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Mar 15, 2011

Massachusetts Employment & Labor Report - March 2011

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Employers May Not Deduct Costs of Damage to Company Property from Earned Wages

On January 25, 2011, in Camara v. Attorney General, the Massachusetts Supreme Judicial Court (SJC) affirmed a decision by the Division of Administrative Law Appeals (DALA), upholding a citation by the Attorney General’s Office against Michael Camara and his company, ABC Disposal, Inc. (ABC), for making illegal deductions from employees’ wages in violation of Massachusetts General Laws ch. 149, § 148 (the Massachusetts Wage Act). In reaching this decision, the SJC validated the Attorney General’s strict interpretation of the Commonwealth’s Wage Act and made it more difficult for employers to deduct costs attributable to an employee’s fault or negligence, even where the employee has authorized the deduction.

At the center of this case was a company policy under which ABC required any worker who it found was at fault for an accident involving a company truck either to accept disciplinary action or agree to set off the damages against his or her wages. At no time did the company allow a driver’s pay to fall below minimum wage.

Concluding that the Wage Act prohibits wage deductions associated with an employer’s unilateral determination of an employee’s fault and damages, the Attorney General’s Office found that ABC’s policy violated the Wage Act, cited ABC and Camara, individually, for an intentional violation, and ordered them to pay restitution. The Attorney General interpreted the Wage Act as generally prohibiting an employer from deducting, or withholding payment of, any earned wages, even where the employer has obtained an employee’s assent by “special contract.” In the Attorney General’s view, regardless of an employee’s agreement, there can be no deduction of wages unless the employer can demonstrate the existence of a valid attachment, assignment, or “set-off” as described in Massachusetts General Laws ch. 149, § 150—a condition that the ABC set-off policy did not meet according to the Attorney General.

ABC and Camara appealed. The SJC reiterated its interpretation of the term “valid set-off” as referring to circumstances where there exists “a clear and established debt owed to the employer by the employee.” The SJC further held that ABC’s policy of making a unilateral assessment of fault and the amount of damages, with no role for an independent decision-maker and apparently not even an opportunity for an employee to challenge the result within the company, did not amount to “a clear and established debt owed to the employer by the employee.” The SJC found the option afforded ABC’s employees to choose “voluntarily” to accept either wage deductions or discipline to be unacceptable.

The SJC’s decision in Camara highlights the risk employers face when they make deductions from wages, even with their employees’ written consent. Given this narrow definition of a “valid set-off,” employers should seek legal counsel before withholding employees’ pay.

Designating Charge As “Administrative Fee” May Not Be Enough to Avoid Liability Under Tip Statute

The Massachusetts Appeals Court recently held that Massachusetts General Laws ch. 149, § 152A (the Tip Statute) requires that even where a charge on an invoice is labeled “administrative fee,” the employer must provide an explicit disclaimer notifying customers that the fee is not a service charge to avoid liability as a matter of law. The Court found that the legislature’s intent in enacting the Tip Statute was to ensure that employees receive the service charges that customers intend them to receive, and employers therefore must affirmatively inform patrons that other fees are not service charges.

In this case, the defendants’ hotel imposed on its private function customers a charge of eighteen or nineteen percent of the amount invoiced for food and beverage. On function documents, this charge was designated an “administrative fee,” with no further written description. The plaintiffs, who worked as bartenders at these functions, argued that the fee constituted a “service charge” under the Tip Statute because it was “a fee that a patron . . . would reasonably expect to be given to” service employees, and that the defendants violated the statute by failing to distribute the fee to the plaintiffs.

The defendants contended that the mere designation of the charge as an “administrative fee” brought it within the Tip Statute’s safe harbor provision, which permits imposition of “any house or administrative fee in addition to or instead of a service charge or tip, if the employer provides a designation or written description of that house or administrative fee, which informs the patron that the fee does not represent a tip or service charge.” The defendants argued that this provision should be read as permitting an employer to provide either (1) a “designation” or (2) a “written description” of the fee expressly informing patrons that it is not a service charge.

After an analysis of the grammatical construction of the provision, the Court found that the defendants’ interpretation added words or punctuation not included by the legislature and that a more accurate reading is “a designation or written description of that house or administrative fee.” The Court noted that the term “administrative fee,” undefined in the statute, is not self-explanatory and could refer to a fee collected by an employer for distribution to staff, particularly where the fee is eighteen or nineteen percent. According to the Court, pursuant to the defendants’ interpretation, any fee so designated could never qualify as a service charge, even where patrons reasonably believed the fee to be one—a result contrary to the statute’s “patron-centric focus.”

This decision suggests that a business’s best chance to prevail in litigation over such fees is to both designate the charge as another type of fee and to include an explicit written disclaimer. If the fee is merely designated as an “administrative fee,” an issue of fact for the jury exists as to whether a patron would reasonably expect the fee to be distributed to employees. Employers should carefully review all written documents provided to customers with an eye toward minimizing the risk of litigation.

(If you are interested in this decision, please let us know and we will provide you with a copy.)

SJC Rules Jury Should Not Have Heard Evidence Outside Scope of MCAD Investigation

The SJC ordered a new trial in Pelletier v. Town of Somerset after concluding that the trial court erred by admitting evidence of harassment claims that the plaintiff failed to raise at the Massachusetts Commission Against Discrimination (MCAD). The SJC found that the trial court violated the “scope of investigation” rule, which prohibits plaintiffs from introducing claims at trial that “the MCAD investigation could not have reasonably been expected to uncover.”

Kim Pelletier, a truck driver, began working for the Somerset highway department in 1984. With the exception of a few summer interns, Pelletier was the only female in the department throughout her entire sixteen-year tenure. In 1998, Pelletier was assigned a new supervisor, Antone Cabral. In 2000, Pelletier filed a charge of discrimination with the MCAD, alleging that Cabral had discriminated against her on the basis of her gender and sexual orientation. After investigating the complaint, the Commission issued a lack of probable cause finding.

Pelletier then filed a complaint in Massachusetts Superior Court. At trial, Pelletier advanced a new theory—that the discrimination she suffered while Cabral was her supervisor (from 1998 to 2000) was actually the culmination of years of discriminatory treatment dating back to 1984. The trial court allowed Pelletier to introduce evidence of discrimination and harassment that allegedly occurred throughout her tenure, including sexual touching, displays of pornographic material in the workplace, and repeated verbal abuse by her male coworkers. The jury returned a verdict in favor of Pelletier for $1.8 million in compensatory and punitive damages.

The town of Somerset moved for a new trial or, alternatively, for remitter to reduce the jury award. The trial court reduced the award to $600,000 on the grounds that a substantial portion of the evidence presented at trial was not within the scope of Pelletier’s MCAD complaint or the Commission’s subsequent investigation into her claims. Both parties appealed the decision and the case reached the SJC.

In analyzing the “scope of the investigation” rule and the admissibility of discrimination claims at trial, the SJC explained that “a claim that is not explicitly stated in the administrative complaint may be asserted in the subsequent Superior Court action so long as it is based on the acts of discrimination that the MCAD investigation could reasonably be expected to uncover.” Here, however, the SJC found that Pelletier’s allegations of harassment that predated her assignment to supervisor Cabral were not related to her MCAD complaint and that she had effectively withheld notice of the scope of her complaint until the time of trial. Such conduct, the Court found, violated the “scope of the investigation” rule.

This decision should help employers narrow the scope of discrimination claims at trial and prevent employees from raising any new claims that they failed to bring at the MCAD.

Superior Court Judge Reads Wage Act Expansively to Include Severance Pay

The Superior Court recently held for the first time that severance payments are “wages” covered by the Massachusetts Wage Act.

In Juergens v. MicroGroup, Inc., Albert Juergens alleged that his employer, MicroGroup, Inc., promised to pay him six months’ salary in severance if he was ever terminated without cause. A few years later, MicroGroup informed Juergens that his position was being eliminated and laid him off without paying him any severance.

Juergens sued MicroGroup, alleging that the company violated the Wage Act by not paying him severance upon his termination. MicroGroup moved to dismiss the claim, relying on the Appeals Court’s decision in Prozinski v. Northeast Real Estate Services, LLC, 59 Mass. App. Ct. 599 (2003), which held that severance payments were not “wages” under the Wage Act. With little analysis other than pointing out that the Prozinski decision was issued before the SJC had “authorized a more expansive interpretation of the Wage Act,” the Court held that the definition of “wages” under the Wage Act should “not be limited to exclude severance pay” and denied MicroGroup’s motion to dismiss. While the Superior Court relied on Wiedmann v. The Bradford Group, Inc., 444 Mass 698 (2005), that decision does not address the issue of severance pay in any manner, and instead deals with the payment of commissions, which, unlike severance, are explicitly covered by the Wage Act pursuant to an oral employment contract.

While Massachusetts courts have long held that employees may assert contract claims against their former employers based on severance agreements, this is the first time a Massachusetts court has held that severance agreements are subject to the Wage Act.

Employers should be concerned about the Juergens decision because if other courts were to follow it, it would open up the full panoply of Wage Act remedies for an employer’s failure to pay severance, including treble damages and attorneys’ fees.

Time Spent Traveling to Twelve-Week Firefighter Training Program Is Not Compensable

The Appeals Court recently affirmed a Superior Court decision holding that employees’ daily commute to a twelve-week training program was not compensable work time under the Massachusetts regulation governing travel time.

In Taggart v. Town of Wakefield, firefighters for the town of Wakefield, Massachusetts, sought overtime pay for time spent traveling to and from a training program at the Massachusetts Fire Academy (MFA) in Stow, Massachusetts. The firefighters, most of whom lived in or around Wakefield, traveled to Stow for the duration of the program—five days per week for twelve weeks—in lieu of reporting to the fire department headquarters in Wakefield. Although the firefighters were paid for all of their training time (forty hours per week), they claimed that they were also entitled to compensation for time spent traveling to the MFA in Stow in excess of time they ordinarily spent commuting to the fire department in Wakefield.

In reviewing the Superior Court’s decision, the Appeals Court looked to a provision of the Commonwealth’s travel time regulations, which states that travel in excess of an employee’s ordinary commute is compensable, “if an employee who regularly works at a fixed location is required, for the convenience of the employer, to report to a location other than his or her regular worksite . . . .” The Appeals Court held that the firefighters’ travel to the MFA was not compensable because the MFA was not a location “other than” their regular worksite, and because the travel was not “for the convenience” of Wakefield.

The Appeals Court found that the twelve-week training program was of sufficient duration to make the MFA in Stow the firefighters’ “fixed” work location during the training period. It distinguished prior opinion letters issued by the Massachusetts Division of Occupational Safety, noting that the employees at issue in those letters had been asked to travel to an alternate location for a shorter period of time—between one to five days. The Court stated that such travel requests are not equivalent to the long-term assignment at issue in Taggart.

The Appeals Court further held that the firefighters’ travel was not undertaken “for the convenience of their employer” because their attendance at the MFA program did not primarily benefit the town of Wakefield. Instead, the Court found that the firefighters benefitted equally from the program because such training was necessary for them to perform their duties safely and allowed them to earn tenure as professional firefighters.

This decision provides helpful guidance to employers whose employees must travel to off-site locations for work and provides new avenues for combating claims of unpaid travel time based on the duration of the off-site program and the benefits it confers to the participants.

Caucasian Employee Recovers for Associational Discrimination for Racial Slurs Aimed at His Interracial Relationship

In Grzych v. American Reclamation Corp., a rare case of associational discrimination, a Caucasian complainant prevailed on claims that his former employer, American Reclamation Corp., and its president, Vincent Iuliano, discriminated against him on the basis of race and color based on his interracial relationship with his fiancée, a black woman of Jamaican national origin, and retaliated against him for objecting to the harassment he experienced.

Complainant Eric Grzych lived with his fiancée and their nine-month-old son and worked as a truck driver for American Reclamation, transporting contaminated soil from clients’ properties to American’s facility for processing. On a daily basis, Grzych returned to American’s office to weigh his truckload. Whenever Grzych was in the office, Iuliano greeted him with racial slurs and epithets which referred to Grzych’s relationship with his fiancée.

In January 2008, Grzych filed a charge of discrimination against American and Iuliano at the MCAD. At the public hearing, Grzych testified that he had endured offensive comments from Iuliano on a constant basis and offered testimony from coworkers who claimed that Grzych’s engagement to a black woman was common knowledge in the workplace. Grzych also testified that on January 10, 2008, after enduring yet another racist comment, he told Iuliano that he had had enough and that he would report Iuliano for workplace harassment if the discriminatory comments continued. According to Grzych, he was terminated the next day.

Analyzing the claims, the Hearing Officer concluded that Grzych was a member of a protected class and had standing to sue his employer by virtue of his association with his Jamaican fiancée. The Hearing Officer further concluded that Gryzch had proven his prima facie case of racial harassment and that Iuliano’s speech and conduct were sufficiently severe and pervasive to alter the terms and conditions of Grzych’s employment. Because Iuliano did not dispute the alleged incidents of harassment, the Hearing Officer concluded that both American and Iuliano, as American’s president, were jointly and severally liable for race and color discrimination. The Hearing Officer dismissed Grzych’s retaliation claim, however, not finding credible his testimony regarding his alleged termination and concluding that he had resigned from the company.

The Commission awarded $50,000 to Grzych for emotional distress and ordered American to pay a $10,000 civil penalty to the Commonwealth. The MCAD rarely hears cases of associational discrimination, and this appears to have been the first case of its kind in the employment arena.

Employers should be aware that the Commission recognizes associational discrimination claims and that employees may have standing to bring such claims as a result of their relationships with people outside the office. Employers should continue to train and educate their managers and employees that discriminatory comments are not to be condoned in the workplace, even if those comments are directed at someone who is associated with an employee, rather than at the employee himself or herself.

Healing Pilgrimages Are Not Protected by FMLA

In Tayag v. Lahey Clinic Hospital, Inc., the U.S. Court of Appeals for the First Circuit found that an employee’s seven-week leave of absence to accompany her husband on a “spiritual healing trip” did not constitute medical care within the meaning of the Family and Medical Leave Act (FMLA).

Lahey Clinic Hospital hired Maria Lucia Tayag in 2002 to work as a health management clerk. In 2003, Tayag began to request intermittent FMLA leave in one- and two-day increments to care for her husband, who suffered from several serious medical issues. Lahey routinely granted Tayag’s requests.

In June 2006, Tayag requested a seven-week leave to assist her husband while he traveled to the Philippines on a “spiritual healing trip.” For this longer leave of absence, Lahey required Tayag to provide a note from her husband’s primary care physician detailing the need for Tayag to accompany him on the trip. Rather than submitting the requested documentation from her husband’s physician, however, Tayag produced a note from her own doctor, which stated that Tayag should receive time off to accompany her husband to the Philippines.

On August 8, 2006, after the Tayags had already left for their trip, Mr. Tayag’s cardiologist submitted a certification form to Lahey indicating that, in fact, Tayag did not need to accompany her husband on the trip. Lahey attempted to contact Tayag to inform her that her leave was not approved, but Tayag did not respond. On August 18, 2006, Lahey terminated Tayag’s employment.

While in the Philippines, Mr. Tayag did not receive any conventional medical treatment. Instead, the Tayags attended Mass, prayed, and spoke with a priest and other pilgrims at the Pilgrimage of Healing Ministry at St. Bartholomew’s Parish. Tayag and her husband also spent time visiting other churches, and seeing family and friends. Tayag claimed that she assisted her husband throughout the trip.

In August 2008, Tayag sued Lahey in District Court, alleging that Lahey terminated her employment in violation of the FMLA. The Court resolved the case in Lahey’s favor, finding that Tayag’s trip was not “protected” under the FMLA because it was effectively a vacation. Tayag appealed to the First Circuit, which reaffirmed that decision, finding that the FMLA does not protect the type of “healing” trip taken by the Tayags.

In deciding this issue, the First Circuit looked to the express language of the statute and found that the concept of “medical care” did not encompass such a trip. The Court then examined the law’s treatment of faith healing, which considers Christian Science practitioners to be healthcare providers to the extent that they are “others capable of providing healthcare services” within the meaning of the regulation. Although Tayag argued that the faith-healing exception is unconstitutional because it distinguishes between different religions, the First Circuit found her briefing on this issue to be so cursory that it considered the argument waived. Accordingly, the Court found that the faith-healing exception did not apply to Tayag’s claim and that the FMLA did not otherwise cover “healing pilgrimages.” Moreover, the First Circuit found that Tayag’s failure to provide adequate certification for her FMLA leave was independently sufficient to affirm the District Court’s decision to award summary judgment in the employer’s favor.

This decision serves as a reminder that not all requests for leave are covered by the FMLA and that employees must provide sufficient medical certification to justify their absence from work, particularly when they are seeking unconventional forms of medical treatment.

Table of Cases

Camara v. Attorney Gen., No. SJC-10693, 2011 WL 198644 (Mass. Jan. 25, 2011).
Grzych v. Am. Reclamation Corp., 32 MDLR 238 (2010).
Juergens v. MicroGroup, Inc., No. WOCV2010-2379-D (Mass. Super. Ct. Jan. 27, 2011) (Curran, J.).
Pelletier v. Town of Somerset, 458 Mass. 504 (2010).
Prozinski v. Ne. Real Estate Servs., LLC, 50 Mass. App. Ct. 599 (2003).
Taggart v. Town of Wakefield, 78 Mass. App. Ct. 421 (2010).
Tayag v. Lahey Clinic Hosp., Inc., No. 10-1169, 2011 WL 241968 (1st Cir. Jan. 27, 2011).
Wiedmann v. The Bradford Group, Inc., 444 Mass 698 (2005).

Next Massachusetts Employment & Labor Law Report: June 15, 2011.