Tag Archives: employee

Non-Compete Reform Comes to Massachusetts

By on August 30, 2018

     After years of trying to find common ground on non-compete reform, the Massachusetts legislature passed a bill – which Governor Charlie Baker signed into law on August 10, 2018 – that promises to significantly change the employment landscape in the Commonwealth. The new law will take effect on October 1, 2018.

The following is a brief, non-exhaustive overview of some of the law’s most notable features:

  • The law defines a non-competition agreement as an “agreement between an employer and an employee, or otherwise arising out of an existing or anticipated employment relationship, under which the employee or expected employee agrees that the employee will not engage in certain specified activities competitive with the employee’s employer after the employment relationship has ended,” but excludes certain agreements from its purview, including: (1) non-compete agreements made in connection with the sale of a business; (2) non-compete agreements made in connection with the cessation or separation of employment (provided the employee is given seven business days to rescind acceptance); (3) employee non-solicitation covenants; (4) customer/client/vendor non-solicitation covenants; and (5) non-disclosure of confidential information agreements.                                                                                                                                                                                                                   
  • Both traditional employees and independent contractors are covered under the law.                                                                                                                                                                                              
  • All agreements must be in writing and signed by both parties, and must expressly affirm an employee’s right to consult with counsel before signing.                                                                                                                                                                                                                                                                                                       
  • If a non-compete agreement is signed at the beginning of an employment relationship, it must be given to the employee when the employment offer is made or 10 days before the commencement of employment, whichever is earlier.  Agreements signed after the commencement of employment must be “supported by fair and reasonable consideration independent from the continuation of employment.”                                                                                
  • The law requires so-called “garden leave pay” or some “other mutually agreed-upon consideration.” Garden leave pay refers to an agreement in which the employer, during the course of the restricted period, continues to pay the former employee at least 50 percent of the “highest annualized base salary” that employee received within the two years preceding his or her termination. The law does not further define or elaborate upon what “other consideration” might be acceptable in lieu of garden leave pay, however.  In addition, it remains to be seen whether garden leave pay constitutes sufficient consideration for those non-competes executed after the commencement of an employment relationship, or whether some consideration above and beyond the garden leave pay is required in those circumstances.                                                                                                                                                  
  • Agreements not to compete must be “reasonable.” They can be no broader than necessary to protect a legitimate business interest; they cannot exceed one year in duration; their geographic scope must be reasonable; and they must otherwise be reasonable “in the scope of proscribed activities in relation to the interests protected.”                                                   
  • Non-compete agreements may not be enforced against non-exempt employees; undergraduate or graduate students engaged in short-term employment; employees who have been terminated without cause or laid off; or employees who are 18 years old or younger.                                                                                                                                                      

These new requirements apply only to non-compete agreements entered into on or after October 1, 2018. Nevertheless, employers may wish to revise existing non-compete agreements for current employees in order to avoid disparities amongst employees, as well as potential future litigation.



Show Me the (Same Amount of) Money!

By on June 21, 2018

The state’s new pay equity law, which amends the Massachusetts Equal Pay Act (“MEPA”), will take effect on July 1, 2018.  It is one of the strongest pay equity laws in the country, and subjects employers to double damages and attorneys’ fees in the event of a violation.  Moreover, it is a “strict liability” statute.  Thus, whether or not an employer intends to discriminate against employees of one gender is “irrelevant” to the analysis.

The amendments prohibit employers from, among other things:

• Paying different wages to people of different genders who perform “comparable work,” unless the difference in salary is attributable to one (or more) of six enumerated statutory factors;

• Asking job applicants about their wage or salary history;

• Decreasing the wages of an employee solely to close the wage gap;

• Retaliating against employees for exercising their rights under MEPA.

The revisions also establish a safe harbor provision for employers who perform self-evaluations of their pay practices.

What Does “Comparable Work” Mean?

MEPA defines “comparable work” as work that “requires substantially similar skill, effort, and responsibility” that is performed under similar working conditions.  Employers should not assume that a job title, or even a job description, necessarily determines comparability.  In fact, employees need not even be in the same business unit or department in order have “comparable” jobs.  Notably, this is a broader definition than the “equal work” standard under federal law.

Even if employees are in comparable roles, however, employers are permitted to pay them different salaries if the difference is based on of one (or more) of the following factors:

• A seniority system (as long as seniority is not affected by pregnancy, parental or family leave);
• A merit system;
• A system that measures earnings by quantity or quality of production, sales, or revenue;
• The geographic location in which a job is performed;
• Education, training, or experience, as long as these factors are reasonably related to the job in question; and
• Travel that is a regular and necessary part of the job.

What Employers Should Know About the Safe Harbor Provision

In order to trigger the safe harbor provision, which establishes an affirmative defense against liability for claims of pay discrimination, an employer must have conducted a “reasonable and good faith” pay audit within the previous three years (and before an employee files an action), and must demonstrate that it is making “reasonable progress” towards eliminating wage differentials across genders.

Self-evaluations not only help employers identify and rectify wage gaps, they guard against liquidated damages in the event of a judgment against the employer, even if the evaluation was not “reasonable” in detail and scope.

Guidance for Employers

The Massachusetts Attorney General’s Office has issued a Guidance that addresses the amendments.  While the Guidance does not have legal force, it is a useful compliance tool and a good place to start if you have basic questions about how to ensure you are compensating your employees equally across genders for “comparable work.”  However, employers should bear in mind that “the complexity of the analysis required will vary significantly depending on the size, make-up, and resources of each employer”; the Guidance does not, and cannot, address the many fact-specific situations that may arise at any given place of employment.

In addition to the Guidance, the AG’s Office has generated a “Pay Calculation Tool” to help employers identify and evaluate gender-based pay gaps.  Smaller employers with clearly defined groupings of comparable jobs and relatively simply pay structures may benefit from using the tool, at least as a first step; it is not appropriate for large pay groups or complicated pay structures.  Furthermore, the data the tool generates may be discoverable in litigation or government investigations, so employers should consult with counsel before conducting any self-evaluation.

“Culture of Profanity” or a Hostile Work Environment? Massachusetts Court Issues Ruling on Permissible Use of Expletives in the Workplace

By on August 22, 2016

Hostile work environments exist when an employer’s statements, actions, and behavior make it impossible for an employee to perform their job. Massachusetts law protects employees against discrimination and hostile work environments by prohibiting an employer, or its agents, from refusing to hire an individual, discharging an employee, or discriminating on the basis of a protected class status.  Protected class status exists based on an individual’s “race, color, religious creed, national origin, sex, gender identity, sexual orientation, genetic information, or ancestry.” 

Recently, in Griffin v. Adams & Assoc. of Nevada, et al., the United States District Court for the District of Massachusetts determined that a former employee sufficiently presented evidence to bring a hostile work environment claim based on sexually derogative terms directed at him by his former supervisor and others.

In Griffin, a former employee filed suit for discrimination based on his sexual orientation, harassment, and retaliation against his former employer and his former supervisor.  In defense, the employer argued that the employee failed to establish a hostile work environment claim because the conduct directed at him was not “of a sexual nature” and was not a comment on the employee’s gender or sexual orientation.  In making this argument, the employer relied on a prior Massachusetts Appeals Court case, Prader v. Leading Edge Products, Inc., which held that use of “crass garden-variety expletives” in a workplace, which are not sexual commands or lurid innuendos, may only evidence a “culture of profanity” in the workplace and would be insufficient to establish a sexually hostile work environment.

The District Court’s summary judgment decision in Griffin, dismissed the employer’s Prader argument.  The Court determined that the comments directed at Mr. Griffin went beyond “garden-variety expletives” (such as those commonly used with or without meaning or reference to a sexual connotation), making it reasonably possible to construe the statements as sexual innuendo that “could suggest discriminatory animus.”  The District Court held that the specific nature of the statements, when viewed with consideration to previous statements (derogatory comments about the former employee’s attire and mannerisms being “feminine,” describing his office décor as “flamboyant,” and using derogatory terms based on his sexual orientation), went beyond statements “tinged with offensive sexual connotations” and could be reasonably viewed as discrimination based on sexual orientation and gender stereotypes.

The Griffin decision allowed the employee’s hostile work environment and retaliation claims to survive summary judgment, permitting the employee to proceed with those claims against the defendants toward trial.  While the Griffin decision did not determine whether the employer’s actions actually violated Chapter 151B, it should serve as a stern reminder to employers that protected-class discrimination and hostile work environments are not tolerated under Massachusetts law.  While the use of common profanity may be a recognized element of a work environment, that may not excuse the employer from liability where profanity with offensive connotations is targeted toward particular employees.  Employers must work with their human resources staff and employment counsel to create and maintain policies that promote healthy work environments and prohibit discriminatory conduct.  Should you have questions or concerns regarding Massachusetts’ anti-discrimination laws, hostile work environments, or your company’s practices, consult a Massachusetts employment attorney.

Defend Trade Secrets Act – Employment Implications

By on June 2, 2016

President Obama recently signed the Defend Trade Secrets Act (“DTSA”), which provides a federal private right of action for the misappropriation of trade secrets. Previously, trade secret claims were handled only at the state level. The DTSA does not preempt state law, but instead provides another avenue for recovery. Trade secret owners may pursue federal claims including property seizure (to prevent dissemination of trade secrets), injunctive relief, and damages for actual loss and unjust enrichment. Property seizure is not lightly granted, and the DTSA provides a detailed framework for when and how property may be seized. Further, if the trade secret is willfully and maliciously misappropriated, courts may award double damages and attorney’s fees.

In the employment context, employees are immune from liability under the DTSA (and arguably state laws as well given the DTSA’s specific wording) for disclosing trade secrets that are made in confidence to a government official or attorney for the purpose of reporting or investigating a violation of law. Employees are permitted to use trade secret information in a lawsuit alleging retaliation by an employer for reporting a trade secret violation, as long as any court document containing trade secrets is filed under seal.

Although the DTSA provides a powerful cause of action for employers, the DTSA also contains some employee protections. Employers must now provide notice to employees of the immunities contained in the DTSA in agreements with employees (such as nondisclosure agreements), which may be handled by including a cross-reference to a company policy containing notice of the immunity. Failure to provide such notice prevents employers from receiving multiple damages or attorney’s fees under the DTSA. While injunctions are available under the DTSA, any injunction may prevent actual or threatened misappropriation but must not prevent the employee from entering into an employment relationship or conflict with state laws concerning the restraint of trade.

In sum, employers may now bring a civil action against employees who misappropriate trade secrets that can lead to damages and injunctive relief including seizure. However, to receive the full benefits of the DTSA, employers must update their nondisclosure and similar agreements to inform employees of the immunities available under the DTSA.  The DTSA’s effect on the technology, biotechnology and pharmaceutical industries almost certainly will be far-reaching.  As a result, the DTSA is of particular importance to businesses in greater Boston, Cambridge and other emerging technical hubs in Masshachusetts and throughout New England.  Both employers and employees should contact a Massachusetts employment attorney to update their agreements and confirm their duties.

An Overview of Massachusetts Non-Solicitation Agreements

By on May 18, 2016

Non-competition agreements (“non-competes”) often contain clauses referred to as “non-solicitations.” These provisions are sometimes viewed as synonymous to a non-competition clause but there are important distinctions between the two. Massachusetts courts use a similar analysis on the two types of provisions, non-solicitation provisions serve a different function. The usual purpose of a non-solicitation is to prevent a former employee from stealing clients, prospective clients or other employees from their former employer.  As such a non-solicitation contrasts with a non-compete which ordinarily intends to bar a former employee from directly competing with the former employer in subsequent employment.

The basic non-solicitation clause is simple, usually stating that the employee agrees not to solicit certain categories of individuals for some period of time.  As with non-competes, non-solicitations will be enforced when they are supported by valid consideration and are generally reasonable to protect a legitimate business interest.  Protecting employer good will towards employees and/or customers qualifies as a legitimate business interest. Businesses have an interest in protecting the customer relationships developed by employees during employment, which also relates to an employer’s legitimate interest in protecting customer good will.  While non-competes require a narrowly tailored provision to be enforceable, Massachusetts courts will often enforce non-solicitations for longer periods than non-competes, as a non-solicitation is less of a burden on an employee who is still otherwise able to work. 

Standard non-solicitation language is relatively straightforward.  It can be surprisingly difficult, however, to determine when a solicitation has occurred, and Massachusetts courts have not yet worked out all of the details.   For instance, if a former employee subject to a non-solicitation is directly contacted by a client of the former employer, has the employee breached the non-solicitation merely by receiving the business? As with many legal questions, the short answer is that it depends.

Massachusetts courts have observed that the line between solicitation and acceptance of business is a hazy one. Thus far, the courts have not drawn a bright line legal distinction between circumstances when the client makes first contact with the former employee, and when the employee makes first contact with the client. Instead, courts look to the facts of the case to determine whether the former employee made an improper solicitation. Further complicating the analysis, while a former employee may be barred from soliciting, the employee’s new employer is under no such restriction and neither are the customers in question because those parties are not subject to the non-solicitation agreement entered into by the employee and former employer.  Nevertheless, the employee and new employer should tread carefully to ensure that the employee and new employer’s actions do not yield other causes of action for the aggrieved former employer, such as an unfair business practice claim for behavior that may not strictly run afoul of the non-solicitation provision.

Judicial analysis of non-solicitations recognizes that the context of the particular industry is important. When the individual subject to a non-solicitation is selling fungible, off-the-shelf goods, initial contact with prohibited parties is likely quite important, as there is probably little to differentiate the sellers.  Where a complex transaction is involved and products are highly customized, prohibited contact may be less important to securing a sale. Further distinction can be drawn between an overt direct solicitation, and a more subtle indirect solicitation. Directly inviting an employee or customer to engage with a new company would clearly breach a non-solicitation, but more subtle “nudge-nudge wink-wink” approaches can be equally damaging.   The courts will look at the overall context of the business relationship and the agreement at issue to resolve whether particular conduct breaches the non-solicitation agreement.  Given the fact specific nature of the inquiry, it can be a difficult question to determine in any particular instance whether contact with a client is prohibited by the non-solicitation.  

Non-solicitation agreements are another powerful tool for employers to protect legitimate business interests.  Like non-competes, non-solicitations must be drafted and implemented carefully to be enforceable and useful. Massachusetts courts will engage in a fact-intensive analysis to determine whether a non-solicitation is valid and under what circumstances the provision has been breached. Both employers and employees should consult with an experienced Massachusetts employment attorney to determine their rights and obligations with respect to any particular non-solicitation provision.

Copying Employer Data Ruled Not a Material Breach of Employment Contract

By on March 29, 2016

A recent Massachusetts Supreme Judicial Court case, EventMonitor, Inc. v. Anthony Leness, narrowly interpreted a common employment contract provision. Leness was an executive at EventMonitor. The parties signed an employment agreement, which provided the manner in which EventMonitor could terminate Leness’s employment. The agreement provided a  for-cause termination provision, permitting termination if Leness engaged in fraud or “defalcation” (misappropriation) of EventMonitor’s funds or other assets. The employment agreement also included a nondisclosure provision, requiring Leness to avoid disclosure of any of EventMonitor’s proprietary information and to return all such information if his employment terminated.

After six years of employment, the relationship between Leness and EventMonitor soured, and EventMonitor terminated Leness without cause. Shortly thereafter, EventMonitor learned that Leness had bought a one-year subscription to an on-line data storage service, and used this service to copy all of EventMonitor’s files that were on the computer. These files included proprietary information. After learning that Leness copied such information, EventMonitor retroactively changed Leness’s termination to be “for cause,” which allowed EventMonitor to suspend severance payments owed to Leness.

EventMonitor sued Leness for breach of contract, and Leness asserted several counterclaims, arguing that EventMonitor had no valid reason to consider Leness’s termination “for cause” and cease making severance payments. After a bench trial, the judge found that Leness had not materially breached the employment contract, and thus could not have been fired for cause. The judge found for EventMonitor on other counts, and both parties appealed.

The Supreme Judicial Court upheld the ruling. The court explained that a contract breach is a material breach when it involves “an essential and inducing feature of the contract.” Although Leness’s copying and failure to return EventMonitor’s proprietary information was a breach of the employment contract, the breach was not material because there was no evidence that Leness used the proprietary information for any purpose or disclosed the information to anyone. The court accepted the trial judge’s finding that the essential purpose of the relevant section of the employment contract was to protect the confidentiality of EventMonitor’s proprietary information, and as there was no evidence that EventMonitor’s information was disclosed to any third parties, Leness’s contract breaches were not material.

This ruling may be surprising to some observers because Massachusetts courts are ordinarily very protective of a business’s confidential information, and there was no dispute that Leness retained copies of such information. However, the plain language of Leness’s employment contract indicated that EventMonitor wanted to prevent the disclosure of such information. Because such information was not actually disclosed, EventMonitor’s interests, as stated in its contract, were protected. This ruling is instructive for employers.  Employment contracts should expressly state that the return of all company information is considered a material part of the agreement, and further that any severance packages are conditioned on not only the nondisclosure of proprietary information, but also on its full return, in order to ensure their enforceability. Concerned companies should contact a Massachusetts employment lawyer for a review of their contracts.

Summary Judgment Considerations in Discrimination Cases

By on March 11, 2016

Massachusetts law prohibits employment discrimination based on race, among other things. It is often difficult for plaintiffs to produce direct evidence of discrimination (i.e., the “smoking gun”), so Massachusetts law allows plaintiffs to prove discriminatory intent by producing evidence showing an employer’s adverse employment decision was merely a pretext. In a very recent opinion, Bulwer v. Mount Auburn Hospital et al., the Massachusetts Supreme Judicial Court clarified the burdens of proof faced by each party after a motion for summary judgment. A summary judgment motion is granted when the moving party shows there is no genuine issue of disputed fact, and thus the moving party is entitled to a judgment as a matter of law, avoiding the need for a trial.

The plaintiff in Bulwer is a black man of African descent, pursuing a license to practice medicine. Mr. Bulwer earned a medical degree abroad, and to practice medicine in the United States he needed to complete a residency program that he began at Mount Auburn Hospital. During Mr. Bulwer’s first year of residency, he received several opposing reviews, some deeply critical and others quite favorable. After receiving such reviews, Mount Auburn Hospital terminated his employment, and he filed suit thereafter, alleging, among other things, employment discrimination. After discovery, the defendants moved for summary judgment. The Superior Court judge allowed the motion.

Per the seminal 1973 Supreme Court decision, McDonnell Douglas Corp. v. Green, Massachusetts courts employ a three-stage, burden-shifting paradigm:

“In the first stage [of this paradigm], the plaintiff has the burden to show. . . a prima facie case of discrimination.  To do so, a plaintiff must provide “evidence that: (1) he [or she] is a member of a class protected by G. L. c. 151B; (2) he [or she] performed his [or her] job at an acceptable level; [and] (3) he [or she] was terminated.” “In the second stage, the employer can rebut the presumption created by the prima facie case by articulating a legitimate, nondiscriminatory reason for its [employment] decision.” In the third stage, the burden of production shifts back to the plaintiff employee, requiring the employee to provide evidence that “the employer’s articulated justification [for the termination] is not true but a pretext.”” (citations and footnotes omitted).

Here, the defendants argued that at the third stage of inquiry, the plaintiff had to present evidence that the defendant’s reasons for termination constituted a pretext hiding a discriminatory purpose. The Court disagreed, finding that Massachusetts law does not require so great a burden at this stage, which would be akin to requiring the plaintiff to produce direct evidence of discriminatory animus. To survive a summary judgment motion, the plaintiff must present evidence from which a reasonable jury could infer that the defendants’ stated reasons for its action were not the real reasons. If the plaintiff can do so, the case should proceed to trial, at which time a jury can decide if a defendant’s reason for an action is false, and if so, if that falsity is in fact hiding a discriminatory motive. Here, Mr. Bulwer produced “five categories” of evidence from which a jury might infer that the defendants’ stated reasons for terminating the plaintiff’s employment were a pretext. That was sufficient, as the purpose of a summary judgment motion is neither resolving issues of material fact nor weighing the credibility of the evidence.

This is an important clarification. If the defendants’ argument carried the day, plaintiffs would have greater difficulty even getting to a trial, given the scarcity of direct evidence in these sorts of cases. The court went on to remind the litigants that at the summary judgment phase, the burden of persuasion rests with the moving party, in this case the defendants. The plaintiff has an obligation to produce evidence, and ultimately bears the burden of persuasion at trial. However, summary judgment is not trial. Summary judgment is an important tool in litigation, but in preparing to file such a motion, parties must be cognizant of each party’s obligations. Competent Massachusetts employment lawyers can evaluate the evidence to determine if summary judgment is appropriate.

Proposed Noncompete Legislation Could Reshape Employment Relationships in Massachusetts

By on March 3, 2016
At a Greater Boston Chamber of Commerce breakfast this week, Massachusetts House Speaker DeLeo proposed compromise legislation regarding non-compete agreements. The Speaker’s proposal included three points:  limiting non-competes to twelve months; requiring employers to provide employees notice that a non-compete will be required before employment begins (and inform employees of a right to counsel), and banning non-competes for low-wage workers. While the legislature has been reluctant to limit non-compete agreements, the Speaker’s proposal may indicate renewed interest in changing that law and should be monitored by interested parties. 


DOL’s New Interpretation Regarding Classification of Workers: “Most Workers Are Employees.”

By on August 13, 2015

Many Massachusetts employers are subject to two different legal schemes regarding the proper classification of employees: Massachusetts state law, and federal law. It is important for employers to be familiar with both schemes in order to avoid a state or federal misclassification investigation. The Department of Labor Wage and Hour Division (“DOL”) recently issued an Administrator’s Interpretation addressing the legal standard used to determine if an individual should be classified as an “employee” or an “independent contractor” under the Fair Labor Standards Act (“FLSA”).

The Supreme Court and lower courts have developed an “economic realities” test which examines the actual relationship between the employer and the individual. The DOL’s interpretation attempts to clarify that test, to answer the question of “whether the worker is economically dependent on the employer or truly in business for herself.” Although the court system is not strictly bound by DOL interpretations, courts usually find such interpretations persuasive, and this interpretation is consistent with case-law. Under the test, each factor must be analyzed in relation to the other factors, and no single element of the test outweighs the others. While the elements of the test vary slightly under case law from different courts, they generally consist of the following six factors:

Whether the Work is an Integral Part of the Employer’s Business

Where the work performed “is integral to the employer’s business,” as it is more likely than not that the worker is economically dependent on the employer, and therefore an employee. This factor is considered a compelling factor and exists “even if the work is just one component of the business and/or is performed by hundreds or thousands of other workers.” Along those lines, the work can be considered integral if it is the same as the work of many other employees, such as at telemarketing call center, or even if the work is performed outside of the employer’s premises, such as at an employee’s home or at a customer’s location. For example, in a construction company that builds residential homes, a carpenter is integral to the business, while the accountant that handles the company’s annual tax returns is not.

Whether the Worker’s Managerial Skills Affect Their Opportunity for Loss or Profit

The next factor is whether the worker’s profit or loss is affected by their level of managerial skills and input. An analysis of the worker’s “managerial skills” focuses on that worker’s ability to affect the profitability of the employer’s business based on the managerial role the worker has. “Managerial skills” are those normally associated with operating an independent business, e.g. the individual’s ability to make hiring decisions, to determine what materials and equipment to purchase, how and where to advertise, and what location should be rented for the business. Merely working more hours does not demonstrate managerial skill. The corollary to the ability to increase profit is the risk of suffering loss. A true independent contractor is in business for themselves and may directly profit or loss based on the business’s success.

How the Worker’s Relative Investment Compares to the Employer’s Investment

Next is the value and degree of investment by the worker. The worker’s investment must be considered against the investment made by the employer. Independent contractors typically make investments that support a business as an independent going concern beyond the current job, and affect that businesses’ growth, its cost structure, and its presence in the applicable marketplace. Workers who make substantial monetary investments, even in tools or equipment used for the employer’s business, may still be classified as employees. To weigh in favor of an independent contractor, an investment must be a legitimate “business investment” or “capital expenditure,” not merely a tool or piece of equipment necessary to do the job, and such investment must be substantial. Even a seemingly large expenditure such as a vehicle may pale in comparison to the investment made by an employer which includes land and heavy machinery.

Whether the Work Performed Requires Special Skills and Initiative

In weighing this factor, the DOL is not assessing the specialty of the worker’s technical skills, but determines whether the worker utilizes “special skills,” involving business judgment and initiative. In other words, the skills of building and running the business, not technical skills. To be properly classified as an independent contractor, those skills must demonstrate that the worker is in business for themselves. A true independent contractor performs independent judgments beyond the current project, has autonomy in deciding the sequence of the work performed, has control over whether additional work is performed, and is responsible for acquiring the next job. An electrician is a technically skilled worker, but is only an independent contractor when actually running his or her own electrician business, not merely reporting to work as an electrician for another company.

Whether the Worker’s and Employer’s Relationship is Permanent and Indefinite

The “permanence” of the relationship is not tied to the actual length of employment. Rather, a court will examine whether the relationship is only tied to the length of one project, or is to be continuous and repeated until either the worker or the employer elects to terminate the engagement. An independent contractor often handles one job or project for an employer, and does not work continuously or repeatedly for the same employer. This evaluation must also be made with consideration to the type of industry the work is being performed in. A lack of permanence or indefiniteness may be due to “operational characteristics intrinsic to the industry,” e.g. the use of part-time workers, seasonal workers, or staffing agencies, which still weighs on the side of employee if, for example, a particular worker works every applicable season for the same employer. True independent contractors function under their “own business initiative” and are running a business separate from that of the employer.

The Nature or Degree of Control the Employer Assert Over the Worker

The final factor of the “economic realities” test involves a determination of the type of control exercised over the worker by the employer. Employers who control the meaningful portions of the work performed by the worker are utilizing employees, not independent contractors. The “independent” work performed must be more than mere theory; the worker must actually exercise control over the meaningful aspect. Additionally, lack of direct supervision by the employer will not necessarily be indicative of independent contractor status where the worker performs work from home or at offsite locations. Examples of control indicating an employer-employee relationship includes regulating aspects of the worker’s job; setting work schedules; standardizing a dress code; and directing what tasks are carried out by the worker. The DOL’s interpretation cautions against giving the “control” factor an oversized role and states that this factor must be analyzed in the context of whether the worker is economically independent from the employer.

Impact of the DOL’s Interpretation

The DOL’s interpretation sets forth its official position on how employment relationships should be evaluated under the FLSA. Although the DOL’s interpretation is not binding on courts, it is persuasive and should be considered by employers. Businesses will benefit from reviewing their use of independent contractors, both in regard to the current legal standard and under the changes in the DOL’s interpretation, to evaluate any potential misclassifications. Federal investigations are time-consuming and the monetary penalties for misclassification can be severe.

The foregoing information is a general summary of the Administrator’s Interpretation published by the DOL. If you are operating your own company or are concerned about your rights as an employee, contact a knowledgeable employment attorney to review your classification scheme.

Employee Handbooks: Have you covered the basics?

By on August 3, 2015

Many companies use an employee handbook or manual, which can be a useful management tool when properly utilized. An effective handbook sets forth company policies in plain English and covers every important company policy. Clarity is vital when implementing any kind of policy, and employees will benefit from understanding both what the company offers and what it expects in return. Although an employee handbook is recommended for most businesses, it is possible to do more harm than good, particularly when policies are poorly presented, or if the company sets forth a series of policies but fails to follow them.

There is no one-size-fits-all employee manual. Some manuals that just cover the basics may be ten to fifteen pages long, while some large corporations have manuals numbering into the hundreds of pages. In general, an employee handbook should serve as an employee resource, a convenient way for a company to communicate with its employees.

Most handbooks set forth employer commitments, which are useful to provide clarity to employees and as a partial defense to some employment-related claims. For example, employers should include policies relating to discrimination, sexual harassment, workplace bullying, drug and alcohol use, and violence, and then state how complaints are handled. This ensures that employees know that the company will not stand for any kind of dangerous and illegal conduct. Employees will feel safe in the workplace, and should a problem occur, the employer will be prepared to handle the problem and minimize the impact. For example, should an employer face a claim from an employee regarding sexual harassment, an anti-sexual harassment policy in a handbook will demonstrate that the employer has taken proactive steps to comply with the law and provide a safe environment, which can be helpful in resolving the claim with a minimal cost.

Employers and employees will also benefit from clearly stated internal policies and procedures related to the day-to-day operations of the company. For example, employees should be well aware of the company’s dress code, the company’s standard business hours, what sort of lunch breaks and other breaks are permitted, as well as how the company handles tardiness and unexcused absences. It is also wise to set forth how the company handles various kinds of leave: paid vacation is considered a “wage” in Massachusetts, and the Commonwealth recently enacted the Earned Sick Time law. There are also laws governing time off for holidays and jury duty. The various employment-related laws provide benefits and obligations to employers and employees, and so it is in everyone’s best interest to set forth how the company handles these matters in writing.

Today’s technology focused world has many traps for the unwary. Companies of all sizes have begun implementing policies related to the use of social media in (and sometimes outside of) the workplace, the use of company email, and the requirement to maintain the confidentiality of sensitive company information. Although risk can never be eliminated, an effective handbook can minimize the company’s exposure to lawsuits and costly government investigations.

An effective handbook can aid with both hiring and firing. On the hiring side, there is a real cost to bringing on a new employee, as that person must spend time learning the ways in which matters are handled by the company. A good handbook will ease the transition, minimizing the time that must be spent learning the company’s system and also acting as a resource for questions the employee has regarding company policy. On the firing side, an effective handbook will set forth grievance and termination procedures, so both the managers in charge of firing and the employees understand what is expected of them. A handbook also aids an employer in fighting off wrongful termination lawsuits by showing that a particular policy was in place, an employee was warned about violating such policy, and then the employee was ultimately terminated for violating the policy. Further, fired Massachusetts employees are entitled to unemployment assistance unless the employer can demonstrate one of a few factors, including the employee’s deliberate violation of a company policy. A handbook, read and signed by each employee, is evidence of the existence of company policies.

Any company with more than a handful of employees should consider developing an employee handbook. Consulting with a qualified employment attorney will ensure that the handbook complies with current law and does not expose the company to unnecessary risk.