Massachusetts Employment & Labor Law Report

Supreme Judicial Court Clarifies Requirements For Valid Release of Wage Act Claims

Employer Not Liable for Violations of FMLA Notice Provisions

First Circuit Orders Workers To Arbitrate Claims Despite Not Signing Arbitration Agreement

First Circuit Revives Insubordinate Employee's ADA Retaliation Claim

Supreme Judicial Court Clarifies Requirements For Valid Release of Wage Act Claims

In Crocker v. Townsend Oil Company, the Massachusetts Supreme Judicial Court (SJC) clarified the circumstances in which employers can obtain an enforceable release of claims under the Wage Act, Mass. Gen. Laws c. 149, §§ 148, et seq. The Crocker decision is important for all employers who seek releases of wage and hour claims from employees or independent contractors. Failure to adhere to the SJC's ruling could result in an employee being able to assert claims against an employer even after having accepted payments (such as severance) in consideration for a general release.

The plaintiffs in Crocker were delivery truck drivers for Townsend Old Company. Townsend hired the plaintiffs as independent contractors and signed contractual carrier agreements with them. Pursuant to these agreements, Townsend paid the plaintiffs based on the amount of oil delivered; plaintiffs did not receive an hourly wage and were not eligible for overtime.

In 2007, Townsend terminated its agreements with the plaintiffs. Pursuant to termination agreements signed with the plaintiffs, Townsend agreed to pay them several thousand dollars each in consideration for, among other things, a general release of claims. In 2009, the plaintiffs filed a putative class action lawsuit against Townsend, claiming that Townsend had misclassified them and others as independent contractors, rather than employees, and that as a result Townsend owed them wages and overtime. Townsend moved to dismiss, arguing that the plaintiffs' claims were barred by the general release. The case ultimately was transferred to the SJC.

The Wage Act prohibits "special contracts" by which an employer seeks to exempt itself from the Wage Act's provisions, which can be quite onerous. For example, successful plaintiffs are entitled to mandatory treble damages and attorneys' fees, regardless of whether an employer makes a mistake in good faith. At the SJC, Townsend argued that the general release within the termination agreements should be afforded full force and affect, and should bar the plaintiffs' Wage Act claims, because the termination agreements were negotiated at arms' length, the general release applied all potential claims, and Massachusetts law generally favors the enforcement of general releases. In contrast, the plaintiffs argued that the general release was unenforceable under the Wage Act because it constituted a "special contract."

The SJC took the middle ground. Although it ruled that employees can release Wage Act claims, it held that the general release contained within the termination agreements was not enforceable as to Wage Act claims because it did not explicitly refer to the rights and claims under the Wage Act. The SJC held that a release of Wage Act claims "must be plainly worded and understandable to the average individual, and it must specifically refer to the rights and claims under the Wage Act that the employee is waiving."

The Crocker decision is good news for employers because it establishes that Wage Act claims can be released. However, employers should review and update their termination agreements to ensure that the release contains explicit and plain language referring to rights and claims under the Wage Act.

Employer Not Liable for Violations of FMLA Notice Provisions

In Bellone v. Southwick-Tolland Regional School District, the U.S. District Court for the District of Massachusetts found that an employee's FMLA rights were not violated when his employer sent untimely and inadequate FMLA notices because no harm occurred as a result.

On March 4, 2010, Plaintiff Scott Bellone, a teacher, requested medical leave. Although the Family and Medical Leave Act (FMLA) requires employers to send employees an FMLA eligibility notice within five days of learning that an employee's leave may be for an FMLA-qualifying reason, Bellone's employer, Southwick-Tolland Regional School District (Southwick), did not send any type of notice until March 24, 2010. Further, the notice did not contain all of the information that an eligibility notice is required to contain under the FMLA.

On May 20, 2010, after Southwick informed Bellone that his medical information certifying his need for leave was insufficient, Bellone authorized Southwick to communicate directly with his doctor. Under the FMLA, Southwick was supposed to send Bellone a notice designating whether his leave was FMLA-qualifying within five days of obtaining enough information to make that designation. The District Court found that Southwick should have sent the designation notice within five days of May 20, 2010. Southwick, however, did not send the notice until July 9, 2010.

Southwick requires employees to submit fitness-for-duty certifications in order to return from serious health conditions. Bellone did not submit a fitness-for-duty certification until August 31, 2010, which was after his allotment of FMLA leave expired on June 4, 2010. Earlier in August 2010, Southwick hired a replacement for Bellone's position. Once Southwick received Bellone's fitness-for-duty certification, it offered him another position co-teaching and tutoring. Bellone did not report for that position and was subsequently terminated for job abandonment.

Bellone brought a lawsuit alleging that Southwick interfered with his FMLA rights by failing to provide timely and adequate eligibility and designation notices. The District Court, however, dismissed that allegation because Southwick's actions did not harm Bellone. Southwick gave Bellone his full allotment of FMLA leave, and Bellone was not medically able to return until after his allotment expired. Therefore, Bellone was not entitled to reinstatement. The District Court found that Bellone's inability to work, not Southwick's untimely or inadequate notices, caused Bellone's harm.

Bellone also alleged that Southwick's fitness-for-duty requirement interfered with his FMLA rights. However, the District Court also dismissed that claim, finding that Southwick required a fitness-for-duty certification as part of a uniform policy, which is legal under the FMLA.

The Bellone decision is a useful reminder for employers to provide timely and adequate FMLA notices to employees. Although the District Court ruled in Southwick's favor, the result might have been different if Southwick's actions had harmed Bellone, such as if he had prematurely returned to work because Southwick did not provide a timely designation notice. The decision also affirms the legality of fitness-for-duty certifications, as long as they are required as part of a uniform policy.

First Circuit Orders Workers To Arbitrate Claims Despite Not Signing Arbitration Agreement

In Awuah v. Coverall North America, Inc., the U.S. Court of Appeals for the First Circuit dispensed an important win to businesses by ordering franchisees to arbitrate their claims even though they had not signed, received, or reviewed an arbitration agreement.
Coverall contracts to provide commercial janitorial cleaning services to buildings, and its franchisees do the cleaning. A large group of plaintiff-franchisees asserted various state law claims against Coverall, including misclassification as independent contractors. Many of the plaintiffs became franchisees by signing Franchise Agreements, which provided that all disputes between Coverall and franchisees "shall be submitted promptly for arbitration." Some plaintiffs, however, did not sign a Franchise Agreement or even see the Franchise Agreement. Instead, these plaintiffs became franchisees by signing Transfer Agreements or Guaranties, or both. While neither the Transfer Agreements nor the Guaranties included arbitration clauses, they both included language incorporating all rights and obligations that are in the Franchise Agreement.

The plaintiffs moved the U.S. District Court for the District of Massachusetts to include those who became franchisees by signing Transfer Agreements or Guaranties as part of the class who would have their state law claims addressed by the District Court. While Coverall argued that those franchisees were required to arbitrate their claims instead of having them addressed by the District Court, the plaintiffs argued that those franchisees did not have adequate notice of the arbitration clause and thus were not required to go through arbitration. The District Court held that franchisees who signed Transfer Agreements or Guaranties but did not receive the actual Franchise Agreement containing the arbitration clause were not required to go arbitrate their claims because Coverall did not give those franchisees adequate notice of the requirement to arbitrate.

The First Circuit disagreed, holding that while the Transfer Agreements and Guaranties did not use language explicitly incorporating the requirement to arbitrate, those franchisees were still required to arbitrate their disputes because other language in the agreements clearly communicated the purpose of incorporating the Franchise Agreement's arbitration clause. The First Circuit found significant the language stating that the franchisees assumed all of the rights and obligations under the Franchise Agreement. "All" means "all" the First Circuit affirmed, meaning that the Transfer Agreements' and Guaranties' incorporation of "all" obligations under the Franchise Agreement clearly included the obligation to arbitrate disputes. The First Circuit expounded that there is no heightened notice requirement for the enforcement of arbitration clauses in Massachusetts. The Court further noted that in Massachusetts, one who signs an agreement is generally bound by its terms, regardless of whether he or she reads and understands them.

This decision is important for employers who are looking to enforce arbitration agreements. While arbitration agreements that are signed directly may be more clearly enforceable, the decision shows that courts may enforce arbitration agreements that are not signed or even reviewed as long as they are properly incorporated by reference into another enforceable agreement.

First Circuit Revives Insubordinate Employee's ADA Retaliation Claim

The U.S. Court of Appeals for the First Circuit recently found in Kelley v. Correctional Medical Services, Inc. that an employer who terminated a disabled employee for insubordination may be liable to the employee for retaliation because the employer's supervisor had previously made disparaging comments related to the employee's disability.

Katherine Kelley, a prison nurse employed by Correctional Medical Services (CMS), became disabled after injuring her hip while horseback riding. Kelley alleged that after her injury and resulting medical leave, her supervisor accused Kelley of lying about her injury, prohibited Kelley from using a cane until she could provide a note from her doctor, and told Kelley that she had to work full-time. A CMA manager also told Kelley that her supervisor "wanted her gone."

During a shift when there was a shortage of available nurses, Kelley was assigned to a post that would have required her to respond to medical emergencies throughout the prison facility. Kelley refused to perform that duty, stating that the assignment would require too much physical activity. Kelley also refused to perform a second responsibility of the position, counting narcotics, not because of her disability but because she claimed that another nurse had already completed that task. On a conference call with Kelley's supervisor, another nurse agreed to handle both job duties that Kelley refused to do. After the call, however, Kelley's supervisor instructed security to escort Kelley from the building because she refused assignments. Kelley's supervisor subsequently reviewed the CMA personnel manual and confirmed that refusing an assignment is a terminable offense. CMA then terminated Kelley's employment for insubordination.

Kelley sued CMA, claiming that she had been discharged in retaliation for her requests for reasonable accommodations. The U.S. District Court for the District of Maine granted summary judgment for CMA, holding that Kelley had failed to produce evidence suggesting that the stated reason for her termination – insubordination – was pretextual. The First Circuit reversed, finding that Kelley had produced sufficient evidence to allow a jury to determine whether her termination was an overreaction to justify dismissal of an employee who had asserted her right under the Americans with Disabilities Act to request reasonable accommodations.

The First Circuit noted that even though Kelley was insubordinate and that part of her insubordination was unrelated to her disability, there was evidence that Kelley's supervisor had expressed hostility towards Kelley's disability and seemed eager to be rid of her. The First Circuit ruled that under such circumstances, a jury should determine whether Kelley's supervisor seized upon her insubordination as a basis for Kelley's dismissal in order to mask her retaliatory animus.

The Kelley decision shows that a terminated or disciplined employee may have a retaliation claim even if the employee committed an otherwise terminable offense. Before disciplining an employee, employers should ensure that the discipline imposed is proportionate to the offense and that there is no evidence to suggest that the discipline is a masked form of retaliation.

Table of Cases

Crocker v. Townsend Oil Co., 464 Mass. 1 (2012).
Bellone v. Southwick-Tolland Reg'l Sch. Dist., No. 12-30105-KPN (D. Mass. Jan. 14, 2013).
Awuah v. Coverall N. Am., Inc., No. 12-1301 (1st Cir. Dec. 27, 2012).
Jones v. Nationwide Life Ins. Co., 696 F.3d 78 (1st Cir. 2012).

 

Next Massachusetts Employment & Labor Law Report:
June 14, 2013