Massachusetts Employment & Labor Law Report

Supreme Judicial Court to Decide Validity of "No-Tipping" Policies

Failure to Require Confidentiality Agreement Dooms Misappropriation of Trade Secrets Claim

Disabled Veteran's USERRA Claim Survives Summary Judgment

CEO'S Statements Sufficient Basis to Overturn Employer's Summary Judgment Victory

Mandatory “Annual Bonus” Not A “Wage” Under The Massachusetts Wage Act

Supreme Judicial Court to Decide Validity of "No-Tipping" Policies

The Massachusetts Supreme Judicial Court (SJC) recently granted a request for direct appellate review on the issue of whether the Massachusetts Tip Statute, Mass. Gen. Laws ch. 149, § 152A (Tip Statute), allows employers to maintain "no-tipping" policies. The SJC's decision will impact hospitality and restaurant employers throughout Massachusetts. We are following the case closely and will report further developments.

By way of background, in December 2011 in the case Meshna v. Scrivanos (previously reported here), the Massachusetts Superior Court (Court) held that the Tip Statute does not bar employers from enforcing "no-tipping" policies for wait staff employees, so long as such policies are communicated effectively to customers. The plaintiffs in this case are wait staff employees who claim that they are required to refuse tips from customers, return to customers any tips left to them, or, when returning the money is not possible, to deposit the money in the register, to be retained by the company. The plaintiffs claim that after they filed the lawsuit, the defendant revised its policy and required employees to place money that could not be returned to customers into "abandoned change cups," to be used to discount the purchases of subsequent customers.

In response to the defendant's motion for judgment on the pleadings, the Court held that the Tip Statute does not bar "clearly and conspicuously announced" no-tipping policies, and that employers may require employees to return money to customers pursuant to such policies. However, the Court denied the defendant's motion because the plaintiffs' allegation that customers routinely leave or attempt to leave tips "supports an inference that at least a substantial number of defendant's customers do expect that money they leave will go to employees." The Court held that if customers reasonably believe that the money they leave is provided to employees, the defendant's practice of retaining the money (when employees are unable to return it to the customers) would violate the Tip Statute.

The litigation continued after the Court's ruling. In response to the defendant's motion for summary judgment, a different judge in the Court again held that the Tip Statute does not prohibit no-tipping policies, but certified this question to the Massachusetts Appeals Court. (The Court also certified a second related question.) The SJC granted the plaintiffs' request that it, not the Appeals Court, directly decide the issue. Although the parties have filed their briefs, the SJC has not yet scheduled oral arguments. The SJC has invited third parties to submit amicus briefs.

While the Tip Statute does not expressly prohibit no-tipping policies, employers seeking to implement such policies should seek legal counsel before doing so, and should consider delaying implementation of such policies until after the SJC issues its decision.

We will provide an update after the SJC holds oral arguments.

Failure to Require Confidentiality Agreement Dooms Misappropriation of Trade Secrets Claim

A recent Massachusetts Superior Court (Court) decision serves as a reminder that employers must take affirmative steps to protect information that they consider to be confidential and/or trade secrets.

In C.R.T.R., Inc. v. Lao, CRTR, which recycles and sells nonfunctioning electronics, sued two individuals who had a business relationship with the company for alleged misappropriation of trade secrets. Defendant Kenneth Lao worked for CRTR as an independent contractor and assisted in running CRTR. Kenneth also worked for another corporation at the same time. Defendant Jimmy Lao, Kenneth's uncle, was a customer of CRTR and was also in negotiations to acquire CRTR. Both Kenneth and Jimmy had access to CRTR's business records, including pricing information and customer names. CRTR, however, did not require Kenneth or Jimmy to sign a confidentiality agreement.

In August 2011, Jimmy wrote a demand letter to CRTR, alleging that CRTR was not providing the proper discount for the purchase of recycled electronics. At the same time, Kenneth resigned from CRTR. CRTR sued Kenneth, Jimmy and Jimmy's company, alleging that they had misappropriated CRTR's trade secrets, including pricing information and customer lists.

Defendants moved for summary judgment, arguing that (i) the records at issue were not trade secrets, and (ii) even if considered trade secrets, CRTR had not taken adequate steps to protect the confidentiality of the records. Defendants pointed to the fact that CRTR had not required them to sign a confidentiality agreement.

The Court found that there was sufficient evidence that the records at issue were trade secrets. The Court relied on company testimony that competitors could use pricing information and customer names to offer better pricing to CRTR's customers, and that the business records were not known to others outside of CRTR's business.

However, the Court found that CRTR did not take reasonable steps to protect the records. Most notably, the Court found that CRTR never required Kenneth or Jimmy to sign a confidentiality agreement. According to the Court, in order to maintain a misappropriation of trade secrets claim a plaintiff must warn the persons to whom trade secrets have become known, preferably in writing, that the information is confidential and that they are expected to protect its confidentiality. While some CRTR employees testified that they knew that the records were confidential, CRTR never told them so, never drafted a confidentiality policy, and never took any steps to prevent unauthorized disclosure. Because CRTR could not establish sufficient protective measures, the Court dismissed the trade secrets claim.

The Court's decision shows how important it is for companies to use confidentiality agreements, policies and/or other affirmative steps to protect confidential information Without taking appropriate measures, an employer may have no recourse if an employee or third party misuses information.

Disabled Veteran's USERRA Claim Survives Summary Judgment

In Angiuoni v. Town of Billerica, the U.S. District Court for the District of Massachusetts (Court) denied the defendants' motion for summary judgment on a former disabled veteran employee's claim that the Town of Billerica and its Chief of Police violated the federal Uniformed Services Employment and Reemployment Rights Act, 38 U.S.C. § 4311 (USERRA), when it terminated his employment. As more military personnel return home from military service abroad, employers and their managers must be aware of the rights and protections afforded to them under USERRA and other statutes.

In 2008, the U.S. Army Reserve honorably discharged Joseph Angiuoni due to a service-related back injury. In April 2009, Angiuoni became a probationary officer in the Billerica Police Department (Department), and he was classified as a disabled veteran under the Massachusetts Civil Service Statute, Mass. Gen. Laws ch. 31, § 26, et al. After a one year probationary period, Angiuoni would have had the opportunity to become a tenured officer. Under the Civil Service Statute, a tenured officer who is a disabled veteran receives preference over all other offers in the event of layoffs, regardless of seniority. Angiuoni's training did not go well, and on several occasions he failed to follow police procedures.

At about the time the Department hired Angiuoni, other police officers, including Angiuoni's supervisor, began to fear that there would be layoffs. Angiuoni claimed that his supervisor said that it was unfair that Angiuoni might receive preference over the supervisor because of Angiuoni's disabled veteran status.

In November 2009, Angiuoni's supervisor and two other managers submitted their evaluation of Angiuoni's performance. Angiuoni's supervisor and another manager gave Angiuoni a negative evaluation, while the third manager's evaluation was positive. The Department failed to provide the evaluations to Angiuoni at that time, placed him on administrative leave (without informing the union of the meeting or Angiuoni of his right to union representation), and the Town ultimately terminated Angiuoni's employment on November 30, 2009 after a Town hearing. Angiuoni sued the Town and the Chief, alleging, among other things, that they violated USERRA.

In response to the defendants' motion for summary judgment, the Court found that the supervisor's alleged statements sustained Angiuoni's burden of showing that his military service was a motivating factor in his termination—even though there was no evidence that the Chief or anyone else in the Town harbored anti-military animus—because an employer can be liable if a supervisor "performs an act motivated by anti-military animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action." The Court also ruled that the defendants did not show that they would have terminated Angiuoni regardless of his veteran status because of the defendants' admission that the termination decision was based, in part, on the supervisor's negative evaluation. Finally, the Court determined that the Department's failure to provide the evaluations to Angiuoni until after the termination permitted an inference of pretext.

While veteran status discrimination claims are not as prevalent as other claims of discrimination, this case serves as a reminder of employers' obligations to veterans and military personnel under USERRA. Employers should review their anti-harassment trainings and policies to ensure that they cover protections provided by USERRA and similar state statutes.

CEO'S Statements Sufficient Basis to Overturn Employer's Summary Judgment Victory

The U.S. Court of Appeals for the First Circuit (First Circuit) recently overturned an employer's summary judgment victory in a Fair Labor Standards Act (FLSA) retaliation case, finding that the CEO's alleged repeated statements that he wanted to fire the lead plaintiff in a collective action could have created an awareness among decision-makers of the CEO's desire to retaliate, even though there was no direct evidence that the CEO had any involvement in the decision to terminate the plaintiff, or that the decision-makers were even aware of the CEO's alleged statements.

In Travers v. Flight Servs. & Sys., Inc., a skycap recruited coworkers to join a collective action alleging failure to pay minimum wage. In multiple conversations with the plaintiff's then-supervisor and other witnesses, the CEO allegedly complained about the expense of the lawsuit and stated a desire to terminate the plaintiff's employment. Subsequent to those alleged statements, a customer complained that the plaintiff had solicited a tip in violation of company policy. The plaintiff admitted that he had advised the customer that tips were optional and not included in the established fees, and that he said something to the effect of "I'm sorry you weren't happy with the service" when the customer declined to tip. The company terminated the plaintiff, citing a policy stating that tip solicitation was a terminable offense. The CEO was not directly involved in that decision.

The U.S. District Court for the District of Massachusetts granted summary judgment in the company's favor. On appeal, the First Circuit overturned that decision, finding that a reasonable jury could conclude that the CEO's alleged comments – which came from "the apex of the organizational hierarchy" – had become well-known to others within the organization. Furthermore, the First Circuit found that there was insufficient evidence that the termination would have occurred regardless of the CEO's alleged animus. The Court noted that the company's policy did not bar employees from informing customers that tips are appreciated, and that the company had not terminated other employees who had allegedly solicited tips.

The First Circuit limited its holding, stating that while the evidence did not conclusively establish an inference of retaliation, the evidence was "not so clear as to place beyond reasonable challenge" the company's assertion that it would have terminated plaintiff's employment regardless of the CEO's alleged comments.

The Travers case is a cautionary tale that the statements of an executive at the "apex of organizational hierarchy" may be considered evidence of retaliatory animus, even if the executive plays no role in the decision-making process and there is no direct evidence that the decision-makers are actually aware of the executive's comments. However, this fact-specific decision should not foreclose summary judgment in cases involving stray comments if the employer can present stronger comparators and other persuasive evidence that the discipline would have occurred regardless of any alleged retaliatory intent.

Mandatory "Annual Bonus" Not A "Wage" Under The Massachusetts Wage Act

In Boesel v. Swaptree, Inc., the Massachusetts Superior Court (Court) held that a mandatory Annual Bonus was contingent on continued employment, and therefore was not a "wage" under the Massachusetts Wage Act, M.G.L. ch. 148, § 148 (Wage Act).

The plaintiff, Gregory Boesel, was Swaptree's founder and former CEO. According to the complaint, in March 2010 Boesel resigned as CEO and entered into a separate employment agreement where he accepted the position of President, while continuing to be a board member and stockholder. Under the employment agreement, Boesel received a base salary and was eligible to receive a mandatory Annual Bonus of $25,000 per year and a discretionary bonus of up to $100,000 based on achievement of performance goals. Both bonuses were payable "at the same time as such bonuses for the CEO are payable." The CEO's bonuses were payable after the calendar year ended.

Swaptree did not pay Boesel an Annual Bonus in 2011 or a discretionary bonus for 2010. Boesel demanded payment of the bonuses. After an unsatisfactory response from the company, Boesel filed a complaint against Swaptree and five individual defendants (all directors/executives of Swaptree) with the Attorney General's office, and then filed suit in the Court. Boesel's complaint also included other claims, such as failure to pay earned vacation, breach of fiduciary duty and intentional interference with contractual relations. While Boesel was in the process of filing the suit, Swaptree paid him his 2010 Annual Bonus in December 2011 and paid his 2011 Annual Bonus in March 2012. Boesel proceeded with his claims, alleging that the payment of the bonuses was untimely under the Wage Act.

Boesel's claims against Swaptree were dismissed due to an arbitration agreement. Boesel continued with his claims against the individual defendants and moved for summary judgment on the Wage Act claim. The individual defendants cross-moved for summary judgment.

The Court examined the employment agreement and found it to be clear and unambiguous. The Court noted that Boesel's salary and Annual Bonus were defined in separate paragraphs and contained different terms with respect to when the amounts were "payable." The Annual Bonus was payable only on a single date after the calendar year ended, and the Court determined that the word "Annual" meant that payment of the bonus was contingent on Boesel being employed for a full calendar year. The Court concluded that the Annual Bonus was not a "wage" because payment was attached to a contingency (continued employment). The Court cited to earlier decisions from the Supreme Judicial Court and U.S. Court of Appeals for the First Circuit that held that payments attached to a contingency are not "wages" under the Wage Act.

While this case is helpful to employers seeking avoid to avoid Wage Act claims (and mandatory treble damages and attorneys' fees), employers should review employment agreements to ensure bonuses (or other payments) that are contingent and/or discretionary are unambiguously described as such.

Table of Cases

Meshna, et al. v. Scrivanos, et al., SJC-11618.
C.R.T.R., Inc. v. Lao, et al., No. 2011-962 (Mass. Super. Ct. Dec. 30, 2013)
Angiuoni v. Town of Billerica, et al., No. 11-11661-NMG (D. Mass. Feb. 5, 2014)
Travers v. Flight Servs. & Sys., Inc., No. 13-1438 (1st Cir. Dec. 12, 2013)
Boesel v. Swaptree, Inc., et al., No. 11-04537 (Mass. Super. Ct. December 23, 2013)