Fans of Star Trek will no doubt remember the classic episode, “The Trouble with Tribbles.”  Employers facing claims under the 2008 amendments to the Massachusetts Wage Act are facing their own challenges, which could be called “The Trouble with Trebels.”  Under the amendments, the Legislature changed the language of G.L. 149, § 150, to make the award of treble (or triple) damages mandatory in all wage claim cases.  Before the amendments, it was left to a judge’s discretion to determine whether an award of multiple damages was called for under the circumstances of each particular case.

A recent decision by the Massachusetts Appeals Court makes clear that the mandatory treble damages provision applies to claims for unpaid commissions under the Wage Act, in the same way that it applies to claims for other types of wages.  The plaintiff in Weber v. Coast to Coast Medical, Inc., Doc. No. 12-P-1005 (Mass. App. Ct. Apr. 10, 2013), claimed that he was owed nearly $12,000 in unpaid commissions in connection with his job as a sales representative for a medical equipment company.  After the jury entered a verdict in the plaintiff’s favor, the judge awarded three times the amount of the unpaid commissions—nearly $36,000—as damages under the Wage Act’s mandatory treble damages provision.  (The judge also awarded $25,000 for attorney’s fees—relief that was already mandatory before the 2008 amendments.)

The defendant employer appealed, arguing that “commissions” are not included in Section 150’s “lost wages and other benefits” language.  The employer took the position that the  language in Section 148 of the Wage Act that makes the statute applicable “so far as apt, to payment of commissions,” shows that the Legislature intended to differentiate between commissions and other types of “wages.”  The Appeals Court rejected this argument, pointing out that while not all benefits fall within the term “wages,” commissions have been held by the courts to be wages, and recoverable under Section 150.  The Appeals Court held that, under long-standing principles of statutory interpretation, the Legislature is presumed to be aware of the provisions in related statutes.  Therefore, the Appeals Court held that when the Legislature amended Section 150 to make treble damages mandatory in cases for recovery of “wages,” they were aware that that term also included commissions.

For at least the next few months, DOMA is the law of the land, and the United States government will continue to define  “marriage” as a “legal union between one man and one woman as husband and wife,” and “spouse” as a “person of the opposite sex who is a husband or a wife.”  DOMA, however, appears to be on its last leg.  The demise of DOMA will likely trigger significant policy and benefit changes for employers.  Here is a list of four potential issues to keep in mind in the coming months as DOMA’s fate continues to unfold.

 

  1. Health Insurance – Many employers provide health insurance benefits to their employees, and their employees’ federally-recognized spouses and children.  These benefits are considered a non-taxable fringe benefit under the Internal Revenue Code and exempt from income tax liability.  Health insurance benefits for an employee’s domestic partner or same-sex spouse, however, while still a fringe benefit, is not exempt from income tax liability, and instead imputed to the employee as income.  If DOMA is overturned, insurance benefits provided to same-sex spouses will no longer be imputed as income, and will instead be exempt from income tax liability.
  2. Title VII of the Civil Rights Act – While New Hampshire and Massachusetts recognize sexual orientation as a protected class and therefore afford some protections to employees against discrimination based on sexual orientation, the Civil Rights Act does not.  It does, however, prohibit discrimination based on gender.  If the DOMA-definitions of “marriage” and “spouse” are overturned, some experts argue that employers could potentially be held liable for gender discrimination if they deny benefits to an employee simply because he or she is in a same-sex marriage.  Employers should therefore take active steps to ensure that all existing policies and procedures provide equal treatment, benefits, and opportunities to employees regardless of the gender of their spouse.
  3. FMLA – Employers are not presently required to provide employees twelve weeks of unpaid leave in order to care for a sick same-sex spouse.  In fact, should employers elect to provide employees with such leave, it does not count toward that employee’s twelve weeks.  If DOMA is struck down, all employees will be allowed to take leave under FMLA to care for a same-sex spouse.
  4. 401(k) and 403(b) Plans – Employees with same-sex spouses participating in 401(k) and 403(b) plans that require spousal consent to name a non-spousal beneficiary are currently free to name anyone other than their spouse as the beneficiary.  If DOMA is overturned,  employees with same-sex spouses will gain the same spousal protects provided to all other employees. This raises questions regarding the status of non-spousal beneficiaries designated before DOMA was overturned.  Will these designations stand?  Will the newly-recognized same-sex-spouse automatically undo the prior designation and become the new beneficiary?  Employers should therefore encourage employees with same-sex spouses to revisit their beneficiary designations to ensure their beneficiary designations are as they intended.

A new medical disclosure policy at CVS Caremark has caused a huge stir.  Workers who use the company’s health insurance plan must submit personal information such as height, weight, blood pressure, body fat, and glucose levels.  This new policy will impact about 200,000 employees.

Those employees who participate will qualify for a reduction in their health insurance premium. Those who refuse to disclose must pay an additional $50 per month or $600 per year for the insurance program.  CVS is giving its workers until May 1, 2014 to record this information.  Costs for medical screenings are being paid by CVS.

CVS contends the plan is voluntary and that the results are provided to an independent company so that it never sees the information.  Many media outlets jumped on this story and reported this policy upon learning of this new requirement.  Proponents and opponents of wellness incentive programs have been entering the conversation since.

This wellness policy is consistent with companies trying to encourage a healthier workforce, which tends to result in decreased absences from work, improved employee retention, and increased productivity.  More and more companies are implementing wellness programs in their workplace that contain certain financial incentives for those employees who work out or do not smoke (or quit).  One study reported in The Harvard Business Review suggested $6 in savings for every dollar invested in this type of program. Thus far, courts have upheld such wellness programs that are tied to health plans and that are created to underwrite, classify, or administer risks under such plans.

When it comes to payment of wages, the old saying “better late than never” does not apply.  A case recently issued by the Massachusetts Supreme Judicial Court provides an important reminder of the need to pay terminated employees on the date of discharge for all wages owed, including unused accrued vacation time.

The case, Dixon v. City of Malden, 464 Mass. 446 (2013), involved a city employee who had fifty days of unused accrued vacation time amounting to more than $13,000 when he was terminated from his job as a nursing home administrator in 2007.  The employee’s final paycheck did not include payment for these unused vacation days.  (At the time, the city had a policy that employees terminated for fault would not be paid for unused vacation time—a policy that has since been rendered invalid under Electronic Data Systems Corp. v. Attorney General, 454 Mass. 63 (2009).  The mayor, perhaps intending to avoid a lawsuit, authorized the continuation of the employee’s salary and benefits for another two months after his termination, to the tune of nearly $20,000.  In his testimony at trial, the mayor described the salary continuation as “an attempt to settle [the plaintiff’s] claims.”  However, at the time the additional salary payments were being made, there was no indication that the payments were meant as compensation for the unused vacation time.  In fact, the last paystub the employee received when the salary continuation ended still reflected a vacation balance of fifty days.

The Superior Court judge who heard the case found that, by not paying all wages due on the termination date, the city had not complied with the Wage Act.  However, the Superior Court judge awarded no damages because he found that, after taking the salary continuation into account, the employee “came away with more from the city than was owed.”

On appeal, the Supreme Judicial Court reversed the Superior Court’s judgment and held that the city’s failure to pay unpaid wages on the day of discharge “cannot be mitigated by gratuitous, after-the-fact payments.”

The SJC has adopted the position of the Attorney General, as stated in Advisory 99/1, that the Massachusetts Wage Act requires that terminated employees be paid for earned, but unused vacation time on the day of their discharge.  The SJC held that failure to pay all wages due on the day of discharge is a violation of the Wage Act that results in damages, even if the employer pays all of the wages owed before a claim is filed.  In a footnote, the Court noted that if the city had designated all or a portion of the salary continuation as payment for unused vacation time, the city might have been able to use those payments to offset some of the plaintiff’s damages.  But because the salary continuation was not specifically identified as repayment for the unused vacation time, the SJC rejected the city’s attempts to recast the payments as such retrospectively.  The Court also rejected the city’s argument that awarding additional damages to an employee who already received almost $20,000 in salary continuation would result in a windfall to the employee.  Rather, the Court pointed out that, in wage cases, just like with employee misclassification, “the ‘windfall’ the Legislature appeared most concerned with is the ‘windfall’ that employers enjoy from the … avoidance of holiday, vacation, and overtime pay.”

This case serves as a clear warning to employers to ensure that their policies relating to final paychecks for terminated employees comply with the law, and that those policies are consistently followed in every case.  As the Court observed, the Wage Act imposes “strict liability” on employers who must “suffer the consequences” of violations regardless of intent.  And after the 2008 amendment to the Wage Act, those consequences include a mandatory award of triple damages, attorney’s fees and costs.

The U.S. Citizenship and Immigration Services (USCIS) published a revised Employment Eligibility Verification Form I-9 for use on March 8, 2013.  Form I-9 is used for verifying the identity and employment authorization of individuals hired for employment in the United States. All U.S. employers must ensure proper completion of Form I-9 for each individual they hire for employment in the United States. This includes citizens and noncitizens.

According to the USCIS, improvements to Form I-9 include new fields, reformatting to reduce errors, and clearer instructions to both employees and employers. The Department of Homeland Security published a Notice in the Federal Register informing employers about the new Form I-9.

Effective 03/08/13, employers should begin using the newly revised Form I-9 (Rev. 03/08/13)N for all new hires and reverifications. Employers may continue to use previously accepted revisions (Rev.02/02/09)N and (Rev. 08/07/09) Y until May 7, 2013. After May 7, 2013, employers must only use Form I-9 (Rev. 03/08/13)N. The revision date of the Form I-9 is printed on the lower left corner of the form. Employers should not complete a new Form I-9 for current employees if a properly completed Form I-9 is already on file.

The revised forms are available in English and Spanish online at www.uscis.gov. To order forms, employers may call USCIS toll-free at 1-800-870-3676. For downloadable forms and further information on USCIS programs, immigration laws, regulations, and procedures, please visit www.uscis.gov.

The United States District Court decision issued on February 22, 2013, Walker v. N.H. Administrative Office of the Court (“AOC”), in which it ruled on what portions of an employer’s investigation file should be turned over to the plaintiff.  The case was filed by the Administrator of the estate of the former clerk of a circuit court in Littleton alleging that the employee, Michele Walker, experienced harassment, discrimination and retaliation so severe that it caused her to commit suicide.  The AOC,  to which Walker formally complained, hired counsel and an independent investigator to conduct an investigation into the allegations of workplace discrimination and harassment.

The plaintiff filed a motion asking for the complete file of the investigator.  The AOC claimed that documentation from the file including the investigator’s handwritten notes and communications between the investigator and the AOC’s attorney were protected from disclosure due either to attorney client privilege or because they were work product prepared in anticipation of litigation.  The court ruled that all but a small portion of the documents at issue were subject to  discovery.  The privileged documents included:

  • Documents post-dating the investigation prepared in anticipation of litigation including portions of the investigation report and correspondence from the investigator contained her mental impressions and opinions.
  • Email communications from the attorney for the AOC to the investigator giving advice about what might be subject to disclosure in future litigation.

Most of the investigation report including the factual summaries of witness interviews (including that of Walker) had to be produced.  The court ruled that because the plaintiff who was the primary witness was deceased, there was no way the estate could realistically obtain a substantial equivalent to the evidence being sought.  The court also determined that the AOC could not use its investigation as both a sword and a shield. The AOC  claimed in its defense that it conducted a prompt and thorough investigation of Walker’s allegations; it could not now claim that the documentation which memorialized the investigation was not subject to discovery.

Employers who commission investigations and investigators themselves should assume that investigation files and communications between investigator and employer representatives will be discoverable in future litigation.  If  one is going to seek to shield a particular document or category of documents from discovery, counsel should be included in the communication.  The documents should be marked  “Confidential/Attorney-Client Privileged.”   Efforts should be made to segregate privileged communications from the rest of the file and mark them as such.   This will not guaranty that the document will not have to be produced in the future,  but it might help to show that the intent in creating them was to prepare for a possible lawsuit.

The Equal Employment Opportunity Commission recently reported retaliation under all statutes as the most frequently filed discrimination charge in fiscal year 2012.  Race and sex discrimination were the next most frequent charges. The statistics reflect charges of employment discrimination filed for statutes enforced by the EEOC.

The EEOC received almost 100,000 charges of discrimination in the fiscal year that ended September 30, 2012.  Of the charges received, retaliation charges filed under all the discrimination statutes topped the list with 37,836.   Following close behind were race discrimination charges with 33,512 and sex discrimination charges with 30,356.  Retaliation has consistently held the highest spot since 2009 when it overtook race charges.  GINA charges increased in 2012 but remained the lowest reported charge filed with 280.

EEOC charge receipts for Massachusetts totaled 426 for FY 2012.  The EEOC received 143 charges for retaliation for all statutes, along with 139 for sex, 137 for age, and 128 for disability.

EEOC charge receipts for New Hampshire totaled 59 for FY 2012.  Disability topped the charges with 28, followed close behind with retaliation for all statutes at 20, sex at 16, and age at 14.

The EEOC received $44.2 million through its litigation program in monetary benefits in FY 2012.  $34.3 million of that monetary recovery was for Title VII discrimination charges.

Judge Cornelius Moriarty of the Worcester Superior Court recently found that unused personal time is included within the definition of “wages” under the Massachusetts Wage Act, G.L. c. 149, § 148.

The case, Donna Byrnes v. Konstantina B. Lukes et al., (Docket No. WOCV200901403, Sept. 27, 2012), involved various claims arising out of the termination of a teacher’s employment.  Among other things, the plaintiff asserted a claim under the Wage Act seeking to recover payment for 1.5 unused personal days.  The employer opposed the claim on the grounds that payment for unused personal days is not “wages” under the Wage Act.

As Judge Moriarty noted in his opinion, the Wage Act does not expressly define the term “wages.”  He observed, however, that in construing the Massachusetts Equal Pay Act, the Supreme Judicial Court has held that “wages” includes “all forms of remuneration for work performed,” suggesting an expansive view of what is covered.  Judge Moriarty rejected the argument that the language in the Wage Act expressly including holiday and vacation pay in the definition of “wages” somehow excludes personal days, which are not specified in the Act.  Judge Moriarty wrote that the references to holiday and vacation pay in the Act are “merely illustrative and not exclusionary.”

Based on his finding that unused personal days constitute wages, Judge Moriarty awarded the plaintiff $346.50 in damages.  This case was filed in 2009, at a time when the Wage Act provided for discretionary trebling of damages.  Due to a recent amendment ot the Act making treble damages mandatory, had the case been brought today, the plaintiff’s damages would have received three times as much for her claim.

While the Byrnes case is not binding precedent, it is still noteworthy as it reflects at least one judge’s analysis on the evolving issue of what is, and is not, included in “wages” under the Massachusetts Wage Act.

“Sticks and stone may break my bones”…but names in the workplace may cost you a fortune! The Proposed Workplace Bullying Law and its Likely Consequences for Massachusetts Employers.

When I was a newly minted attorney a superior once hurled the f-bomb at me because he did not like the answer I was giving to a legal question. He told me I had “a (expletive deleted) annoying way of never answering a question directly.” When I related the incident to another supervisor, he said the fellow had no business speaking to me that way.

As insulting as the incident was, should it provide grounds for a lawsuit? It very well may, if a certain bill – “[a]n Act addressing workplace bullying, mobbing, and harassment” – S. 916 -becomes law during the next legislative session on Beacon Hill.

Senate Bill 916 provides simply that “[n]o employee shall be subjected to an abusive work environment.” An “abusive work environment” is defined as “an employment condition where any employee, acting with malice, subjects another employee to abusive conduct so severe that it causes tangible harm to the target of the abusive conduct[.]” The term “tangible harm” is defined broadly as “psychological harm or physical harm.”

The term “abusive conduct” is defined to include: “repeated infliction of verbal abuse such as the use of derogatory remarks, insults and epithets; verbal or physical conduct of a threatening, intimidating or humiliating nature,” and sabotaging or undermining an employee’s work performance. Attempts to exploit an employee’s known psychological or physical vulnerability also qualify as abusive conduct under the proposed law.

The proposed bill makes the employer “vicariously liable” for an abusive work environment created by its employees. The “bullied” employee is given a “private right of action,” i.e., a right to sue the employer, and may be awarded punitive damages as well as attorneys’ fees. The Act also allows the bullied employee to sue a perpetrator individually.

While the intent of the Act may be laudatory – an aspirational condition referred to as the “Healthy Workplace” – the effect on Massachusetts businesses should S. 916 become law promises to be draconian. This is so because the proscribed activity is comprised of vague and  hazy behavioral concepts which may lend themselves well to the “I know it when I see it” subjective standard of analysis, but which tend to defy objective scrutiny and definition.

In the context of a lawsuit, the Act allows the employer several so-called affirmative defenses. For instance, where “[t]he complaint is based on an adverse employment action reasonably made for poor performance, misconduct, or economic necessity.” The term “adverse employment action” is defined nebulously as “an outcome which negatively impacts an employee.” This definition includes, but is not limited to, “termination, constructive discharge, demotion, unfavorable reassignment, failure to promote, disciplinary action, or reduction in compensation.”

Under the proposed statutory framework, the employer is left having to prove in court that the complained about conduct did not rise to the level of “bullying.” The employer is saddled with the burden of demonstrating that any “adverse employment action” was the result of legitimate business necessity, and not part of the unlawful employment practice complained of by the employee.

It is not too far a stretch to imagine that under the auspices of S. 916 the abusive conduct complained of – such as the sabotaging or undermining of an employee’s work performance – will become, from the plaintiff’s perspective, part and parcel of any adverse employment action such as “demotion, unfavorable reassignment, failure to promote,” and the like. Thus, a depression (a condition fitting the “tangible harm” definition) stemming from the failure to obtain that much-sought-after promotion may give rise to a civil suit. All plaintiff need do is allege that the failure to promote was motivated by malice or active ill will.

And it is unlikely that such a complaint would be amenable to disposition on a motion to dismiss. There are far too many complicated evidentiary issues put into play by the statute’s vague definitions – issues such as motivation, state-of-mind, degree of severity and the like, which are extremely unlikely to be determined one way or the other by a court reviewing initial allegations. A reviewing court is also empowered with the ability to order the offending conduct to stop, to reinstate the bullied employee, or to remove the offending party or bully from the workplace.

All of this means that the employer faced with a “bullying” lawsuit will be compelled to either settle-out quickly, or proceed with a very costly, time-consuming litigation process, the final outcome of which cannot be predicted given the extremely subjective nature of the “abusive work environment” concept intoned by the proposed law.

Ironically, under the present state of federal law, an employer may not be able to sufficiently protect itself via promulgation of an anti-bullying code of conduct.  The National Labor Relations Board ruled recently that employee handbook language which included a courtesy rule requiring employees to be “courteous, polite and friendly” to one another, and refrain from being disrespectful or using profanity, could be considered unlawful.

Massachusetts businesses are already confronted with a bramble bush of rules and regulations relative to the employer/employee relationship. Senate bill 916, while well-intentioned, promises to create an extremely difficult and unacceptably expensive  “walking on eggshells” work environment.

Employer liability for harassment in the workplace is before the U.S. Supreme Court.  On November 26, 2012, the Supreme Court heard oral argument in Vance v. Ball State University.  At issue is the scope of the “Supervisor” Liability Rule in discrimination cases under Title VII.  This is a long awaited case on who qualifies as a “supervisor” for purposes of establishing employer liability in the workplace context.

The determination of whether there is a basis for employer liability under Title VII depends on whether the harasser is a supervisor or a co-worker.  In Faragher v. City of Boca Raton, 524 U.S. 775 (1998), and Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998), the Supreme Court held that an employer is vicariously liable under Title VII for severe or pervasive harassment of an employee by a supervisor.  This Supervisor Liability Rule applies even if the employer is unaware of the discrimination.  On the other hand, if the employee’s harasser is a co-employee, the employer is not liable unless the employer was negligent in allowing the conduct.

In Vance, an African-American server in the Banquet & Catering Department at Ball State University complained that she was continually harassed at work due to her race by her co-workers.  One of those co-workers oversaw and directed plaintiff’s daily work but did not have the power to hire or fire plaintiff.  In upholding summary judgment for the employer, the Seventh Circuit held that harassment by an employee who was considered a supervisor by the employer because of the authority to direct and oversee the plaintiff’s daily work was not sufficient to make the employer strictly liable because the harasser did not have the power to take formal employment actions against the plaintiff.

Vance will decide a split in the Circuit Courts since Faragher and Ellerth.  The First, Seventh, and Eight Circuits limit the scope of “supervisor” liability to those harassers who have the power to hire, fire, demote, promote, transfer,  or discipline the victim.  The Second, Fourth, and Ninth Circuits expand liability to include harassment by those with oversight authority in the workplace generally.

A decision is expected before the end of the term in June 2013.  If the Supreme Court holds a “supervisor” includes the broader category of employees with authority to direct and oversee another employee’s daily work, employers could see an increase in claims of discrimination for hostile work environment.  Employers should continue to  implement anti-harassment training for all employees, including those with any supervisor or managerial job duties.

See Vance v. Ball State University, No. 11-556.