Massachusetts Employer Alert: Morgan Lewis Discusses Legal Trends

Author: Gloria Ju

June 6, 2014

Massachusetts employers must be on constant alert for changes in the state's employment law landscape. Lisa Stephanian Burton and Peter J. Mee, attorneys from the labor and employment practice of Morgan, Lewis & Bockius LLP, shared their legal and professional insights with XpertHR into the legal trends affecting Massachusetts employers.

What is the biggest challenge facing HR in Massachusetts today?

Burton warns that Massachusetts is one of the most heavily regulated states in the nation from an HR/employment law standpoint. The Commonwealth's many laws require employers to exercise diligence in areas ranging from payroll to employee classification to background checks and drug testing. With this backdrop, one of the biggest challenges facing HR professionals in Massachusetts today is compliance with the Commonwealth's wage and hour requirements. Plaintiffs' attorneys are highly active in this area and they are not alone. The Massachusetts Attorney General's Office conducts multiple investigations into private employers' practices every year - often resulting in fines approaching $1 million.

One particularly important area of focus, according to Burton, is the classification of individuals as employees or independent contractors. Massachusetts employers must also ensure that individuals categorized as employees are properly classified as exempt or nonexempt. Another important area is proper compliance with the Massachusetts Wage Act's administrative requirements for frequency and manner of payment. Finally, compliance with the Commonwealth's meal break law is critical. These are only some examples of certain challenges facing HR professionals in Massachusetts. HR professionals are encouraged to work closely with their employment counsel to craft policies that will insulate them from private litigation and government investigations.

Have there been any notable new Massachusetts laws or higher court rulings in the last year that will have an impact on the workplace?

Massachusetts Law

• The Temporary Worker Right to Know Act requires temporary staffing agencies to provide temporary employees with written notice of certain information before the employees can go to a new work assignment. Such information includes the staffing agency's name, address and phone number; job pay rate and pay date; job start date and expected duration; if there is a strike or lockout, whether meals or transportation will be provided; whether the position requires special clothing, tools, licenses or training; and the name, address and phone number of the site. As Mee explains, the law also prohibits staffing agencies from charging temporary employees for certain items and services related to employment, such as registering for the staffing agency or performing a Massachusetts criminal offender record information (CORI) check.
• All newly hired teachers at public and private schools, bus drivers and others working at schools or child care programs with direct unsupervised contact with children were required to undergo a national background check before the start of the 2013-2014 school year. This included the FBI checking fingerprints against a federal database. By signing this measure into law, Massachusetts Governor Deval Patrick closed a loophole in the Massachusetts CORI law. CORI mandated state background checks for teaching positions and certain other jobs, but did not require applicants' fingerprints to be submitted to the FBI.

Mee further explains that recent Massachusetts cases have focused on disability discrimination and the Massachusetts Wage Act (Wage Act), often expanding potential employer liabilities. In those cases, the Massachusetts Supreme Judicial Court decided the following:

• When an employee claims he or she is owed unpaid wages, the employee is not limited to bringing a claim under the state statute (i.e., the Wage Act), but he or she may also bring claims under common law (claims created through court decisions), such as breach of contract. In Lipsitt v. Plaud, the court found that a museum director could pursue a claim for breach of contract to recover unpaid wages under his employment contract, along with his claims under the Wage Act. As a result, the employee could recover wages that were unpaid for longer than the Wage Act's three-year limitation period (i.e., under state common law breach of contract law, an employee has six years to file a claim).
• The court ruled in Crocker v. Townsend Oil Co., Inc. that an employee is permitted to release Wage Act claims in a settlement or contract termination agreement as long as the release is plainly worded and understandable to the average individual and specifically refers to the rights and claims under the Wage Act that the employee is waiving. The decision does not provide extensive guidance on the detail required to meet the standard, so an employer should err on the side of caution when crafting release language.
• An employer's failure to pay wages cannot be lessened by gratuitous, after-the-fact payments. In Dixon v. City of Malden, an employer attempted to reduce liability for its failure to pay a former employee unpaid vacation days by paying the employee salary and benefits after his termination. The court deemed this action improper and in violation of the Wage Act's requirement to timely pay wages. Violations of the Wage Act may not be circumvented after the fact.
• The Massachusetts Fair Employment Practices Law (Chapter 151B) prohibits an employer from discriminating against an employee not only on the basis of his or her own disability, but also based on the disability of a person with whom the employee associates. In Flagg v. AliMed, Inc., the court found that an employer had violated state law when it terminated an employee because it did not want to pay for substantial medical expenses incurred by the employee's disabled spouse under the employer's health plan. This case recognizes a claim of associational discrimination for the first time, in which the claimant, although not a member of a protected class himself or herself, may be the victim of discrimination directed toward a third person who is a member of the protected class and with whom the plaintiff associates.

Federal Law

The US Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI) recently announced that 14 Massachusetts employers were fined more than $175K in total for fiscal year 2013 immigration-related employment violations. The fines resulted from investigations and audits of Form I-9, Employment Eligibility Verification, documents. Massachusetts employers should be careful to hire only authorized workers and to comply with the Form I-9 verification process.

Are there any bills and/or proposed rules currently pending that could have a big effect on employers?

Minimum Wage Increase

Burton advises that the Massachusetts House of Representatives recently approved a bill that would increase the Commonwealth's minimum wage from $8.00 per hour to $10.50 per hour over the course of the next two years. The House bill now heads to the Senate, which already passed a separate minimum wage bill in November 2013. The Senate version would increase the minimum wage to $11.00 per hour over the next three years.

Mandatory Paid Sick Time

Also of note, Burton advises that the Earned Paid Sick Time Act, House Bill 1739, accompanied Senate Bill 900 for referral to the Committee on Senate Ways and Means on May 5, 2014.

Under the Act, an employee would earn one hour of sick time for every 30 hours worked, beginning with their start date. Whether the time is paid and the maximum amount of time that could be earned would depend on the employer's size:

• An employee working for an employer with fewer than six employees would earn up to 40 hours of unpaid, job-protected sick time per year;
• An employee working for an employer with six to 10 employees would earn up to 40 hours of paid sick time per year; and
• An employee working for an employer with 11 or more employees would earn up to 56 hours of paid sick time per year.

The Act also contains provisions for notice and sick time payout upon termination.

Elimination of Noncompete Agreements

The Morgan Lewis attorneys both point out that Governor Patrick has proposed eliminating noncompete agreements. Under the Governor's proposed bill, Massachusetts employers would be barred from making employees sign noncompete agreements. The bill also would require Massachusetts to adopt the Uniform Trade Secrets Act.

Are there any notable labor and employment enforcement trends to watch in Massachusetts?

Independent contractor misclassification continues to be a hotbed for litigation, Burton warns. Massachusetts has the most restrictive test in the nation, and many employers are finding themselves on the losing end of misclassification claims. Massachusetts employers must satisfy a three-prong test to classify workers as independent contractors rather than employees:

• The individual is free from employer control and direction in connection with the performance of the service;
• The service is performed outside the usual course of the employer's business; and
• The individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.

The burden of proof falls on the employer. The Massachusetts Attorney General's Office has taken a hard stance. Employers face significant penalties if found in violation of the statute, including liability for back wages, mandatory tripling of damages and attorney fees. The Attorney General may impose civil and criminal fines as well.

The law has recently been extended beyond Massachusetts' borders. In 2013, the Supreme Judicial Court held that out-of-state plaintiffs who work for a Massachusetts-based employer may sue for violations of the independent contractor law. In Taylor, et al. v. Eastern Connection Operating, Inc., the individuals lived and worked in New York. The court held that the Massachusetts independent contractor law may be applied if a written contract exists providing for actions to be brought under Massachusetts law and if application of Massachusetts law is not contrary to a fundamental policy in the jurisdiction where the individuals live and work.

What is the number one mistake you see employers making today?

With the recent influx of start-up companies seeking to do business in Massachusetts, both Morgan Lewis attorneys have seen a trend of employers who want to propose extremely liberal and flexible HR policies to adapt to their "open-minded" and relaxed employment atmospheres. One example is unlimited vacation. This trend has the potential to expose employers to significant discrimination claims based on the variability of their decisions on whether to approve vacation requests. Disability accommodations present another problem under such schemes. While usually adopted with good intentions, these policies tend to present numerous legal problems under Massachusetts law. Quite simply, they cause more problems than they are worth.