First, he claimed to his employer that Reverse Logistics issued monetary credits to customers without having received proper documentation; this, in his view, raised the risk of Staples overpaying credits to customers who did not return goods. Second, he alleged that Reverse Logistics knowingly withheld money from contract customers by under-issuing credits over $25.00; this, in his view, raised the risk to Staples of inaccurately accounting by overstating Staples revenues and to customers of not getting full refunds. Third, he claimed that Reverse Logistics's practice of canceling and reissuing pick-up orders could permit couriers to overbill Staples. This, in his view, raised the risk of a reduction in Staples's profits.In considering whether Day was protected under SOX's whistleblower provision, the First Circuit noted that Section 1514A prohibits retaliation against any employee who “provide[s] information...regarding any conduct which the employee reasonably believes constitutes a violation” of the pertinent laws listed in that section.
The precise issue before the First Circuit was whether Day "reasonably believed" that Staples' conduct violated SOX. The court, thus, addressed what constitutes a “reasonable belief” under Section 1514A. In doing so, the First Circuit first noted that SOX protects employees from retaliation where the employee voices about any one of three specific types of illegal conduct:
The employee must show that his communications to the employer specifically related to one of the laws listed in § 1514A. ... [I]n addition to a subjective belief, an objectively reasonable belief that conduct complained of constituted a violation of the relevant law set out in the statute. The employee is not required to provide the employer with the citation to the precise code provision in question. The employee is not required to show that there was an actual violation of the provision involved.Although the court found that Day possessed subjective good faith, it concluded that his complaints lacked the objective component. Specifically, the First Circuit stated noted that "the complaining employee's theory of such fraud must at least approximate the basic elements of a claim of securities fraud." In this case, the court characterized Day's complaints as more akin to concerns over efficiency, rather than shareholder fraud. The court also found that Day failed to satisfy the materiality requirement:
[C]omplaints about purely internal practices that are not financial in nature and are not reported to shareholders do not meet the materiality requirement for an objectively reasonable belief in shareholder fraud.The First Circuit's decision provides much needed guidance regarding the elements employees must satisfy to assert a viable whistleblower claim under the Sarbanes-Oxley Act.]]>
The FPA takes effect as if enacted on May 28, 2008 and applies to all claims of discrimination in compensation under Title VII and the Civil Rights Act of 1964 (42 U.S.C. et seq.) … that are pending on or after that date. The FPA therefore applies to this case. (internal quotations omitted) (emphasis added)The court further noted that the FPA allows victims of unequal pay to recover back pay for up to 2 years preceding the filing of the charge. ]]>
The Ledbetter Fair Pay Act of 2009 has three key features. First, the statute not only applies to gender discrimination, but also to unequal pay based on the following types of discrimination: (a) race, color, religion, and national origin under Title VII; (b) age under the Age Discrimination in Employment Act (ADEA); and (c) handicap discrimination under the Americans with Disabilities Act (ADA). Second, the statute allows employees who have suffered these types of unequal pay discrimination to recover back pay for up to two years preceding the filing of a charge with the Equal Employment Opportunity Commission. Third, the Act takes effect retroactively as if enacted on May 28, 2007.
The Fair Pay Act is a welcome change for employees who suffer pay discrimination. For more information on this issue please visit the New York Times article entitled,Obama Signs Equal Pay Legislation.
The Massachusetts Wage Act, namely M.G.L. c. 149, §148, explicitly defines the term "wages" to equal "commissions" where certain parameters are satisfied:
This section shall apply ... to the payment of commissions when the amount of such commissions, less allowable or authorized deductions, has been definitely determined and has become due and payable to such employee ....Where commissions are "due and payable" and "definitely determined," the caselaw in Massachusetts makes clear that the Wage Act applies to highly paid executives, and not just hourly workers. In Wiedmann v. Bradford Group, Inc., the Supreme Judicial Court upheld a claim of pay to a professional who had earned an irregular commission which had been held, by the trial court, to have been unprotected. Thereafter, the Massachusetts Appeals Court in Okerman v. VA Software Corp. followed the Wiedmann decision, and explicitly held it was reversible error to dismiss wage claims of highly paid executives claiming irregular, contingent commissions, above and beyond a “healthy” base salary. The Appeals Court further opined that to exclude the recovery of such commissions would "vitiate the entire paragraph in the Wage Act addressing commissions,” and render the commissions paragraph meaningless.
It is illegal for an employer to in any way penalize an employee who attempts to recover unpaid commissions. The Supreme Judicial Court in Smith v. Winter Place, LLC has interpreted this provision to cover internal complaints: “Complaint made to an employer (or a manger of the employer) by an employee who reasonably believes that the wages he or she has been paid violate such laws readily qualifies as" protected conduct.
When seeking to recover unpaid commissions, its important to determine first whether the commissions can be construed as "wages" under the Massachusetts Wage Act, and second to ensure that you are protected from retaliation.
]]>Must a plaintiff present direct evidence of discrimination in order to obtain a mixed motive instruction in a non-Title VII discrimination case?
Gross asserted an age discrimination claim under the Age Discrimination in Employment Act (ADEA) and prevailed before a jury. At trial, Gross was required to prove that his age was a "motivating factor" in his employer's decision to demote him. In doing so, Gross relied on circumstantial evidence. The 8th Circuit Court of Appeals, however, reversed on the basis that the trial court should have required Gross to use direct evidence to prove age discrimination under the ADEA.
The Supreme Court and Massachusetts courts are no strangers to mixed motive issues. In Price Waterhouse v. Hopkins, which involved gender discrimination under Title VII, the United States Supreme Court held that the burden of persuasion shifts to the employer once mixed motives have been shown. Justice O'Connor's concurring opinion in Price Waterhouse, however, required an employee to produce "direct evidence" of discrimination where mixed motive is at issue. Congress later amended Title VII to make "motivating factor" -- and not "direct evidence" -- the standard required in mixed motive cases.
The Supreme Judicial Court (SJC) of Massachusetts faced a similar issue in Wynn & Wynn, P.C. v. Massachusetts Commission Against Discrimination, which involved gender discrimination claims under the Fair Employment Practices Act (M.G.L. c. 151B, s. 4). There, the SJC followed the Supreme Court's reasoning in Price Waterhouse, holding that the burden shifts to the employer once mixed motives are shown. Once the burden shifts, the employer can avoid liability only by proving that it would have made the same decision even without the illegitimate motive.
In Wynn & Wynn, the SJC also discussed the quality of evidence needed in mixed motive cases, noting that an employee must "demonstrate with a high degree of assurance” that the challenged employment decision was a “mixture of legitimate and illegitimate motives.” The SJC ultimately applied a direct evidence standard, stating there must be “some strong (direct) evidence of discriminatory bias.” The SJC made clear that direct evidence "consists of statements by a decisionmaker that directly reflect the alleged animus and bear squarely on the contested employment decision.”
Subsequent to Price Waterhouse and Wynn v. Wynn, Congress amended Title VII to make "motivating factor" -- and not "direct evidence" -- the standard required in mixed motive cases. The Supreme Court noted this change in deciding Desert Palace, Inc. v. Costa, where it held that “[i]n order to obtain [a mixed motive instruction under Title VII], a plaintiff need only present sufficient evidence for a reasonable jury to conclude, by a preponderance of the evidence, that ‘[protected class] was a motivating factor for any employment practice.’”
Unlike Title VII, Congress has not detailed the quality of evidence needed under the ADEA. As Professor Paul Secunda of Marquette University Law School has commented, "this case is going to be a tough one to predict."
]]>Client: "I just landed a new job, with better pay and more room for growth. Can you look at my new employment agreement?"In Massachusetts, non-competes are in fact enforceable where they protect a legitimate business interest and are reasonably limited in both temporal and geographic scope. If your employer has asked you to sign a non-compete, its a safe bet that the company's counsel has crafted the agreement to give it the best chance of standing up in court.
Me: "Sure. Did you happen to sign a non-compete with your old employer?"
Client: "I think so, but I've heard that non-competes are pretty much unenforceable in Massachusetts."
Me: "Unfortunately, that's not the case. Non-competes are enforceable in Massachusetts, albeit under limited circumstances."
One of Apple Inc.'s newest executives, Mark Papermaster, recently fell victim to the non-compete he signed with his former employer, International Business Machines Corp. (IBM). After leaving for Apple in October, IBM sued Papermaster, claiming that the move violated his non-compete agreement in which he agreed not to work for a competitor within one year after leaving his job.
On October 22, 2008, IBM filed its Complaint in the Southern District of New York in which, among others requests for relief, it petitioned the court for a preliminary injunction preventing Papermaster from working at Apple. In particular, IBM claimed that the agreement is enforceable because it protects a legitimate business interest since Apple is a competitor.
In his Affidavit, Papermaster challenged IBM's assertion that Apple competes with its business. Specifically, Papermaster noted that "IBM focuses on high-performance business systems such as information technology infrastructure, servers and information storage products, and operating systems software" (Para. 13). Papermaster went on to state that "Apple, on the other hand, is in the business of designing, manufacturing and marketing consumer-oriented hardware and related products" (Para. 14). In the end, IBM's argument resonated with U.S. District Judge Kenneth Karas, who ordered Papermaster to immediately "cease his employment with Apple Inc. until further order of this court."
Non-competes have fueled a growing debate in Massachusetts over the last year. As reported in Boston.com's article entitled, Why 'noncompete' means 'don't thrive ', making non-competes illegal in Massachusetts could greatly benefit the local economy:
The partners at Spark Capital, a Boston venture capital firm, began a campaign ... to get rid of noncompetes in Massachusetts. They sent a letter to Governor Deval L. Patrick in which they predicted that the result would be "more start-ups originating in the Commonwealth, a reduction in the exodus of talented people, and the ability for Massachusetts to better compete nationally and globally as a hub of innovation."While businesses may oppose such a move, such a position could be short-sighted. Its not unreasonable to assume that IBM has found itself in Apple's shoes before, hoping to a hire a key employee whose talents and ideas could be fully realized. In the long run, promoting the free flow if ideas and labor is good for employees and employers alike. Some companies seem to be catching on. As reported in the same article, Google's Cambridge office does not require its employees to sign non-competes. Hopefully, this mindset will continue to gain traction.
The bottom line: If your employer asks you to sign a non-compete, YES it can be enforceable and YES you should have it reviewed beforehand to protect the career to which you have devoted countless late nights, early mornings, and weekends.
]]>In that case, Linda Guyden worked as Aetna's Director of Internal Audit. At numerous points throughout her employment, Guyden expressed concerns over Aetna's Internal Audit Department, describing it as “ineffective, demoralized, and without independence or objectivity.” Guyden raised her concerns with senior management and advocated the need for an outside audit. Eventually, Aetna agreed to an outside audit to review its internal controls. According to Guyden, however, senior management delayed the release of the outside auditor’s report. Aetna terminated Guyden's employment 10 days before she was scheduled to meet with the company's Audit Committee and review the outside report.
Guyden filed her lawsuit for wrongful termination pursuant to Section 1514A of SOX, which prohibits public companies from “discharg[ing] . . . an employee . . . because of any lawful act done by the employee . . . to provide information . . . regarding any conduct which the employee reasonably believes constitutes a violation of [federal securities law], when the information or assistance is provided to . . . a person with supervisory authority over the employee . . ..” In response, Aetna requested that the court dismiss the complaint and compel arbitration based on an arbitration agreement that Guyden had executed.
The trial court agreed and the Second Circuit affirmed the lower court's decision, stating:
The primary purpose of the statute is to provide a private remedy for the aggrieved employee, not to publicize alleged corporate misconduct. Although Guyden correctly points out that the broad purpose of the Sarbanes-Oxley Act is to strengthen the integrity of capital markets, the whistleblower provision in particular fills a far narrower gap in the law–it protects employees when they take lawful acts to disclose information or otherwise assist in detecting and stopping actions which they reasonably believe to be fraudulent.The Second Circuit further noted the legislative history surrounding the passage of the Sarbanes-Oxley Act:
Tellingly, and further undermining Guyden’s argument that the public purpose of SOX should preclude arbitration, both Houses of Congress, acting separately, rejected versions of SOX that would have prohibited mandatory arbitration of whistleblower claims.Although her claim is not lost, arbitration in general favors employers over employees. The Second Circuit's ruling presents yet another sobering lesson for employees: If you have any doubt about the implications of a document that your employer requests you to sign, run it by an employment lawyer first. ]]>
Under M.G.L. c. 112, s. 12X, non-compete agreements are null and void as to physicians. In Falmouth Ob-Gyn Assocs., Inc. v. Abisla, the Supreme Judicial Court struck down a doctor’s contractual obligation to pay $250,000 in liquidated damages after leaving to compete against his former practice. In a similar vein, M.G.L. c. 112, s. 74D nullifies non-competes as to registered or licensed practical nurses.
Under the Massachusetts Rules of Professional Conduct, non-competes are unenforceable as to lawyers. However, in Pettingell v. Morrison, Mahoney & Miller, the Supreme Judicial Court considered the enforceability of a forfeiture-for-competition clause contained in a law firm’s partnership agreement. The clause required partners who withdraw from the firm, and who later compete, to forfeit certain payments. Although the Supreme Judicial Court ruled that the clause was unenforceable in that particular case, it noted that forfeiture-for-competition clauses are not per se illegal and may be upheld if a law firm could demonstrate that its survival and well-being justified such a clause.
In 1998, the Massachusetts legislature exempted individuals in the broadcasting industry, including television stations and radio stations. In particular, M.G.L. c. 149, s. 186, nullifies non-compete agreements in the broadcasting industry where: (1) the employer terminates the employee, (2) the employment relationship is terminated by mutual agreement, or (3) the employee’s contract expires. Notably, Section 186 does not prohibit the enforcement of non-compete agreements where the employee voluntarily terminates his or her employment prior to the expiration of an employment contract.
Recently, in 2008, the Massachusetts legislature made non-competes unenforceable with respect to social workers under M.G.L. c. 112, s. 135C:
A contract or agreement creating or establishing the terms of a partnership, employment, or any other form of professional relationship with a social worker licensed under this chapter that includes a restriction of the right of the social worker to practice in any geographic area for any period of time after termination of the partnership, employment or professional relationship shall be void and unenforceable with respect to that restriction. This section shall not render void or unenforceable the remainder of the contract or agreement.Beyond these exemptions, a court will refuse to enforce a non-compete against any employee where the non-compete is not: (1) necessary to protect a legitimate business interest, (2) reasonably limited in time and geographic scope, (3) consonant with the public interest, and (4) supported by consideration. The burden of proof as to the enforceability of a non-compete agreement lies with the employer. For more information, please visit our previous blog post entitled, Massachusetts Non-Compete Agreements in a Nutshell.
Whoever knowingly, with the intent to retaliate, takes any action harmful to any person, including interference with the lawful employment or livelihood of any person, for providing to a law enforcement officer any truthful information relating to the commission or possible commission of any federal offence, shall be fined under this title, imprisoned not more than 10 years, or both.Since its inception, however, whistleblowers have not fared particularly well before the Department of Labor, the agency responsible for interpreting and enforcing SOX claims:
The government has ruled in favor of whistleblowers 17 times out of 1,273 complaints filed since 2002 .... Another 841 cases have been dismissed. Many of the dismissals were made on the grounds that employees worked for a corporate subsidiary ....Many cases hinge on whether SOX should apply to whistleblowers who work for subsidiaries of public companies. Department of Labor spokesperson, Sharon Worthy, doesn't think so: "The plain language of the statute only applies to publicly traded corporations." But Senator Patrick Leahy (D-Vermont), who helped draft SOX's whistleblower clause, sharply disagrees: "Otherwise, a company that wants to do something shady, could just do it in their subsidiary."
While Section 806 does not expressly include subsidiaries of publicly traded companies, consistent with its intent, the law has been correctly applied to private subsidiaries of publicly traded companies in a number of cases:
The Sarbanes-Oxley Act is a complex statute. Where used correctly, SOX can be an effective tool for protecting whistleblowers who are courageous enough to speak out against a company's illegal conduct. If you are or will soon become a whistleblower, finding an attorney to effectively represent your interests may require that you invest some time. To ensure that your rights are fully protected, choose a law firm that specializes in employment law.
For more information, please visit The Wall Street Journal article entitled, Whistleblowers Are Left Dangling.
]]>Unfortunately, the Appeals Court construed the health care whistleblower statute narrowly. Section 187(b)(3) prohibits retaliation against a health care provider who:
[O]bjects to or refuses to participate in any activity, policy or practice of the health care facility or of another health care facility with whom the health care provider’s health care facility has a business relationship which the health care provider reasonably believes is in violation of a law or rule or regulation promulgated pursuant to law or violation of professional standards of practice which the health care provider reasonably believes poses a risk to public health.In dismissing the employee's whistleblower claim, the court reasoned that an employee who objects to a proposed unlawful activity, policy, or activity is not protected under Section 187(b)(3).
The ruling creates an obvious disincentive for health care providers to speak out against and oppose proposed policies, which they reasonably believe will pose a risk to public health. Rather, as the court's decision makes clear, an employee's conduct is only protected where there is opposition to an existing policy.
]]>Employers can avoid paying overtime only in limited circumstances. For example, managers and supervisors may qualify for the executive exemption if they: (1) manage at least two direct reports, (2) possess the authority to hire and fire employees, or whose input into such matters carries weight, and (3) regularly exercise discretion about how to carry out their job duties.
Unfortunately, to increase profits, some employers may classify an employee as exempt from overtime, even though the worker's duties and responsibilities do not warrant such an exemption. To illustrate such a scenario, lets look at the TV sitcom, The Office. Specifically, as the the self-proclaimed Assistant Regional Manager, would
Dwight Schrute satisfy the executive exemption? The answer is obvious: Dwight would not meet the executive exemption because, despite his title, he has no direct reports; no authority to hire or fire employees; and spends the majority of his time selling Dunder Mifflin's paper products, not managing employees.
On a much larger scale, a similar question recently arose in a lawsuit against the New York grocery store chain, Gristedes. In Torres v. Gristedes, Judge Paul A. Crotty of the Federal District Court in Manhattan found that Gristedes violated federal and state laws by misclassifying department heads and so-called co-managers as exempt from overtime
[T]he overwhelming weight of the evidence suggests ... that the class members were not salaried executives or administrators within the contemplation of the FLSA. Instead, ... Gristede’s co-managers and department managers received a regular paycheck that was tied automatically to the amount of hours they worked during the pay period.The decision affects approximately 400 current and former Gristedes' managers who, collectively, may be owed as much as $25 million. In reaching such a successful result, the plaintiff's relied on well-known economist, Dr. Stephen A. Schneider of Nathan Associates, Inc., who provided statistical analysis regarding the gross underpayments made by Gristedes.
To read more about the settlement, please visit the New York Times article entitled, Judge Rules That Gristede’s Broke Law on Overtime Pay.
]]>The Farragher/Ellerth defense is an affirmative defense arising out of two 1998 Supreme Court decisions: Farragher v. City of Boca Raton, and Burlington Industries v. Ellerth. For the Farragher/Ellerth defense to apply, an employer must satisfy two elements: (1) reasonable care was taken to prevent and promptly correct the harassing or discriminatory behavior, and (2) the employee unreasonably failed to take advantage of the preventive or corrective opportunities provided.
In June 1999, Bonnie Chaloult began working at Interstate Brands in Biddeford, Maine. In August 2005, Chaloult resigned after enduring a series of debasing remarks from her supervisor, Kevin Francoeur. Such remarks included:
Approximately one year later, Chaloult filed a lawsuit based on, among other things, the sexual harassment she suffered from Francoeur. Surprisingly, the federal District Court of Maine accepted the Farragher/Ellerth defense on the basis that Chaloult failed to report specific instances of misconduct during her employment. The First Circuit affirmed the district court's decision. In doing so, both courts failed to acknowledge the reality of the workplace. If your manager knows that your supervisor is subjecting you to such demeaning conduct, and fails to take remedial measures, how confident would you feel in voicing such concerns? Would you keep quiet to ensure to avoid possible retaliaton?
]]>[I]f [Noonan's] relationship with Staples is terminated by Staples for "cause" ... the right to exercise this option with respect to any shares not previously exercised shall terminate immediately ...The contract provided a definition for "cause," but gave Staples the discretion to ultimately interpret whether Noonan's alleged transgressions fit that definition. The question before the First Circuit was whether it could review Staples' interpretation.
In their respective arguments before the First Circuit, Staples argued that the court had no authority to review its "cause" determination, while Noonan argued that the court could review Staples' decision de novo with no deference to Staples' reasoning.
The court rejected both arguments and, relying on precedent, adopted a middle ground. In particular, the court held that while Staples' decision could be reviewed, it would only be overturned if it was arbitrary, fraudulent, or made in bad faith. This is an extremely high standard. Not surprisingly, in light of this standard, the First Circuit affirmed Staples' decision to terminate Noonan for "cause."
The lesson learned: Review your employment contract with counsel before you sign it. Where possible and necessary, revise the language to ensure that your employer does not enjoy total discretion to decide the definition of "cause."
]]>"Workplace bullying" is not at issue in this matter, nor is there any basis in the law for a claim of "workplace bullying." In other words, you are not to determine whether or not the Defendant, Daniel Raess, was a "workplace bully." The issues are as I have instructed you: whether the Defendant assaulted the Plaintiff, Joseph Doescher on November 2, 2001, and whether that assault constituted intentional infliction of emotional distress.The trial court refused the instruction. The Appeals Court in Raess v. Doescher (Appeals Court) reversed on the basis that the probative value of the workplace bullying evidence was substantially outweighed by the unfair prejudice. In the end, the Indiana Supreme Court had the last say:
In determining whether the defendant assaulted the plaintiff or committed intentional infliction of emotional distress, the behavior of the defendant was very much an issue. The phrase "workplace bullying," like other general terms used to characterize a per-son's behavior, is an entirely appropriate consideration in determining the issues before the jury.As expected, the jury's verdict was upheld. For more information about the decision, please visit the Boston Business Journal's article entitled, Bullies beware: Employees have more options -- including court -- to confront bad bosses]]>