Newsletter
Sep 13, 2013
Massachusetts Employment & Labor Law Report
Massachusetts Joint Task Force Recovers More Than $21 Million From Employers During 18 Month Period
Massachusetts Supreme Judicial Court Recognizes Associational Disability Discrimination
Alleged Company-wide Policy Insufficient Basis for Class Certification
Massachusetts Joint Task Force Recovers More Than $21 Million From Employers During 18 Month Period
Even as the national and state economies recover, we continue to see states search for untapped sources of revenue from employers, and we expect this trend to grow.
Massachusetts is no exception. In 2008, Governor Patrick created the Joint Task Force on the Underground Economy and Employee Misclassification ("JTF"). The JTF represents an unprecedented level of cooperation between numerous Massachusetts executive agencies, including the Department of Labor, the Department of Revenue (DOR), the Department of Industrial Accidents (DIA), the Attorney General's Office (AG), and the Division of Unemployment Assistance (DUA).
The JTF's recently released 2012 Annual Report, (click here) corroborates our own anecdotal experiences that agencies (state and federal) are sharing data on a more frequent and substantive basis, and that a relatively "straightforward" complaint regarding a discrete issue can quickly evolve into full-blown audits on numerous wage and hour issues conducted by several different agencies.
In addition to conducting cross-agency compliance checks (17,000 conducted in 2012), the JTF also responds to complaints made through its referral phone line, online referral service, and complaints made directly to member agencies. Last year, the JTF received and investigated 237 such complaints. Once a complaint is made or referred to the JTF, member agencies review the complaint to determine if there are any potential violations that fall within their jurisdiction.
The JTF is not just relying on old-fashioned complaints. The DUA, in conjunction with the JTF, has implemented a fraud detection technology called AWARE, which is a database that can "run cross matches between several different agencies' data." According to the Report, the technology is used to compile possible audit targets and is "greatly improving audit targeting strategies for the DUA."
The JTF's efforts are paying off for Massachusetts. According to the Report, between July 2011 and December 2012, Massachusetts recovered more than $21 million in wage restitution, state taxes, unemployment contributions, fines and penalties from employers—more than the total amount recovered by the JTF during the prior 40 months combined. This recovery represents money "above and beyond what member agencies collect through their ordinary enforcement efforts."
For employers who are in compliance with all Massachusetts laws, efforts like the JTF may be a welcome opportunity to ensure that other employers do not gain a competitive advantage by illegally reducing the money spent on wages, insurance, payroll taxes, licenses, and other employee benefits.
On the other hand, employers who unintentionally violate a law may quickly find themselves subject to scrutiny on numerous issues by several different agencies. In addition to being subject to potential fines and penalties, Massachusetts employers face automatic treble damages and attorneys' fees if their employees or former employees prevail in civil wage and hour lawsuits.
Employers that receive any complaints of potential wage and hour violations, or find themselves the subject of an audit from a state agency, are advised to immediately consult with counsel.
Massachusetts Supreme Judicial Court Recognizes Associational Disability Discrimination
The Massachusetts Supreme Judicial Court (SJC) altered the state's disability law landscape in July with a narrowly tailored decision allowing some—but not necessarily all—claims of associational disability discrimination to proceed under Massachusetts General Laws c. 151B, § 4(16) (Chapter 151B).
In Flagg v. Alimed, Inc., a plaintiff alleged that his former employer fabricated reasons for terminating him because it did not want to pay for health plan costs related to his wife's disability. The Massachusetts Superior Court granted the Company's motion to dismiss, finding that Chapter 151B only covers individuals with disabilities and provides no protections for employees who are associated with disabled individuals. The plaintiff appealed, arguing that Chapter 151B, which does not expressly cover associational discrimination, should still encompass this form of discrimination because it causes a direct and specific injury to the employee and represents "a formidable barrier to the full participation of an individual in the workplace," which Chapter 151B is intended to prevent.
The SJC agreed and issued a narrow ruling in Flagg's favor. Looking to the general purpose of Chapter 151B and the Massachusetts Commission Against Discrimination's (MCAD) more expansive reading of the statute, as well as the federal Rehabilitation Act of 1973, the SJC found that Chapter 151B encompasses certain associational discrimination claims despite the absence of express statutory language on point. As stated by the SJC: "When an employer subjects an otherwise satisfactory employee to adverse employment decisions premised on hostility toward the handicapped condition of the employee's spouse, he is treating the employee as if he were handicapped himself -- that is, predicated on discriminatory animus, the employer treat's the spouse's handicap as a characteristic bearing on the employee's fitness for his job."
However, the SJC was careful to limit its holding to the facts of this case, and in particular the fact that the employer sought to avoid health insurance costs related to the care of an employee's disabled spouse. A concurring opinion highlights the narrowness of the holding, noting that "[t]he court does not decide in this case whether associational discrimination . . . will be interpreted to extend beyond the type of case at issue here." The concurring Justice further clarified that the SJC's opinion does not suggest that an employer is required to provide a reasonable accommodation to a non-disabled employee to allow the employee to attend to matters relating to the disabled individual with whom the employee is associated (although some accommodation might be required under other statutes, such as the Family and Medical Leave Act).
Flagg brings Massachusetts disability discrimination law in line with the Americans with Disabilities Act, which expressly prohibits associational disability discrimination. However, a careful reading of Flagg reveals that its holding only applies to a narrow set of situations. Nevertheless, employers who offer subsidized health insurance to employees should exercise caution if they learn that a covered family member is disabled. Further, employers generally should stay tuned to case law developments on courts' potential adoption of the MCAD's expansive view of Chapter 151B with respect to other forms of associational discrimination.
Massachusetts Supreme Judicial Court Reluctantly Agrees That Its June 2013 Decision On Class Arbitration Waivers Is No Longer Good Law
On June 20, 2013, the United States Supreme Court issued its decision in American Express Co. v. Italian Colors Restaurant (AmEx), holding that class waivers in arbitration agreements cannot be invalidated on the grounds that the inability to arbitrate on a class-wide basis precludes "effective vindication" of plaintiffs' rights. Since that decision, many questioned whether AmEx abrogated other state court decisions that had invalidated class arbitration agreements based on the "effective vindication" doctrine.
On August 1, 2013, the Massachusetts Supreme Judicial Court (SJC) answered that question. The SJC acknowledged that AmEx abrogated its decision in Feeney v. Dell (issued only eight days before AmEx), and held that class arbitration waivers may not be invalidated in Massachusetts on the grounds that they effectively deny plaintiffs a remedy.
In AT&T Mobility, LLC v. Concepcion (2011), the Supreme Court held that the Federal Arbitration Act (FAA) preempted a California rule that classified most consumer class arbitration waivers as unconscionable. In light of Concepcion, in Feeney the SJC acknowledged that Massachusetts courts could no longer invalidate class arbitration waivers based solely on Massachusetts' public policy favoring class proceedings in certain contexts. According to the SJC, courts could invalidate such waivers only when a plaintiff demonstrated that "the class waiver, when combined with other terms of the arbitration agreement, effectively denies the plaintiff a remedy and insulates the defendant from private civil liability for violations of State law." The SJC held that the Feeney plaintiffs sustained their burden because the claims asserted were hotly contested and required advanced knowledge of tax codes, the claimed damages were nominal (less than $250), and there were no mandatory fee-shifting or bounty provisions for successful plaintiffs.
In Machado v. System4, LLC, a companion decision issued the same day as Feeney, the SJC held that the plaintiffs could not sustain their burden because their alleged damages based on certain franchise fees alone ranged from approximately $9,500 to over $21,000. However, the SJC did strike the arbitration agreement's bar on multiple damages as an illegal attempt to circumvent the Massachusetts Wage Act, M.G.L. c. 149, § 148 (Wage Act). The SJC held that an arbitrator who finds for a plaintiff in a Wage Act claim must award treble damages and attorneys' fees.
Following the Supreme Court's AmEx decision, Dell filed a petition for rehearing on the grounds that AmEx undermined the SJC's holding in Feeney. Although the SJC stated that it regarded "as untenable the Supreme Court's view that the FAA's command to enforce arbitration agreements trumps any interest in ensuring the prosecution of low-value claims," it recognized that it was bound to accept that view "as a controlling statement of Federal law." As a result, it (i) held that class arbitration waivers may no longer be invalidated in Massachusetts on the grounds that they effectively deny plaintiffs a remedy, and (ii) reversed the trial court's denial of Dell's motion to confirm the arbitration award.
In a companion rescript for Machado (also issued on August 1), the SJC applied its holding in Feeney to the claims at issue in Machado. This makes clear that the rejection of the "effective vindication" doctrine applies equally to wage and hour claims. The SJC also reaffirmed its ruling that the bar on multiple damages was not enforceable.
We believe that the SJC's decision in Feeney is a harbinger of how other state courts will respond to AmEx. This portends well for employers that seek to enforce class arbitration waivers and limit plaintiffs to arbitrating their individual claims in employment disputes, including wage and hour claims.
Massachusetts Appeals Court Extends Wage Act's Protections and Remedies To Non-resident Employee Who Worked Primarily Out of State
In Dow v. Casale, the Massachusetts Appeals Court held that a plaintiff who lived and worked out of state may bring suit under the M.G.L. c. 149, § 148 (Wage Act), which provides for automatic treble damages and attorneys' fees for successful litigants.
Florida resident Russell Dow, the former sales director of Starbak, Inc., a developer and manufacturer of video conferencing software and hardware, alleged that beginning in 2008, Starbak failed to pay commissions that were owed to him. Starbak was a Delaware corporation with a sole place of business in Massachusetts, and defendant Gregory Casale was Starbak's CEO. Dow's written employment agreement with Starbak provided that it would be governed by Massachusetts law. Although Dow lived in Florida and primarily worked from his Florida residence, he served customers in at least thirty states, travelled to at least nineteen of those states, and travelled to Massachusetts approximately twenty times in 2008 and 2009.
Dow brought claims against Casale under the Wage Act (which allows for individual liability), seeking more than $100,000 in unpaid sales commissions, as well as certain unreimbursed expenses, accrued vacation time, treble damages, and attorney's fees. Casale argued that the Wage Act did not extend to Dow because he was a nonresident who did not primarily work in Massachusetts. Both parties brought cross motions for summary judgment, and the Superior Court entered judgment for Dow, analogizing the reach of the Wage Act to the law of personal jurisdiction and concluding that Dow's contacts with Massachusetts were sufficient to afford him a remedy under the Wage Act. Casale appealed.
The Appeals Court affirmed the Superior Court's decision. Applying a choice-of-law doctrine to its analysis, the court found that "given the nature of Dow's work, his employment with Starbak had no substantial relationship to any place but Massachusetts." In reaching this conclusion, the court considered that (1) Starbak was headquartered in Massachusetts; (2) its facilities were located in Massachusetts; (3) Dow's business cards listed Starbak's Massachusetts contact information as his own; (4) Dow's paychecks came from Massachusetts; (5) Dow visited and worked from the Massachusetts office several times a year; (6) Dow emailed and telephoned Casale, who was located in Massachusetts, daily; and (7) Dow's employment agreement provided that it would be governed by Massachusetts law. Thus, the court explained, "no matter where [Dow] physically was located from day to day[,]" for the purposes of the Wage Act, "his work sensibly may be viewed as having 'occurred' in Massachusetts . . .".
This decision is significant for Massachusetts employers because it will likely encourage nonresident employees to bring claims under the Wage Act. Massachusetts employers should be aware that where a nonresident's employment is sufficiently connected to Massachusetts, the remedies of the Wage Act—including automatic treble damages and attorneys' fees—may be available to them.
Alleged Company-wide Policy Insufficient Basis for Class Certification
The U.S. District Court for the District of Massachusetts (District Court) recently denied class certification with respect to a putative class of truck drivers who claimed that they were owed compensation for work allegedly performed during meal breaks.
In Raposo v. Garelick Farms, LLC, the plaintiffs asserted claims for unpaid wages based on two theories arising out of the defendant's policy of automatically deducting thirty minutes from the drivers' work hours each day for a mandatory unpaid meal break. First, the plaintiffs claimed that they frequently worked through their breaks, thus resulting in unpaid work time. Second, they claimed that even when they took a meal break, the restrictions placed on those meal breaks by the company converted the breaks to compensable time. The plaintiffs moved for class certification pursuant to Rule 23 of the Federal Rules of Civil Procedure (Rule 23). The proposed class consisted of all drivers in Massachusetts, which included employees working out of two different facilities.
In denying their motion, the District Court emphasized that, following the U.S. Supreme Court's groundbreaking 2011 decision in Wal-Mart Stores Inc. v. Dukes, federal courts addressing the requirements of Rule 23 should not merely consider whether common questions exist, but whether those questions are capable of "resolv[ing] an issue that is central to each one of the claims in one stroke." The District Court held that, in light of Dukes, the mere existence of a company-wide policy of making automatic deductions for meal breaks is no longer sufficient to merit class certification. The court then determined that class certification was not appropriate for either theory of liability.
With respect to the plaintiffs' first theory of liability, the District Court cited declarations produced by the defendant that indicated that at least some drivers had not worked through meal periods, and that at least some employees who had worked through their breaks received pay for the time after notifying their supervisors. The District Court also noted that the evidence showed that some of the policies at issue were not in fact uniform across the two facilities in Massachusetts. Because the reasons for working through a meal break varied based on several different factors, including the driver's individual needs and desires, "the reason why drivers worked through meal breaks cannot be answered on a class-wide basis."
The District Court next held that it could not determine the effect of the company's rules regarding meal breaks on a class-wide basis. For example, whether an employee would be able to take a break in spite of the company's direction to avoid deviating far from the assigned route depended on the nature of the route and the employee's own "individual needs and desires."
The case demonstrates the effect that the Dukes case can have on class certification in wage and hour cases. The District Court's decision lends support to the argument the mere existence of a common employment policy is not sufficient to obtain class certification. In addition, the decision demonstrates that class certification is not appropriate where individual differences prevent liability from being determined with respect to every class member based on common proof.
Retaliation Claim Dismissed Where Employee's Documented Performance Problems Predate Alleged Protected Activities
In Ponte v. Steelcase Inc., the U.S. District Court for the District of Massachusetts (District Court) granted defendant's Motion for Summary Judgment and dismissed plaintiff's sexual harassment and retaliation claims. In addition to finding a lack of evidence on both claims, the court noted that it could not draw an inference of retaliation where the employee had well-documented performance issues prior to her protected activity.
In June 2010, Steelcase hired Nicole Ponte as an Area Sales Manager. As part of Ponte's training, she attended a new manager training at Steelcase's headquarters in Michigan. In her complaint, Ponte alleged that after dinner one night at the orientation her supervisor, Robert Lau, allegedly insisted on driving Ponte back to her hotel. Ponte alleged that during the car ride, Lau rested his arm on the top of her seat, his hand touched her shoulder for one minute, and he told her that he "did a lot to get [her the] job" and that she "needed to do the right thing by him." Ponte also alleged that on another night this scenario repeated itself and that she told her peer trainees that Lau had "tried to hit on her" and that she was "taken aback" by his actions. Ponte did not report her concerns to anyone else at the company.
Following the manager training, Steelcase's staff reported to Lau that Ponte was having performance issues, including difficulty completing administrative tasks associated with the "on-boarding process." Lau also received several complaints about her conduct and performance from clients in her sales territory. After receiving these complaints, Lau met with Ponte and arranged for her to receive additional feedback and supervision.
In February or March 2011, Ponte reported to Steelcase Human Resources that she had been alone with Lau on "a couple of occasions," and she was "made to feel uncomfortable," but did not go into any further detail and did not mention the car ride. In April 2011, Ponte postponed her first performance review with Lau, but that same evening sent an e-mail to Human Resources reiterating her prior complaints. When Lau met with Ponte for her performance review he rated her "below expectations" and explained to her that she had difficulty developing "soft skills" and had failed to meet her sales goal.
In May 2011, Lau visited Ponte's site in Boston and once again documented his concern about her performance. Lau, in consultation with his supervisor, then decided to terminate Ponte's employment and scheduled a second visit to Boston to do so. Upon learning of Lau's second visit, Ponte again e-mailed Human Resources and explained that she had "concerns" about Lau. Several days later, Steelcase terminated Ponte's employment.
Ponte brought a lawsuit alleging that Steelcase had tolerated the creation of a hostile work environment based upon sexual harassment and had terminated her in retaliation for protected activity (filing a complaint). In granting Steelcase's Motion for Summary Judgment, the District Court found that Ponte's allegations of hostile work environment based upon sexual harassment failed to show that the alleged harassment was sufficiently severe or pervasive to evince a hostile work environment. The Court noted that although there is "no mathematically precise test," Lau's alleged harassing conduct was "subtle rather than severe," it was not frequent, it was not "physically threatening", and there was insufficient evidence that Lau's alleged conduct interfered with her work performance.
Ponte also alleged that Steelcase's termination was not motivated by her performance but rather a desire to retaliate against her for filing complaints against Lau. In assessing pre-text, the Court explained that it must focus "on the perception of [the] decision-maker, i.e., whether the employer believed its stated reason for termination was credible." The Court found that "[w]hen problems with an employee predate any knowledge that the employee engaged in a protected activity, it is not permissible to draw the inference that a subsequent adverse employment action, taken after the employer acquires such knowledge, is motivated by retaliation."
The Ponte decision is a useful reminder for employers to promptly document employee performance issues when they first occur.
Table of Cases
Flagg v. Alimed, Inc., 446 Mass. 23 (July 19, 2013)
Feeney v. Dell, Inc., 446 Mass. 1001 (August 1, 2013)
Dow v. Casale, 83 Mass.App.Ct. 751 (2013)
Raposo v. Garelick Farms, LLC, No. 11-11943-NMG (D. Mass. July 11, 2013)
Ponte v. Steelcase, Inc., No. 12-10376-NMG (D. Mass. July 25, 2013)
Next Massachusetts Employment & Labor Law Report:
December 13, 2013