Newsletter
Dec 13, 2013
Massachusetts Employment & Labor Law Report
Massachusetts Commission Against Discrimination Issues 2012 Annual Report
District Court Adopts Broad Definition of "Whistleblower" Under Federal Dodd-Frank Act
Teacher's Advocacy for Disabled Students Insufficient Basis for Associational Discrimination Claim
Massachusetts Commission Against Discrimination Issues 2012 Annual Report
The Massachusetts Commission Against Discrimination (MCAD) recently issued its 2012 Annual Report. The Report provides insight as to current trends at the MCAD, as well as its future objectives.
Regarding 2012, the Report details the following:
- The MCAD received 3,186 new complaint filings in 2012. 1,1079 (19.9%) alleged disability discrimination, 1022 (18.8%) alleged race discrimination, 951 (17.5%) alleged sex discrimination, and 902 (16.6%) alleged retaliation. According to the Report, "[r]etaliation claims went up once again in 2012, showing an uptick pattern in the last several years."
- There were 4,450 open cases at year's end. Of those open cases, 808 (15%) were in active litigation after a probable cause finding. The Report notes that the case inventory for active litigation has increased and "is directly related to the rise in the probable cause rate."
- Of the 2,207 cases disposed in 2012 (up from 2,078 in 2011), 569 resulted in a Probable Cause (PC) determination, a 26% PC rate. According to the MCAD's previous annual reports, the PC rate was 25% in 2011, 22.3% in 2010 and 17.1% in 2009.
- The Report confirmed our anecdotal experiences of high investigator caseloads. According to the Report, the average investigator caseload was 250 cases. Each investigator was assigned approximately 17 new cases per month, while closing out an average 12 cases per month. This suggests that the investigators' caseloads will increase if new cases continue to outpace closed cases.
- Despite this high caseload, according to the MCAD the average case completion time dropped from 22 months in 2010 to less than 18 months in 2012.
- Commission counsel settled 132 cases through conciliation, resulting in awards of approximately $1,739,665. In 2011, Commission counsel settled 116 cases through conciliation.
- 228 voluntary early mediations occurred, and 155 mediations resulted in settlement. The total amount of money received by individuals via mediation was approximately $1,995,972.
The Report also provides valuable insight regarding the MCAD's future focus and objectives. Although issued late in 2013, the Report highlights the following objectives for 2013 (and beyond):
- Issuing revised sexual harassment, disability and parental leave regulations.
- Development of an online filing system for employment-related complaints.
- Strengthening collaborative efforts with community groups, immigrant communities, traditional civil rights groups such as local human rights commissions, and other advocacy groups.
- Continuing to enhance outreach and collaboration with municipal governments, the business community, and underserved communities.
The creation of an online filing system would be a significant change for the MCAD and likely would result in an increase in new complaints. Additionally, the MCAD's collaborative efforts with other agencies and groups could also impact the number of cases filed.
We will continue to monitor and provide updates on the MCAD's activities.
District Court Adopts Broad Definition of "Whistleblower" Under Federal Dodd-Frank Act
In Ellington v. Giacoumakis, et al., the United States District Court for the District of Massachusetts (Court) held that the federal Dodd-Frank Act (Dodd-Frank) prohibits employers from retaliating against employees who make internal complaints of securities laws violations. In so holding, the Court rejected the employer's argument that Dodd-Frank's whistleblower protections extend only to employees who complain directly to the SEC.
The plaintiff, Richard Ellington, was a financial advisor at New England Investment & Retirement Group (NEINV), a registered investment advisor whose products include reports evaluating publicly traded securities. According to the complaint, in July 2010, Ellington "came to believe" that NEINV was distributing misleading reports to clients. He shared his concerns with defendant Giacoumakis, NEINV's principal and sole shareholder. Several days later, Ellington submitted a report detailing his suspicions to NEINV's compliance officer, Commonwealth Financial Network (CFN), which began an investigation into Ellington's claims. Ellington alleged that several days later Giacoumakis approached him and accused him of being the whistleblower that instigated the investigation. In anticipation of being fired, Ellington emailed documents from NEINV files to himself using CFN's confidential email system. On August 3, 2013, Giacoumakis terminated Ellington, "ostensibly for emailing confidential NEINV information" outside of the company's networks to his personal email account.
After his termination, Ellington voluntarily assisted the SEC with an investigation of NEINV. The SEC found that NEINV violated several securities regulations and imposed civil penalties against the company. Ellington then sued NEINV and Giacoumakis, alleging that they terminated him in violation of Dodd-Frank's whistleblower provisions.
The defendants moved for judgment on the pleadings, arguing that Dodd-Frank's whistleblower protections apply only to employees who complain of securities violations to the SEC. Because Ellington did not complain to the SEC until after he was terminated, the defendants argued, he did not meet the statute's definition of a whistleblower. In the alternative, the defendants asserted that Dodd-Frank was not in effect when Ellington complained of the violations.
The Court rejected the defendants' arguments and found that Ellington's complaints to Giacoumakis and CFN qualified as protected activity under Dodd-Frank. The Court reasoned that although § 78u-6(a)(6) of Dodd-Frank defines a whistleblower as "any individual who provides . . . information relating to a violation of the securities laws to the Commission," Congress intended Dodd-Frank to protect employees who make complaints to supervisors or outside compliance officers. Indeed, § 78u-6(h)(1)(A)(iii) states that it protects employees from retaliation for "making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002 . . ." Sarbanes-Oxley explicitly protects certain internal disclosures. According to the Court, if Dodd-Frank protected only those employees who report complaints to the SEC, then § 78u-6(h)(1)(A)(iii) would be invalid. Instead, the Court followed the SEC's own guidance and adopted a broader interpretation of whistleblower.
In reaching its conclusion, the Court declined to follow the Fifth Circuit Court of Appeals, which held that Dodd-Frank applies only to disclosures made to the SEC. This case puts employers on notice that an employee's internal complaints about potential securities laws violations may be considered protected activity under Dodd-Frank, at least within the District of Massachusetts. Employers should take precautions to ensure that any employment actions taken against an employee who has made an internal complaint are not retaliatory, or cannot be misconstrued as such.
First Circuit: Initial Contact By Former Customers Does Not Automatically Bar Claims of Breach of Non-Solicitation Agreement
In Corporate Technologies, Inc. v. Harnett et al., the U.S. Court of Appeals for the First Circuit (Court) refused to adopt a bright line rule that would automatically prohibit claims of breach of a non-solicitation agreement when the initial contact is initiated by the customers. The case serves as a cautionary tale for employers who hire employees subject to valid non-solicitation agreements.
Brian Harnett, an IT salesman, signed a non-solicitation agreement when he joined Corporate Technologies, Inc. (CTI) in 2003. The agreement prohibited him from soliciting business from CTI's customers for a one year period following his departure from the company. In 2012, Harnett left CTI and joined its direct competitor, OnX. On Harnett's first day, OnX sent out an email to approximately 100 potential clients (40% of which were or had been CTI customers), informing them of Harnett's new association with OnX. The evidence showed that Harnett communicated with at least four of his CTI customers while at OnX. These customers reached out to Harnett after they received the email blast from OnX.
CTI filed for a preliminary injunction against both Harnett and OnX, claiming that Harnett violated his non-solicitation agreement and that OnX had interfered with Harnett's duties under the agreement. The U.S. District Court for the District of Massachusetts granted a preliminary injunction against Harnett but declined to do so against OnX. Harnett appealed and argued that because the initial contact had come from his former clients, and not him, he had not violated the non-solicitation agreement.
The First Circuit noted that it would look to sister jurisdictions and public policy considerations because the Massachusetts Supreme Judicial Court (SJC) had not yet confronted the issue. The First Circuit found that in the employment context, restrictive covenants are intended to "afford the original employer bargained-for protection of its accrued good will ….[and] according decretory significance to who makes the first contact would undermine this protection because that factor, standing alone, will rarely tell the whole tale." The First Circuit concluded that, if confronted with the question, the SJC would hold "that a per se rule vis-à-vis initial contact ha[d] no place in th[e] equation" in determining whether a violation of a non-solicitation agreement had occurred. Instead of a bright line rule, the First Circuit held that initial contact should be only one of the factors that courts look to when drawing the line between improper solicitation and permissible acceptance of business.
The First Circuit found that the District Court did not abuse its discretion in granting a preliminary injunction against Harnett based on the evidence of Harnett's meetings and communications with the CTI customers following the blast email by OnX. The District Court concluded that this evidence permitted a plausible inference that Harnett was enticing them to do business with OnX and not CTI. Given these activities, the First Circuit held that it was reasonable to infer that the email from OnX was "part and parcel of a pattern of solicitation."
Although the First Circuit decision is not technically binding on Massachusetts state courts, it provides guidance for employers who hire employees subject to non-solicitation agreements. Employers should think carefully before sending "announcement" emails to customers with which the employee worked at his prior company, as a court could later find that the email was part of a "pattern of solicitation." Employers also should develop plans regarding how to respond to requests that are truly initiated by the employee's former customers.
Teacher's Advocacy for Disabled Students Insufficient Basis for Associational Discrimination Claim
In Perez v. Greater New Bedford Vocational Technical School District, the U.S. District Court for the District of Massachusetts (Court) dismissed a claim of associational disability discrimination under Massachusetts General Laws c. 151(B), § 4(16) (Chapter 151B). The Court held that an alleged adverse employment action occurring after advocacy for disabled students could not ground a claim of associational disability discrimination. Although this case further defines the limited circumstances in which Massachusetts courts will allow associational disability discrimination claims, it serves as a reminder for all Massachusetts employers to be cognizant of associational discrimination claims generally and demonstrates the creative arguments being advanced by plaintiffs and their counsel.
According to the complaint, in July 2008, the Greater New Bedford Vocational School District (School District) hired Perez as the Director of Special Education. Perez claimed that when she started her new job the school was not compliant with special needs laws. According to Perez, the School District did not support her efforts to address the non-compliance and gave her a negative performance review. Perez claimed that she prepared a grant request under the Individuals with Disabilities Education Act, but School District asked her to amend it in a way that would allow the hiring of a technician to assist in school-wide computer needs, rather than one trained specifically to aid disabled students. When Perez refused to amend the grant, the School District faulted her for being uncooperative. In February 2010, the School District notified Perez that the principal did not intend to renew her contract for the next school year. In May 2010, the School District placed Perez on administrative leave for the rest of the 2009-2010 school year and did not rehire her.
Perez filed a lawsuit alleging, among other things, that the School District engaged in associational disability discrimination when it failed to rehire her because of her "association with and advocacy on behalf of disabled students at the school." The School District moved to dismiss this count, arguing that Chapter 151B does not extend so far as to allow associational disability discrimination claims based on an employee's advocacy for disabled students. The Court agreed.
Although the Massachusetts Supreme Judicial Court (SJC) recognized claims of associational disability discrimination under Chapter 151B in its 2013 Flagg v. AliMed, Inc. decision, the Court noted that the SJC limited its holding to the circumstances of that case, where an employee alleged discrimination based on the disability of his spouse. Further, in a concurring opinion in Flagg one Justice noted that "the court does not decide in this case whether associational discrimination . . . will be interpreted to extend beyond the type of case at issue here."
Interpreting the SJC's reasoning in Flagg, the Court held that Chapter 151B does not cover claims of associational disability discrimination based on advocacy for disabled students. The Court reasoned that, unlike the plaintiff in Flagg, Perez did not claim that the School District regarded her as having a disability by proxy. Additionally, Perez did not claim that the School District acted because of her "association with any specific disabled child." The Court dismissed Perez's claim.
Although this decision limits the reach of associational disability discrimination claims under Chapter 151B, the scope of these claims is developing and remains unclear. In this case, the result could have (but not necessarily) been different had Perez claimed that the School District acted against her because of her association with a specific child. In certain circumstances, a court could extend associational disability discrimination claims to non-familial relationships.
District Court Suggests That Plaintiff Must Prove "But For" Causation In FMLA Retaliation Case - But Allows Claim To Proceed To Trial Based On Supervisor's Alleged Statements
In Chase v. United States Post Service, et al., the United States District Court for the District of Massachusetts (Court) suggested that the "but for" causation standard, applied in Title VII retaliation cases pursuant to the U.S. Supreme Court's 2013 decision in University of Tex. Sw. Med. Ctr. V. Nasser may also apply in FMLA retaliation cases. The Court allowed the retaliation claim to proceed, however, based on the evidence of pretext.
Plaintiff Chase worked for the United States Post Office (USPS). He alleged that in 2006, after he returned to work from an on-duty injury, his supervisor stated on the branch's loudspeaker, "Will Bob Mr. Chase, the injury fraud specialist, please report to the office." In July 2010, Chase again was injured on duty. He was granted FMLA leave; in 2011, he was eligible for FMLA leave through March. Chase alleged that when he went to work to file injury-related paperwork, his supervisor stated on the loudspeaker, "There's a job posted on the bulletin board for an injury compensation specialist since you're the biggest fraud when it comes to injuries."
In September 2010, police arrested Chase and his brother, who also worked for USPS, and charged Chase with possession of cocaine with intent to distribute and conspiracy to violate drug laws. The supervisor placed the brother on emergency off-duty status, but did not do the same with Chase. According to Chase, in fall and early winter 2010, his supervisor pressured him to return to work and told Chase that he agreed that the criminal charges were baseless. In January 2011, the supervisor began the process of terminating Chase. The supervisor requested from USPS a removal notice for Chase for "failure to perform duties in a satisfactory manner," allegedly based on the seriousness of the criminal charges, related negative publicity and Chase's refusal to answer questions at a pre-disciplinary interview. Chase's termination was effective September 30, 2011. Chase admitted in his deposition that he would not have been able to return to work until at least November 2012.
Chase sued USPS and his supervisor alleging, among other things, FMLA retaliation based on the theory that the supervisor used Chase's arrest as a pretext to terminate him for taking FMLA-protected leave. The defendants moved for summary judgment on all claims.
The Court denied the motion on Chase's retaliation claim, finding a genuine issue as to whether the supervisor's reason for terminating Plaintiff – his arrest – was a pretext for retaliation. The Court conceded that, in light of the U.S. Supreme Court's Nasser decision, there was a strong argument that Chase must establish "but for" causation in order to prove his retaliation claim; that is, he must prove that he would not have been fired "but for" his supervisor's retaliatory animus. This is a higher standard than in discrimination claims, where an employee can satisfy his burden by proving that discriminatory animus was merely a "motivating" or "substantial" factor in the adverse action.
According to the Court, Chase met his burden even if the higher standard applied. The Court noted the "ample" statements by the supervisor suggesting that he harbored animus against employees taking injury leave. The Court also found persuasive the timing of the decision – five months after Chase's arrest – and evidence that the supervisor did not terminate other employees who were arrested on drug-related charges.
While this case is helpful to employers in that it suggests that the higher "but for" causation standard applies in FMLA retaliation claims, it demonstrates that alleged statements by supervisors can be used to meet even the higher standard. Managers should be trained on how to communicate with employees concerning workplace issues.
Table of Cases
Ellington v. Giacoumakis, et al., No. 13-11791-RGS (D. Mass. Oct. 16, 2013)
Corporate Technologies, Inc. v. Brian Harnett et al., No. 13-1706 (1st Cir. 2013)
Perez v. Greater New Bedford Vocational Technical School District, No. 13-11066-FDS (D. Mass. Nov. 13, 2013)
Chase v. United States Post Service, et al., No. 12-11182-DPW (D. Mass. Nov. 4, 2013)
Next Massachusetts Employment & Labor Law Report:
March 14, 2014