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.

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.

Moving Jobs in Face of Noncompetition Agreements takes Advance Planning

Moving jobs can be stressful, even when motivated by promises of better pay, a chance to move up the business ladder, or a more pleasant work experience. When a new job is in the same industry as the old, as is frequently the case, the stress that naturally comes with new job challenges can be compounded by a former employer’s concerns over uses of its business information. In some cases, those concerns are documented by writings that include substantial penalties for disclosing or misusing confidential data. Employees commonly sign such agreements without giving them much thought, until, that is, it’s time to move jobs. It’s at that point that many discover they may be restricted from competing at all with their former employers.

Navigating issues like these takes some planning. Here are a few steps employees should consider taking before signing on with a new company or resigning from a current one.

  1. Make sure you are familiar with all the documents you signed with your current company. If you need to, ask to see the contents of your personnel file. It is not uncommon for employees to discover restrictive agreements that they don’t recall signing. If you don’t understand your agreement, seek legal help.
  2. Consider what access you’ve had to internal documents and how, if at all, any information that may be contained in them could be used with a new employer. The answer to this question normally turns on the nature of an employee’s job.
  3. Be sure your prospective new employer is aware of any restrictive covenants you may have signed with your current one. Most now require new employees to affirm that they have no restrictions that affect performance in a new job. Failing to disclose relevant information can lead to big trouble down the road.
  4. Don’t keep copies of any of your current employer’s documents, whether in paper or electronic form, regardless of content. It is best to err on the side or returning documents that are not confidential than to keep any that even arguably are. Be sure that key materials or customer information is not stored on a personal phone or laptop. If it is, consider the potential for future disputes.
  5. If you signed a noncompetition or non-solicitation agreement, carefully coordinate your conduct in a new job with your prospective employer. Consider the reaction your current company will have to your job move and how you can minimize the risks that may be associated with that reaction. Carefully plan and execute your departure from your current employer.

Good Wage and Hour Records are Important to Business Success

Starting a business brings many challenges. Among them is the often overlooked need to create and retain records of employee hours and pay. Many small companies have found out the hard way that failing to do so can lead to severe penalties.

In Massachusetts, employers need to maintain records that include employee names, addresses and occupations, amounts paid each week, and hours worked daily and weekly. All of this is open to inspection by state and federal wage authorities, and fines can be levied for a failure to properly keep records. Often even worse than this are wage-related damages an employer can face if records are not available to defend against claims brought by former employees or the government. Because employers are obligated to keep pay records, those who don’t do so face the prospect of having a court accept as true whatever claims employees may make about the number of hours they worked and the amount of pay they received for that work. That can lead to the triple damage and legal fee awards against them.

The Massachusetts Attorney General aggressively pursues claims brought by former employees. The AG can audit records for individual employees or entire staffs, with major financial implications. In one recent case, an employer paid $300,000 in back wages and penalties as the result of an AG audit. Employers faced with these sorts of inquiries normally have little flexibility when transgressions of the law are identified. They either settle with the government, normally at a substantial cost, or face enforcement action that can lead to far higher penalties. In some cases, employees bring class action claims that can be financially devastating if not settled quickly.

Massachusetts Sick Leave Law Takes Effect Today

Effective today, July 1, 2015, all Massachusetts employees enjoy guaranteed sick leave benefits. The law that was approved by voter referendum last November mandates that every employee receive one hour of accrued sick leave for every 30 hours of work. The leave can be used for a variety of purposes — including worker or family illness, medical appointments, and dealing with domestic violence — and must be paid by employers with 11 workers or more. It is enforced by the Massachusetts Attorney General, which recently issued final regulations, a mandatory workplace poster, and a draft policy for employers to implement. Those materials can be found on the AG’s website at www.mass.gov.

Employers who have not implemented written policies that comply with the statute should do so promptly. The law was incorporated as a new section of the Massachusetts Wage Act, which provides substantial penalties for violations. It is illegal to refuse to provide sick leave, to require documentation under most circumstances, or to punish workers for using it. Employees can use leave in increments as small as one hour at a time. Though they are prohibited from abusing leave, employers should move cautiously before disciplining employees for improper sick leave usage.

 

States Highest Court Rules that Real Estate Agents can be Treated as Contractors, but Leaves Substantial Questions Unresolved

In a major decision that impacts a huge number of Massachusetts businesses, the state’s highest court today affirmed the concept that real estate salespeople may properly be classified as independent contractors and not employees. In doing so, the Supreme Judicial Court concluded that the Massachusetts Independent Contractor Statute, which generally governs classification issues and makes it extremely difficult for companies to properly treat workers as contractors, does not apply to real estate agents. Its reasoning relies on the existence of a distinct statutory scheme that governs real estate sales work and expressly provides that salespeople may be treated as either employees or contractors. Because the court saw major conflicts between the two sets of laws, it held that the more specific one dealing with the real estate industry governs.

The decision does not, however, resolve the ultimate issue whether real estate agents at work today are employees or contractors. Noting a lack of clarity on the question how to determine this question, the SJC left it for another day. It held simply that real estate sales people are not subject to the framework spelled out by the Independent Contractor Statute, Mass. Gen. L. ch. 149, §148B, a framework that would render every salesperson an employee. The SJC expressly permitted the plaintiffs to continue to pursue their misclassification claims, though without relying on Chapter 149. The court invited the Massachusetts Legislature to “clarify how a real estate salesperson may gain employee status under the real estate licensing statute.” It is patent that this cannot be done by simple declaration in a written contract.

The industry should stay tuned. The case is Monell v. Boston Pads, LLC, decided on June 3, 2015.

Searches for Reasonable Accommodations Require Good Faith from Employer and Employee Alike

When it comes to reasonably accommodating employees with disabilities, the process of determining what can be done is a two-way street, at least at the federal level. So says a recent decision from the U.S. Court of Appeals that determined the question whether Kohl’s department store met its obligation to engage in the legally required interactive process aimed at determining what accommodations it could make for its diabetic employee. Over the dissent of one of its members, the Appeals Court awarded summary judgment to Kohl’s because, it found, the employee acted unreasonably.

The case pitted a woman with Type I diabetes against the large department store, which altered its scheduling to require irregular shifts for some of its employees. The schedule was a problem for the employee, Pamela Manning, who asked for an accommodation in the form of a regular work schedule. When Kohl’s delivered a message through its store manager that it could not provide one, the employee abruptly quit her job, citing the detriments to her health of an erratic work schedule, and stormed out of the office. She rebuffed her manager’s plea that she reconsider, delivered both at the office that day and in a conversation by telephone 10 days later, and filed suit. Finding against Ms. Manning, the court wrote, “We must emphasize that it is imperative that both the employer and the employee have a duty to engage in good faith….If an employer engages in an interactive process with the employee, in good faith…but the employee fails to cooperate in the process, then the employer cannot be held liable under the ADA for a failure to provide reasonable accommodations….”

A dissenting justice found Kohl’s negotiating tactics were unfair to its employee and were not conducted in good faith for discrimination law purposes. “A jury could certainly find that Kohl’s did not make reasonable efforts to provide accommodations based on the information it possessed,” the dissent wrote. Harshly criticizing the reasoning of his fellow jurists, the dissent opined that Ms. Manning’s case should have been decided by a jury. The case is EEOC v. Kohl’s Department Stores, Inc.. It was decided on December 19, 2014.

New Minimum Wage Takes Effect

The first phase of Massachusetts’ new state minimum wage law is now in effect. As of January 1, all employees in the Commonwealth must be paid at least $9 per hour. The minimum wage rate was previously set at $8/hour.

The law also requires increases in the rate paid to tipped employees, and the total amount they earn when tips are added must meet or exceed the state’s minimum rate. That rate will increase to $10/hour on January 1, 2016 and to $11/hour on January 1, 2017. Massachusetts is one of several states that recently increased its minimum wage rate after years without changes.

In Massachusetts, paying employees what they earn and are due is particularly important because of harsh penalties in the state’s Wage Act. Failure to meet a number of requirements — including timely payment of minimum wages, commissions, and other sums that may be due to employees — carries a mandatory triple-damages penalty. Employers who lose suits under the Wage Act must also pay legal fees their workers accrue in the collection process.

Voter Initiative Leads to New Sick Leave Rights for All Massachusetts Employees

Passage of the sick leave law by voters on November 4 will have tangible effects on virtually all Massachusetts employers. Though the statute might not require companies that already have written sick leave policies to change things very much, its varied provisions will nonetheless require a careful review of those policies to ensure statutory compliance. Employers who don’t now have formal sick leave rules will need to adopt them by July 1, 2015, when the statute will take effect.

As of that date, all employers must provide for the accrual of sick leave at the rate one hour for every 30 hours worked, up to a maximum of 40 hours per year. Companies with 11 or more workers must pay employees at their regular hourly rates when time is used; those with 10 or fewer need not do so. Employees are entitled to begin using accrued sick time 90 days after accrual begins (July 1, 2015 or the first day of employment, whichever occurs first). Though workers can carry sick time over from year to year, employers are not required to permit them to use more than 40 hours in a calendar year. Unlike vacation pay, earned but unused sick leave need not be paid out when an employee leaves the job. [Read more…]