Labor & Employment Judicial Update

By Robert A. Fisher, Foley Hoag LLP & Jennifer M. Duke, Foley Hoag LLP

Taylor v. Eastern Connection Operating, Inc., 465 Mass. 191 (2013):  In 2010, the plaintiffs brought a class action in Massachusetts alleging that they had been misclassified as independent contractors and that they were not paid in accordance with Massachusetts wage and hour laws.  All of the plaintiffs lived and worked in New York.  However, the written contracts between the plaintiffs and the defendant provided that they were to be construed in accordance with Massachusetts law and that lawsuits were to be brought in the Commonwealth.  The Superior Court initially dismissed the case on the grounds that the Massachusetts independent contractor statute did not apply to non-Massachusetts residents working outside of the Commonwealth.  On appeal, the Supreme Judicial Court reversed, holding that the Massachusetts choice-of-law provision was enforceable and, as a result, the plaintiffs could assert claims under the independent contractor statute.

Fraelick v. PerkettPR, Inc., 83 Mass. App. Ct. 698 (2013):  The plaintiff worked from her home for a “virtual” public relations firm, and, initially, the employer reimbursed her business overhead expenses such as for telephone service and for travel.  About two years after she was hired, the company stopped reimbursing her for these expenses.  When the plaintiff complained about this, the company paid her for only a portion of her incurred expenses.  She then told senior management that she could no longer afford to travel to meet out-of-town clients.  Five days later, the company paid her for the remaining expenses and terminated her employment.  The plaintiff sued her employer in Superior Court, alleging that she was fired in violation of M.G.L. Ch. 149, Section 148A, the anti-retaliation provision of the Wage Act.  The Superior Court dismissed her claim because business expenses are not wages under the Wage Act.  On appeal, the Massachusetts Appeals Court disagreed, holding that the plaintiff reasonably believed that the expense reimbursement arrangement fell within the scope of the Wage Act.  While acknowledging that the reimbursement of business expenses is not covered by the statute, the Appeals Court explained that the employer’s replacement of its expense reimbursement policy with a practice of requiring the employee to advance expenses for the employer’s benefit could amount to a reduction in the plaintiff’s wages.

Cook v. Patient Edu, LLC, 465 Mass. 548 (2013):  The plaintiff sued his employer, a limited liability company and two of its managers, for unpaid wages.  The two managers of the LLC moved to dismiss the claim as to them on the grounds that the Massachusetts Wage Act imposes personal liability on officers of corporations but not on managers of a LLC.  The Superior Court agreed.  On appeal, the Supreme Judicial Court reversed, explaining that managers of LLCs who control, direct and participate to a substantial degree in the financial policy of the entity may face personal liability under the Wage Act.  While acknowledging that the statute did not expressly include managers of LLCs, the Court explained that limited liability companies did not exist as a form of business association when individual liability language was added to the Wage Act and that an expansive interpretation of the statute was justified by the legislative intent.

Depianti v. Jan-Pro Finishing International, Inc., 465 Mass. 607 (2013):  The plaintiff, a janitorial cleaning service franchisee of the defendant, brought a class action in federal court alleging that the defendant had misclassified him as an independent contractor rather than as an employee and had violated Massachusetts wage and hour laws.  The plaintiff did not file a wage complaint with the Office of the Attorney General prior to bringing suit.  Further, the plaintiff’s franchise agreement was with an entity other than the defendant, “a regional master franchisee.”  These two facts prompted the federal district court to certify two questions to the Supreme Judicial Court:  (1) whether a plaintiff’s failure to file a complaint with the Office of the Attorney General prior to the filing of a private court action deprives the court of jurisdiction to hear the Wage Act claims; and (2) whether the defendant could be liable for employee misclassification where there was no service contract between the parties.  As to the first question, the Supreme Judicial Court held that the failure to file a complaint with the Attorney General before filing a private lawsuit does not deprive the court of jurisdiction, provided that the Attorney General is notified of the suit during its pendency.  The Court explained that the failure to file a complaint with the Office of the Attorney General does not interfere with the purposes of M.G.L. Ch. 149, § 150.  As to the second question, the Supreme Judicial Court concluded that no contract between the parties is required for the defendant to be liable for employee misclassification.  It explained that the statute contains no such limitation and any such requirement would undermine its broad remedial purpose.

Dow v. Casale, 83 Mass. App. Ct. 751 (2013):  The plaintiff, a former sales director of a Massachusetts-based software company, sued the company’s CEO under the Massachusetts Wage Act for unpaid commissions and accrued vacation time.  The plaintiff lived in Florida, and apart from 8-12 business trips to Massachusetts, had worked outside of the Commonwealth.  The Superior Court found that the plaintiff had sufficient contacts with Massachusetts to fall within the protections of the Wage Act.  On appeal, the Appeals Court affirmed that conclusion.  It explained that Massachusetts was the state with the most substantial connection to the plaintiff’s employment and thus it was reasonable to allow him to sue under the Wage Act.

Lipsitt v. Plaud, 466 Mass. 240 (2013):  The plaintiff, a museum director for the Franklin D. Roosevelt American Heritage Center, claimed that he did not receive his full salary due to the center’s financial difficulties.  He brought suit, asserting claims under both the Massachusetts Wage Act and the common law.  The Superior Court dismissed the common law claims as preempted by the Wage Act.  On appeal, the Supreme Judicial Court disagreed, explaining that nothing in the Wage Act suggests that the legislature intended for it to be the exclusive remedy for unpaid wages.  To the contrary, the Court explained that the legislature sought to enhance the rights of employees regarding the payment of wages, not supplant existing claims for relief.

Flagg v. AliMed, Inc., 466 Mass. 23 (2013):  Employee Marc Flagg’s wife had been receiving medical care in connection with a brain tumor.  As a result, on certain days, Flagg had to leave work for a half hour to pick up his daughter.  He did not punch out for this time, and Flagg alleged that his employer, AliMed, knew that he was not punching out.  Nonetheless, AliMed, terminated him purportedly for not punching out.  Flagg sued AliMed for disability discrimination under Chapter 151B, alleging that he was terminated because his wife had a serious, expensive medical condition that rendered her totally disabled and for which AliMed was financially responsible through its health plan.  The trial court dismissed the Chapter 151B claim on the basis that the statute does not cover associational discrimination.  On appeal, the Supreme Judicial Court reversed the dismissal and held that Chapter 151B prohibits associational discrimination.  Although the statute specifically refers to an employee’s disability, the SJC explained that the statute also protects individuals who are “regarded as” having an impairment but who themselves are not actually disabled.  It reasoned that when an employer takes an adverse action against its employee because of his spouse’s impairment, that employee suffers the same discrimination as an employee whom the employer “regards as” being disabled.  In a concurring opinion, Justice Gants suggested the Court’s holding was a narrow one -- that a claim of associational discrimination is limited to where the employer does not want to incur under its health plan the anticipated medical expenses arising from the spouse’s disability. 

Lashgari v. Zoll Medical, 84 Mass. App. Ct. 1106, 2013 WL 4029211 (Aug. 9, 2013) (unpublished Rule 1:28 opinion):  The plaintiff alleged that he had told manager, Shawn Price, that he could not work additional hours because his autistic son required constant care.  He alleged that he was then demoted by vice president Clifford King and constructively discharged.  The plaintiff sued Zoll Medical for associational discrimination in violation of Chapter 151B.  He also sued King for intentional interference with advantageous business relations.  The Superior Court dismissed the complaint for failing to state a claim for relief.  The Appeals Court affirmed the dismissal.  It explained that the plaintiff had failed to allege a claim for associational discrimination because he did not allege any connection between the conversation about his autistic son with his subsequent demotion.   As to the intentional interference claim, the Appeals Court held that the complaint failed to show that King acted with actual malice.

Advanced Micro Devices, Inc. v. Feldstein, 2013 WL 266746 (D. Mass. June 10, 2013):  An employer argued that the defendants, several former employees, violated the Computer Fraud and Abuse Act (“CFAA”) by logging into the company’s secure network and copying proprietary data before they left the company.  The defendants moved to dismiss the claim, contending that downloading of information did not occur “without authorization” or in a manner that “exceeds authorization” under the CFAA because the defendants accessed the data with their valid login credentials.   The federal court reasoned that “Congress’ intent in passing the CFAA was to address computer hacking activities and not to supplement state misappropriation of trade secrets laws.”  However, the Court did not dismiss the CFAA claim.  Instead, the Court stated that the claim could survive if the employer pleaded specific details indicating that the defendants used fraudulent or deceptive means to obtain confidential company information, and/or that they intentionally defeated or circumvented technologically implemented restrictions to obtain confidential company information.

Brennan v. Sentient Jet, LLC, 2013 WL 2251002 (D. Mass. May 21, 2013):  Plaintiffs sued their former employer in federal court, alleging they were owed overtime pay, sales commissions, and bonuses under state and federal wage and hour laws.  Several months before this action, the employer had sued the plaintiffs in state court for breaching their noncompetition agreements, misappropriating trade secrets, and intentionally interfering with business relations.  In the state court suit, the plaintiffs did not assert any counterclaims against the employer, but, as part of their defense, they argued that the noncompetition agreements were void because the employer failed to compensate them as required by the terms of their employment relationship.  The employer moved for summary judgment on the plaintiff’s claims on the basis that the wage and hour issues were previously litigated and decided in the employer’s favor, and that Rule 13(a) of the Massachusetts Rules of Civil Procedure required the plaintiffs to assert any claims for overtime wages as counterclaims in the state action.  The federal court granted summary judgment.  The court concluded that the plaintiffs were precluded from bringing their wage claims because the elements of collateral estoppel were met, and due to the fact that the plaintiffs failed to raise them in as counterclaims in the state court action.

Interpros, Inc. v. Athy, 2013 WL 2181650 (Mass. Super. May 5, 2013):  An employer, a staffing company, sued a former employee for violating his non-competition agreement.  The employee argued that the agreement was unenforceable because after he signed it in 1997, he was promoted twice and he never signed a new agreement.  In denying the employer’s motion for preliminary injunction, the Court ruled that the non-competition agreement was void, because the employment relationship had changed materially.

Weiss v. DHL Express, Inc., 718 F.3d 39 (1st Cir. 2013):  A former employee brought a breach of contract action against his former employer in which he sought to recover a $60,000 service-based bonus. He alleged that he was terminated without good cause, which entitled him to the full payout under the terms of the bonus plan. The jury found for the former employee.  The employer’s claim on appeal was that the court erroneously allowed the jury to independently determine whether good cause existed for the termination given that the bonus plan reserved this determination for a committee of the company.  The First Circuit Court of Appeals found that the bonus plan gave the committee broad discretionary authority to determine all matters relating to the plan.  The plan document made clear that whether the employee was terminated without good cause and remained eligible for the bonus was a decision within the ambit of the committee’s sole and final decision-making authority.  The committee had determined that the employee was terminated with good cause.  Therefore, the Court ruled in favor of the employer and reversed the judgment against the company.