July 1, 2018. As additional protection, the legislature included language to protect employers that perform self-evaluations of their pay practices and make reasonable progress toward eliminating any they may identify. The Massachusetts Attorney General may issue regulations to help guide self-evaluations, but employers are free to devise their own processes to do so. Because the new law bars employers from asking applicants about salary histories prior to a job offer, all should review job applications to remove any questions on the subject and train managers not to inquire about salaries during job interviews. Policies that may bar employees from discussing their salaries must also be amended as they will become illegal under the equal pay law.

MA Legislature Again Fails to Pass Noncompetition Law

Though it was closer this time, there’s no solace for those hoping to finally see noncompetition legislation in Massachusetts. Despite passing two bills that would have brought clear rules to this area of law, hopes were dashed this week when the House and Senate were unable to bridge differences in their versions of the proposed law. Because they could not reach a compromise by July 31, the legislation will need to be introduced anew and start the legal process over again in 2017.

The legislative failure leaves noncompetition law a matter of judicial discretion. Under current rules, employers can enforce reasonable restrictive covenants that are part of valid written agreements. They can only do so, however, if they have legitimate business interests to protect. The most common enforcement strategy is to commence litigation seeking an injunction that bars former employees from violating contractual terms. The fact-specific nature of such litigation means that suits are normally argued in court and outcomes are uncertain. The result, of course, is often expensive litigation.

The House and Senate bills sought to bring clarity to noncompetition issues. For details on their specific terms, see the July 8 and July 20 posts on this page.

Senate Action on Noncompetition Bill May Lead to its Failure in MA Legislature

The Massachusetts Senate recently followed the lead of the House of Representatives by passing a comprehensive bill to regulate noncompetition agreements. While this seems to be progress toward a final re-writing of laws that govern these often troublesome employment agreements, the Senate version of the bill varies significantly from the one unanimously passed last month by the House. That means, of course, that the two legislative bodies must huddle together and work out their differences. If they can do so and garner approvals of any agreed form in both the Senate and House, a noncompetition bill would be presented to the Governor for his signature. Because the current session ends July 31, the Senate and House need to move quickly.

Massachusetts House Passes Noncompetition Bill with Substantial Limits — Unanimously

The Massachusetts House of Representatives recently passed a bill that imposes rules for noncompetition agreements. While the bill has yet to become law – it is now being considered by the Senate, which will have to pass it before it can become law, an event that will also require the governor’s signature or, in the alternative, further legislative action – it certainly represents progress on an issue that has long been considered in Massachusetts.

In what may be an indicator of the ultimate passage of the bill into law, it passed unanimously, 150-0. Rules on noncompetition agreements imposed by the bill include the following:

  1. All agreements must be written and signed by employer and employee. Employers must provide them to prospective employees at least 10 days before work begins, and noncompetition forms must inform employees of their right to consult counsel before signing;
  2. Noncompetition agreements for existing employees must meet the same criteria. In addition, employees must receive some form of consideration – money or other material benefit – in addition to continuing employment;
  3. Noncompetition agreements must be narrowly tailored to protect an employer’s trade secrets, confidential information, and/or customer goodwill – that is, a business’s positive relationships with its customers or its positive reputation;
  4. The maximum restricted period is 12 months in most cases, and geographical reach must be reasonable; and
  5. Compensation to affected employees must be provided in the form of pay equal to at least half their highest annual base salary during the two years that precedes employment termination, unless employer and employee agree to compensation in some other form.

The bill would also bar enforcement of noncompetition agreements against employees who are not exempt from federal overtime pay requirements; those under 18; and employees fired without cause or laid off. It includes a provision for enactment of the Uniform Trade Practices Act.

EEOC Urges Employers to Improve Workplace Anti-Harassment Training

Calling workplace harassment an “all too persistent problem,” two commissioners from the Equal Employment Opportunity Commission (EEOC) are calling on employers to rework and improve their anti-harassment training programs. The commissioners headed a task force that evaluated sexual harassment in the work place. The EEOC’s chairperson seems to agree that more and better training is required. She said, “I thank Commissioners Feldbum and Lipnic and the members of the Select Task Force for their work to combat the persistent problem of workplace harassment. Preventing harassment from occurring in the first place is far preferable to remedying its consequences.”

The EEOC was created by the Civil Rights Act of 1964. It is charged with addressing workplace discrimination issues. It is the federal equivalent of the Massachusetts Commission Against Discrimination (MCAD), which has the same mission. In Massachusetts, training employees on sex harassment issues is not mandatory but is strongly encouraged. Whether and to what extent employers accused of sex harassment have done so is often an important issue at MCAD hearings.

Employers will be well-served to examine their workforces and consider how best to train their employees. Anti-harassment training should be tailored to the needs of individual businesses. Its goal should be to help employees understand what sexual harassment is, how it can damage individuals and companies, and how to deal with it as it arises. No anti-harassment program can be effective unless employees believe their employers are serious about it and are consequently unafraid to use complaint and other systems without fear of retaliation.

U.S. Dept. of Labor Issues New Rules for Overtime Pay

Effective December 1, 2016, new rules will be in effect to cover overtime pay requirements. The long-anticipated changes were the subject of numerous comments after they were proposed in 2015. They focus on updating the salary thresholds for overtime pay purposes and include the following:

  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 these amounts 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 these amounts will be exempt from overtime pay; and
  3. A mechanism for automatically adjusting the minimum and highly paid thresholds to keep up with inflation.

The Department expects the changes to cause 4 million new workers to qualify for overtime pay. The changes have been in the works since 2014, when President Obama instructed that the regulations be updated. After publishing proposed rules, the Department received nearly 300,000 comments.

 

Massachusetts Legislators Debate Bill to Provide 12 Weeks of Paid Leave for Employees

The Massachusetts state legislature is considering a bill that would not only provide family leave for employees who now are not entitled to it, but would set up a fund to pay at least part of their lost wages.

Titled “An Act establishing a family and medical leave and temporary disability leave insurance program,” the bill has numerous sponsors in both the House and Senate.  It is currently being considered by the Labor and Workforce Development Committee and is due to be reported out on May 16. Citing the large number of Massachusetts employees who are not entitled to leave provided by the Family and Medical Leave Act (FMLA) due to company size – and decrying the fact that FMLA leave is unpaid and thus difficult for many employees to use in any event – the bill’s sponsors contend that the new law is needed to protect employees who face serious personal or family emergencies.  Among its provisions as currently formulated are the following:

  1. 12 weeks of job protected leave for serious personal /family illness or to care for a newborn, adopted or foster child;
  2. Partial wage replacement in the form of temporary disability coverage that will be funded by employer contributions;
  3. Continued coverage by employers for health care on terms in effect for employees before they begin a leave; and
  4. A one-week waiting period in cases of personal illness and an exemption from funding obligations for employers who provide paid leave benefits, both of which are aimed at controlling costs.

Eligibility for the Act’s benefits would begin after an employee works 1,250 hours for his/her employer. Penalizing employees who take leave would be prohibited. If enacted, the new law will be administered by the Massachusetts Commission Against Discrimination (MCAD). Violators will be subject to the same penalties as apply in discrimination cases generally, including payment of an affected employee’s lost wages, emotional distress and legal fees.