Massachusetts Employment & Labor Law Report - June

An Update on Massachusetts Non-Compete Legislation

Jilted Co-worker’s Animus Sufficient to Allege Title VII Violation

EEOC Provides Guidance on Workplace Accommodations for Religious Clothing and Grooming Practices

District Court Denies Summary Judgment in Unpaid Meal Break Case


 

An Update on Massachusetts Non-Compete Legislation 

In April of this year, Governor Deval Patrick introduced a sweeping economic growth bill (HB4045) which included a ban on employee non-compete agreements.  HB4045 has taken a somewhat convoluted path to date, and we wanted to update you on some notable twists and turns.

By way of background, HB4045 (in its original form) would ban employee non-competes in the Commonwealth with limited exceptions, such as agreements entered in connection with a sale of a business.  The bill would apply retroactively to agreements executed before the bill’s effective date, but would not affect other types of agreements such as non-solicitation agreements (prohibiting solicitation of customers or employees), non-disclosure agreements, forfeiture agreements, and employee agreements not to reapply for employment after termination.  The bill also included provisions adopting the Uniform Trade Secrets Act (“UTSA”), which would make Massachusetts the forty-ninth state to adopt some version of UTSA. 

In mid-May, another bill (HB4082), was introduced that removed those portions of HB4045 not dealing with trade secrets and non-competes, leaving only those sections that would adopt UTSA, repeal the current statutes regarding theft of trade secrets (Sections 42 and 42A of M.G.L. c. 93), and ban employee non-compete agreements.  HB4082 is virtually identical to the non-compete and UTSA provisions of Governor Patrick’s original HB4045 (which was recently stripped of the non-compete and UTSA provisions).  The introduction of HB4082 may have been due to concerns that the progress of HB4045 would be hindered by the wide scope of its provisions unrelated to employee non-compete agreements. 

On May 29, 2014, the Legislature’s Joint Committee on Economic Development and Emerging Technologies held a hearing on Governor Patrick’s original bill, HB4045, which, at the time of the hearing, still included the trade secrets and employee non-compete provisions.  Unsurprisingly, much of the testimony was devoted to these provisions.

As the New York Times reported on Sunday, many of those who testified at the hearing opined that employee non-competes stifle competition.  For example, several legislators spoke of constituents who they deemed “trapped” in jobs because of non-competes signed years earlier, and insinuated that many employees are “ambushed” with non-compete agreements after they have quit their former jobs and rejected other offers.  The Boston Globe and the Boston Herald have each recently published articles about the purported perils of employee non-compete agreements.

Others, however, noted their concern with the way the bill was drafted, and expressed skepticism that an outright ban on employee non-competes would have uniformly positive effects.  For example, some testified that notwithstanding the fact that California bans employee non-competes, and likely because of this prohibition, there is increased trade secrets litigation in that state (which is typically much more costly and time consuming than non-compete litigation).  Indeed, should this phenomenon occur in Massachusetts, some of those testifying noted that expensive trade secret litigation could bankrupt small employers and startups—the same group of employers that Governor Patrick’s original HB4045 (as well as HB4082) was purportedly designed to help.

Nevertheless, many of those who were opposed to the proposed ban on employee non-competes stated that they would be in favor of some form of non-compete reform (some citing with approval the compromise bill previously introduced by Senator William Brownsberger and Representative Lori Ehrlich in late 2012), but that an outright prohibition on the use of non-competes was simply a step too far.  The compromise bill, however, appears to be stalled if not dead on arrival.

In yet another twist, just last week Massachusetts House Speaker Robert DeLeo announced plans to file an economic development package that would be similar to Governor Patrick’s bill in many respects, but conspicuously omits any provision affecting the enforceability of non-competes.  According to the Boston Globe, Speaker DeLeo said that “he has heard from many more companies that oppose a ban on noncompete agreements than favor one, in the weeks since Patrick outlined his proposal.”  It remains to be seen which approach will carry the day.

Notwithstanding this uncertainty, employers with operations in Massachusetts should consult with experienced counsel and take steps to prepare themselves in the event HB4082 or a similar bill becomes law, in which case even previously executed non-compete agreements may be invalidated.  We will continue to monitor these bills, as well as any others that may be filed.
 

Jilted Co-worker’s Animus Sufficient to Allege Title VII Violation  

In a case of first impression, the United States Court of Appeals for the First Circuit held in Velázquez-Perez v. Developers Diversified Realty Corp., et al. that an employer could be liable under Title VII of the Civil Rights Act of 1964 (Title VII) for negligently allowing a female employee’s discriminatory animus to cause a male co-worker’s termination, even though the female employee was not the plaintiff’s supervisor. 

According to the plaintiff Antonio Velázquez-Perez, from June 2007 through August 2008 he was an operations manager for Developers Diversified Realty Corp. (DDR).  During his tenure, the plaintiff often worked with Rosa Martinez, DDR’s HR Representative for Puerto Rico.  Part of Martinez’s responsibilities included advising management on HR issues, including employee discipline.  According to the plaintiff, he and Martinez enjoyed a good working relationship, which included some flirtatious communications, until April 2008, when Martinez attempted to initiate a romantic relationship.  The plaintiff claimed that Martinez began harassing him after he rejected her overtures, including threatening to have him fired, sending him angry and suggestive emails, criticizing him to his supervisors, providing a memorandum detailing her complaints of his performance to senior DDR officials, and ultimately recommending to his supervisors by email that he be terminated.  The plaintiff complained to his supervisors, and the plaintiff claimed that they responded by instructing him to send a conciliatory email to Martinez and even suggested that he should have sex with her.  Four days after Martinez sent the email recommending termination, DDR terminated the plaintiff’s employment.

The plaintiff filed suit in the United States District Court for the District of Puerto Rico, alleging, among other things, that DDR discriminated against him on the basis of sex by terminating him and subjecting him to a hostile work environment in violation of Title VII.  The District Court granted summary judgment against the plaintiff, and he appealed. 

Despite finding that Martinez’s conduct was not sufficiently severe or pervasive to create a hostile work environment and that no reasonable jury could find that Martinez was the plaintiff’s supervisor under the Supreme Court’s holding in Vance v Ball State University, the First Circuit nevertheless found that DDR could be liable for negligently allowing Martinez’s discriminatory acts to cause the plaintiff’s termination.  Noting that the U.S. Supreme Court has not ruled on the precise question of whether employer liability premised on a finding of negligence is limited to hostile workplace claims, and not disparate treatment claims, the First Circuit found “no basis for applying that distinction to permit a negligent employer to escape (or incur) liability on one type of claim but not the other.”  The First Circuit reasoned that an employer “should be liable if it fires the victim based on complaints that it knew (or reasonably should have known) were the product of discriminatory animus.”  The Court ruled that an employer may be held liable under Title VII if: “the co-worker acted, for discriminatory reasons, with the intent to cause the plaintiff’s firing; the co-worker’s actions were in fact the proximate cause of the termination; and the employer allowed the co-worker’s acts to achieve their desired effect though it knew (or reasonably should have known) of the discriminatory motivation.”  Because a reasonable jury could find that Martinez’s conduct satisfied these requirements, the First Circuit found that summary judgment for the employer was inappropriate.

This decision expands the scope of Title VII’s protections.  It serves as a reminder to employers that they should consider the motives of complaining employees before taking any adverse action against a co-worker to ensure that discriminatory animus does not infect the employer’s decision.  Proper investigation of all complaints is key to avoiding liability.


EEOC Provides Guidance on Workplace Accommodations for Religious Clothing and Grooming Practices

The EEOC recently issued a new Guidance and Fact Sheet on “Religious Garb and Grooming in the Workplace:  Rights and Responsibilities.”  Although The EEOC’s view is not necessarily the final word on these issues, the Guidance provides valuable insight for employers on the agency’s view on the heavily-litigated issues of religious clothing and grooming in the workplace.

The Guidance confirms religious discrimination law fundamentals, such as the prohibition of religious-based disparate treatment and harassment, and retaliation based on a religious accommodation request.  Employers must reasonably accommodate sincerely-held religious beliefs unless doing so would cause undue hardship, defined as a “more than de minimis” cost or burden.  The Guidance applies these principles to religious clothing and grooming practices.  An employer must reasonably accommodate a request for a religious accommodation—even if it violates the employer’s usual dress and grooming policy—unless it can show the accommodation would cause an undue hardship.  Because there is no one-size-fits-all answer, employers must weigh each request on a case-by-case basis. 

Sincerely Held Religious Belief.  The Guidance provides that Title VII protects all sincerely-held religious beliefs, even if they are not part of any formal church or sect, are practiced by very few people, or seem illogical or unreasonable.  The law also protects religious practices that the employee recently adopted, or only practices during certain times (such as a religious holiday).  The EEOC takes the position that even “non-theistic moral or ethical beliefs as to what is right or wrong,” can be protected if “sincerely held with the strength of traditional religious views.”  The bottom line?  An employer considering denying an accommodation on the grounds that the request is not based on a sincere or religious belief should seek advice of counsel first.

Undue Hardship.  The EEOC states that coworkers’ disgruntlement or jealousy about a religious accommodation, or customers’ actual or perceived discriminatory preferences, are not sufficient reasons to deny a requested accommodation.  That means that the employer cannot, for example, put an employee who wears religious garb in a non-customer-facing role for fear of customers’ reactions to the attire, or deny an accommodation because other employees will be annoyed that they cannot have an exception for secular reasons.  The EEOC also notes that concern that an accommodation will damage the employer’s “image” or “marketing strategy” may not be sufficient to show undue hardship.

The EEOC acknowledges that an employer may be able to refuse a religious dress or grooming request based on workplace health, safety or security concerns, but warns that the requirement must be necessary to meet those concerns and that employers must consider whether there is any reasonable accommodation that would resolve the safety concern.  For example, a surgical instrument manufacturer that requires men to shave or trim facial hair in order to preserve a sterile environment may be able to reasonably accommodate an employee with a religious objection by allowing him to wear an extra face mask if that would cure the sterilization concern and comport with the religious belief.

Accommodations.  The EEOC offers suggestions for how employers might reasonably accommodate certain attire and grooming requests.  For example, an employer can accommodate an employee’s religious dress or grooming practice by offering to have the employee cover that attire or item at work, but only if the employee’s religious beliefs permit the covering.  Similarly, an employer that requires uniforms may be able to require the employee to wear a religious item in the company’s uniform colors, if doing so is consistent with the employee’s religious beliefs.

Notice.  The EEOC explains that an employee need not use any “magic words” to request an accommodation, but need only make the employer aware of a need for an exception to a policy for religious reasons.  The EEOC takes the position (currently being litigated in the courts) that even without any request, an employer may still be obligated to provide a reasonable accommodation if the employer believes the practice is religious and would require an exception from the employer’s policy.  Given the EEOC’s view, an employer who believes for any reason that an accommodation may be necessary (whether or not the employee has expressly asked for it), should seek guidance from legal counsel.

Minimize Risk.  The Guidance emphasizes some best practices that help employers minimize risk, including (a) training managers on responding to religious accommodation requests; (b) maintaining clear and compliant policies for handling religious accommodation requests; and (c) setting up a process for fact-specific analysis of each request.  Given the EEOC’s focus on this issue, employers faced with requests for a religious accommodation should consult with counsel with specific experience in this area of the law. 


District Court Denies Summary Judgment in Unpaid Meal Break Case

In Raposo v. Garelick Farms, LLC, the U.S. District Court for the District of Massachusetts denied the parties’ cross-motions for summary judgment on claims concerning automatic unpaid meal break deductions and alleged restrictions on employee activities during the meal breaks.  The case is a reminder that employers should be cautious in their use of automatic meal break deductions.

Plaintiffs Walter Raposo and Joseph Mingolla are former delivery drivers for Garelick Farms.  Garelick provided its drivers with two paid 15 minute breaks and one unpaid 30 minute meal break per shift.  Garelick automatically deducted 30 minutes of time from each shift to account for the meal breaks.  The plaintiffs claimed that the company’s records demonstrated that it deducted the full 30 minutes even when their breaks were less than 30 minutes.  The plaintiffs asserted that Garelick’s actions violated the Massachusetts Wage Act, M.G.L. c. 149, § 148 et al. (Wage Act), by failing to compensate them for all hours worked (the “uncompensated time theory”).  Garelick argued that the plaintiffs’ claims of nonpayment were barred because Garelick was entitled to offset any unpaid working time by gratuitous overtime payments and by the daily 15 minute paid breaks.

The plaintiffs also asserted another theory of liability under the Wage Act, alleging that they were not relieved of all work-related duties during their meal breaks, rendering the breaks compensable (the “on-duty theory”).  Specifically, plaintiffs alleged that Garelick required them to (1) stay within 5 to 10 miles of their routes during breaks and (2) keep their trucks within sight during breaks. 

The District Court denied the plaintiffs’ motion for class certification, and after discovery the parties filed cross-motions for summary judgment.
 
The Court denied summary judgment under the “uncompensated time theory,” finding that there was an issue of fact as to the accuracy of the company’s records and as to whether Garelick knew that plaintiffs were not logging 30 minutes per break.  The Court found meritless Garelick’s claim that it was entitled to offset any unpaid work with its gratuitous overtime payments and paid 15-minute breaks.  The Court stated that valid “set-offs” under the Wage Act refer to clear and established debts, and receipt of gratuitous overtime pay and paid breaks are not such debts.

The Court also denied summary judgment to both parties under the “on duty” theory.  The parties agreed that working time does not include meal times during which an employee is relieved of all work-related duties, but disagreed as to the meaning of “work related duties.”   The Court found that “work related duties” does not have a plain meaning, and looked to regulations under the federal Fair Labor Standards Act (FLSA) for guidance.  The Court found that under the FLSA, employees perform compensable work during meal breaks if they “predominantly spend [] the time performing activities for their employer’s benefit.”  The fact that an employee is merely “on call” and must remain in a specific area does not render a meal break compensable.  The Court concluded that on the present record, it could not determine whether the restrictions placed on plaintiffs’ breaks converted the breaks into working time, in part because it was unclear whether the company’s directive changed the plaintiffs’ conduct during their breaks, or instead was a commonsense safety precaution that the plaintiffs would have followed regardless of the company’s policies.

Employers who utilize automatic meal break deductions should consult with experienced counsel to ensure that employees are taking the meal breaks and are getting paid if they take shorter meal breaks.  One possible course of action is to implement policies that allow (or require) employees to review and certify the accuracy of their time records.  Similarly, employers should review any unpaid break policies and practices to ensure that employees are relieved of all work-related duties during such breaks. 

Table of Cases

Velázquez-Perez v. Developers Diversified Realty Corp., No. 12-226 (1st Cir. May 23, 2014)

Raposo v. Garelick Farms, LLC, No. 11-11943-NMG (D. Mass. June 2, 2014)