Don’t Delay: MA Employers Are Now Strictly Liable for Three Times the Amount of Wages for Late Payments With No Safe Harbor for Paying in Full Prior to Suit!

Under the Massachusetts Wage Act (the “Wage Act”), if an employee voluntarily quits their employment, the employer must pay the employee their final wages, including any earned, unused vacation pay, on the employer’s next regular pay day. However, when an employee is involuntarily terminated, the employer is required to pay the employee’s final wages, including accrued and unused vacation pay, on the day the employee is discharged. Paying final wages on the day of discharge can sometimes be challenging, especially if the termination is abrupt (for example, because of an employee’s serious misconduct on the day of termination) or when the terminated employee is working remotely and direct deposit is not available. In addition, employers sometimes make payroll errors that result in employees not receiving all of their final pay on a timely basis. 

The Wage Act also allows employees that do not receive all wages they are owed to pursue a civil action for damages incurred, including liquidated damages in the amount of three times the wages owed, plus attorneys’ fees and costs. During the last decade, courts and litigants took the position that if an employer remedied the wage violation before a complaint was filed with the Attorney General’s office or in court, then employers were only liable for three times the accrued interest on the late payment, calculated at 12% between the date the wages were due and the date of full payment. Unfortunately, that approach is no longer feasible. 

This week, the Massachusetts Supreme Judicial Court (SJC) clarified the Wage Act’s treble damages provision in Reuter v. City of Methuen, SJC-13121 (Mass. April 4, 2022), holding that employers are strictly liable for any delay in payments, regardless of the reason for the delay (including, for example, a payroll error). The Court reasoned that any delay in payment of final wages could cause the terminated employee serious economic harm, and the legislature sought to prevent that by instituting automatic treble damages for violations of the Wage Act. In that case, the Town of Methuen paid Reuter her earned, unused vacation pay ($8,952.15) three weeks after her discharge for misconduct. The Town will now have to pay her an additional $17,904.30, plus interest and thousands of dollars in attorneys’ fees as a result of the delay in payment.

In light of the SJC’s decision in Reuter, when employers delay (even for one day!) in paying a discharged employee their final wages upon termination, they are now risking claims for three times the amount owed (plus interest and attorneys’ fees). As mentioned above, because employers sometimes struggle to pay terminated employees their final wages on the last day of employment, the SJC’s decision in Reuter will likely result in more claims by former employees seeking to capitalize on their employers’ missteps. One possible silver lining – former employees and their attorneys may now be more incentivized to resolve wage disputes before “racing to the courthouse” to file a lawsuit because holding off on filing suit will not cause them to risk foregoing potential treble damages. 

So what are the takeaways for Massachusetts employers who want to avoid a precarious pitfall (and windfalls for terminated employees)? Make sure that your pay practices are accurate and legally-compliant (including proper classification of workers, payment of all working time and overtime, etc.), and do not discharge any employee unless and until you are prepared to pay them their final wages on the day of termination. If it is not possible to pay the employee’s final wages on the termination date but you need to remove them from the workplace (e.g., in the case of misconduct), then you could place the employee on administrative leave until the next day and then pay their final wages at that time. In fact, the Court in Reuter suggested that approach as a possible option.

Nonetheless, the SJC’s clarification of what is now an even more “employee-friendly” Wage Act may cause significant burden to employers and result in increased claims by former employees and their attorneys seeking treble damages and attorneys’ fees.

If you have any questions regarding the Reuter case and/or how you can ensure that your organization is compliant with state and federal wage & hour laws, please do not hesitate to reach out to any member of Mirick O’Connell’s Labor, Employment, and Employee Benefits Group.

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The Times They Keep A-Changing: The New Illinois Restrictions on the Use of Non-Compete and Non-Solicit Agreements

The state-by-state non-compete reform movement keeps rolling – this time in the state of Illinois.  Effective January 1, 2022, the Illinois Freedom to Work Act has dramatically changed the landscape for employers in that state who desire to use non-compete agreements with their employees.  In a marked departure from most other states enacting reform measures, this new law also adds restrictions on the use of non-solicit agreements.

As a quick refresher, non-compete agreements prohibit an employee from working for a competitor for some limited period of time after departing employment.  Non-solicit agreements more narrowly restrict an employee from soliciting the employer’s customers or clients post-termination. 

Non-solicit agreements have typically been less the target of legislative reform than non-compete agreements.  No doubt this has been the case due to the fact that the employer was seeking to protect existing customer relationships (typically referred to as “goodwill”) which it had invested time, effort and expense in creating.  As a result, reform efforts have more often focused on non-competes where there is far less of an identifiable investment appropriate to protect.  As a prime example of this legislative differentiation, the Massachusetts Noncompetition Agreements Act which took effect in 2018 (the “Massachusetts Act”), expressly excludes non-solicitation agreements from the reach of the enacted reforms.

Not so in Illinois.  Painting with a very broad brush, the Illinois Freedom to Work Act (IFWA) imposes the following restrictions on the use of either:

  • Continued employment will not be sufficient consideration for such agreements unless the employment continues for at least two years after signing or the employee is provided undefined “additional professional or financial benefits;” 
  • An employee terminated or furloughed due to the business impacts of COVID “or under circumstances that are similar to the COVID-19 pandemic” must be provided compensation equal to the employee’s final base salary for the entire time period that the restriction is in place (with an offset if the employee has found subsequent employment);
  • Non-compete and non-solicit agreements may not be used with employees earning less than certain annual income thresholds ($75,000 for non-competes; $45,000 for non-solicits; with automatic income threshold increases in 2027, 2032, and 2037);
  • Covenants not to compete with construction workers, shareholders of the employer; or employees subject to certain collective bargaining agreements are illegal and void;
  • Agreements that do not expressly advise the employee to consult with an attorney are illegal and void;
  • Agreements which do not provide a 14 calendar day review period are similarly illegal and void;
  • Attorney’s fees must be awarded to employees who successfully defeat an employer’s enforcement attempt; and
  • The attorney general is empowered to prosecute employers who “engage in a pattern and practice” prohibited by IFWA with fines beginning at $5,000 and escalating with each subsequent violation.

It is interesting to compare the provisions in the IFWA to what is and is not provided in the Massachusetts Act:

  • Coverage.  Non-solicit agreements are not affected and remain enforceable to the same extent as they were prior to enactment of the Massachusetts Act; 
  • Consideration.  Continued employment regardless of how long it continues will not be sufficient consideration for such agreements – “fair and reasonable consideration” (undefined in the statute) must be given to a current employee asked to sign such an agreement and the consideration being provided must be spelled out in the agreement;
  • Laid Off Employees.  A non-compete agreement becomes void if an employee is terminated without cause or “laid off” regardless of what precipitated the lay-off;
  • Garden Leave.  In perhaps the most common misperception, “garden leave” of 50% of an employee’s base salary is an option an employer may provide in consideration for a non-compete agreement, but it is not mandated – although it is anticipated that Massachusetts courts will likely be less receptive to non-competes that do not include a “garden leave” provision; 
  • Off-Limits Employees.  Non-compete agreements may not be used with non-exempt employees, student interns or young employees (under age 19) regardless of income level;
  • Mandatory Notice of Right to Counsel.  The employee must be expressly advised of his or her right to consult with an attorney before signing (one court sitting in Massachusetts held an agreement unenforceable where this language was absent);
  • Mandatory Review Period.  The employee must be provided a 10 business day review period before signing;
  • Attorney’s Fees and Fines.  There are no provisions imposing mandatory attorney’s fees or potential civil administrative penalties under the Massachusetts Act. 

As the non-compete reform movement continues to spread across the country, the widely-varying approaches taken from state-to-state defy any general description.  Where there has been activity, some states have enacted very limited restrictions (such as New Hampshire whose legislation is limited to a ban on non-competes with low wage employees) (see 2019 blog post – The Summer of Non-Compete Reform:  Three Other New England States Get In On The Act).  A few (such as the District of Columbia in particular) (see January 2022 blog post – The District of Columbia’s Aggressive Ban on Non-Compete Agreements) have joined California in banning non-compete agreements outright.  As the comparison between the Massachusetts Act and the IFWA reflects, other states have taken very different and creative approaches tailored to address specific areas of concern of each state’s legislature.  Given this spectrum, the only general takeaway is that employers, particularly those with operations in numerous states, must be knowledgeable about the crazy quilt of laws that have emerged and take the steps necessary to carefully comply.

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OSHA Withdraws COVID-19 ETS, But Signals That It Is Moving Forward with Final Rule

On January 25, 2022, OSHA announced the withdrawal COVID-19 Vaccination and Testing Emergency Temporary Standard (the “ETS”). In the announcement, OSHA stated that although it “is withdrawing the [ETS] as an enforceable emergency temporary standard, [it] is not withdrawing the ETS to the extent that it serves as a proposed rule . . .” In other words, OSHA may use the ETS as a proposed rule that will (undoubtedly) be edited and implemented as a final rule.

Accordingly, at this time, employers with 100+ employees are not required to implement COVID-19 vaccine and testing policies that comply with the ETS. However, employers (of all sizes) are generally free to implement COVID-19 vaccine and/or testing mandates. Please contact us if you have any questions about such policies or the impact of the OSHA ETS withdrawal on your existing policies and practices.

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Supreme Court Stays OSHA’s COVID ETS

The OSHA COVID ETS is once again stayed.

On January 13, 2022, the United States Supreme Court stayed OSHA’s Emergency Temporary Standard which required that employers with 100+ employees require employees to either (a) become vaccinated against COVID-19; or (b) generally, submit proof of a negative COVID test on a weekly basis and wear a mask (the “ETS”). In so doing, the Court found that opponents of the ETS are likely to succeed on their argument that OSHA lacked authority to impose the ETS because COVID – the Court reasoned – is not an occupational hazard but instead a universal, day-to-day risk.

As a result of the Order, employers are now not required to:

  • Institute a COVID-19 vaccine mandate;
  • Provide paid time off for employees to receive and/or recover from the vaccine (unless required by a different law, such as the Massachusetts COVID Emergency Sick Leave law); or
  • Determine and track the vaccination status of employees.

As employers are fully aware, there has been a lot of turbulence in this area. If you have any questions about next steps in light of the stay of the ETS, please do not hesitate to reach out to a member of our Labor, Employment and Employee Benefits Group.

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The District of Columbia’s Aggressive Ban on Non-Compete Agreements Likely to Take Effect in 2022

In December 2020, the District of Columbia Council passed and in January 2021, Mayor Muriel Bowser signed legislation entitled the Ban on Non-Compete Agreements Amendment Act of 2020 (the “DC Act”).  While the effective date of the Act was delayed due to other provisions in the legislation, it appears that it is likely to take effect on April 1, 2022.  The aggressive pro-employee scope of the DC Act is noteworthy and goes much farther than the many state- or local-level attempts to reform or ban non-competes, including the Massachusetts Noncompetition Agreements Act that took effect in 2018 (the “Massachusetts Act”). 

Is the DC Act a sign of things to come in the reform movement or is it likely to remain on the far fringe of non-compete reform?  Only time will tell.

In the meantime, among the most notable provisions of the DC Act:

Outright Ban on Non-Compete Agreements.  First and foremost, non-compete agreements are banned entirely in the DC Act with very limited exceptions (described below).  As a result, the District of Columbia joins only a small number of other legislative bodies that have an outright ban.  Presently, that exclusive club includes only California, Oklahoma and North Dakota (the latter two having enacted bans in the 19th century).

Ban on Moonlighting Restrictions.  Typically, reform efforts have solely focused on narrowing or eliminating restrictions on a departing employee’s ability to compete against his or her former employer.  The DC Act goes one very big step further and sweeps in current employees, prohibiting provisions that restrict a current employee’s right to engage in a competitive activity while still employed, so called “moonlighting.”

Supercharged Notice Requirements.  Many states, including Massachusetts, require advance notice to the employee that they will be asked to sign a non-compete agreement to avoid the “burnt bridge effect” (i.e., an employee being surprised on the first day of employment by being required to sign a non-compete or face having neither a new or old job).  Rather than using notice as a defensive requirement only, the DC Act turns notice into an offensive protection, mandating that all employers located in the District provide notice to all employees as follows:   “No employer operating in the District of Columbia may request or require any employee working in the District of Colombia to agree to a non-compete policy or agreement, in accordance with the Ban on Non-Compete Agreements Act of 2020.

Punishment for End Runs.  In most reform statutes, the negative impact on the employer who attempts to use a non-compliant or banned agreement is lack of enforceability.  The DC Act again goes further and imposes escalating financial penalties upon employers who ignore the ban, including failure to provide the required notice.  Those financial sanctions are enhanced for employers who retaliate against employees who refuse to sign a banned agreement, ask about their rights or request the information mandated by the notice requirement.  Further enhanced penalties arise for serial violators.  When a violation occurs, an employee may seek relief either through an administrative complaint to the Mayor or via a civil action.

Special Provisions for Physicians.  In contrast to Massachusetts’ ban on non-compete agreements for physicians, a unique provision of the DC Act surprisingly permits physician non-competes provided the physician earns total compensation of at least $250,000 per year.

No Retroactive Effect.  Like the Massachusetts Act, the DC Act does not have retroactive effect so agreements in place as of the effective date will arguably continue to be enforceable.  Whether DC courts will enforce them in the face of this dramatic statement of public policy is a significant question (as it still is here in the Commonwealth).

Other Restrictive Covenants – NDA’s.  The DC Act does not impact non-disclosure agreements which are expressly excluded from the definition of “non-compete provision.” 

Other Restrictive Covenants – Non-solicitation Agreements.  Unlike the Massachusetts Act, however, which expressly carves out customer non-solicitation agreements (among other related forms of restrictive agreements) from the definition of a non-compete, the DC Act is silent.  It therefore remains to be seen whether an employee accused of violating a non-solicitation agreement could successfully defend on the basis that such an agreement constitutes a form of prohibition on the employee “performing work or providing services for pay” thereby constituting a banned and unenforceable non-compete.

Limits on Protection.  As in most states, the DC Act does not ban a non-compete used in connection with the sale of a business. 

Every reform effort also seems to have its unique quirks, often the product of legislative lobbying, constituent pressure or unintentionally funny drafting.  The DC Act has some of its own, with carve-outs to the definition of an “employee” to whom the act and its non-compete ban applies.  For example, (a) volunteers to educational, charitable, religious or nonprofit organizations and (b) lay members elected or appointed to office within the discipline of any religious organization and engaged in religious functions are not “employees” defined in the DC Act.  Also excluded – “casual babysitters employed in or about the residence of the employer.”  Hopefully, this carve-out was intended to avoid the need to give the mandatory notice, not to subject middle-schooler Jennifer to a non-compete foist upon her by Mr. and Mrs. Abercrombie so as to avoid their secret lobster bisque recipe finding its way into the hands of the neighboring Fitches.

It is often said, for good or for bad, that legislation at the local level is the place where creativity and ingenuity can be tested (or can go to die).  This theory continues to apply in the non-compete reform field.  Undoubtedly, that trend will continue as legislatures attempt to find the sweet spot between (i) encouraging aspiring entrepreneurs and (ii) protecting those entrepreneurs who have succeeded in developing the better mousetrap.

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Don’t Forget! Minimum Wage Rates in Massachusetts Increase, Effective January 1, 2022

The minimum wage in Massachusetts will increase from $13.50 to $14.25 an hour, effective January 1, 2022.

In addition, the minimum wage for tipped employees who make more than $20/month in tips will increase from $5.55/hour to $6.15/hour. Employers may pay tipped employee this hourly wage rate only if the employee receives at least $14.25/hour when actual tips and wages are combined.

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CDC Shortens COVID-19 Related Isolation and Quarantine Period, and Distinguishes Between Vaccinated Individuals With/Without Booster

On December 27, 2021, the CDC issued updated guidance which significantly shortens the periods of isolation and quarantine it recommends for COVID-related diagnosis and/or exposure. Specifically, the CDC now recommends that individuals who test positive for COVID-19 (regardless of vaccination status) isolate for only 5 days, provided that they are asymptomatic and then wear a mask when around others for 5 days. The CDC previously had recommended 10 days of isolation.

The CDC recommends that individuals who have received a booster shot or completed the primary series of the Pfizer or Moderna vaccine within six months prior to exposure (or the J&J vaccine within two months prior to exposure) wear a mask around others for 10 days after they have been exposed to someone with COVID-19 so long as they are asymptomatic and, if possible, test for COVID-19 on the fifth day after the exposure. If such individual develops symptoms, then they should quarantine and obtain a test.

In addition, the CDC now recommends that unvaccinated individuals who were exposed to COVID-19 but are asymptomatic: test for COVID-19 on the fifth day after exposure; quarantine for five days after exposure; and, after quarantine, wear a mask when around others for five days. The foregoing applies to individuals who received their last dose of the Moderna or Pfzier vaccine more than six months prior to the exposure (or received their dose of the J&J vaccine more than two months prior to the exposure) and have not yet received a booster shot.

In applying the same standards to both (a) unvaccinated individuals; and (b) individuals who have not received a booster within 6/2 months after their primary vaccine, the CDC is essentially requiring individuals to receive booster shots in order to be considered fully vaccinated. This may foreshadow changes to the CDC’s definition of “fully vaccinated” which, in turn, could have implications for employers’ policies and recordkeeping requirements.

The CDC also provided that unvaccinated individuals/individuals who have not received a booster may chose not to quarantine so long as they are asymptomatic and wear a mask for 10 days after exposure.

To the extent state and/or local Department of Public Health agencies recommend longer periods of isolation and/or quarantine, employers would be well-advised to follow the more conservative guidance. As always, employees who have been diagnosed with or exposed to COVID-19 should consult with their healthcare provider and follow their provider’s recommendations.

If you have any questions about the new guidance and/or any COVID-19 related policies or situations, please do not hesitate to reach out.

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Massachusetts Supreme Judicial Court Adopts FLSA’s Joint Employer Test

Jonathan R. Sigel and Ashlyn E. Dowd

On December 13, 2021, the Massachusetts Supreme Judicial Court (SJC) considered whether the so-called “ABC Test” set forth in M.G.L.c. 149, §148B (“Section 148B”) should be applied to determine whether an entity is a worker’s “joint employer” for purposes of Massachusetts’ wage laws.  In Jinks v. Credico (USA) LLC, the SJC held that it does not.

The ABC Test provides the standard to determine whether a worker is an employee or an independent contractor.  Specifically, Section 148B provides that an “individual performing any service, except as authorized under this chapter, shall be considered to be an employee under those chapters unless:

(1) the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and

(2) the service is performed outside the usual course of the business of the employer; and,

(3) 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.

In holding that the ABC Test does not apply to the joint employer determination, the SJC rejected the plaintiffs’ argument – namely, that an entity is an individual’s employer so long as the individual is performing any service’ from which the entity derives an economic benefit.  Jinks v. Credico (USA) LLC, No. SJC-13106 (December 13, 2021).

Instead, the SJC utilized the test under the federal Fair Labor Standards Act (the “FLSA”) to determine joint employer status. The FLSA test considers the totality of the circumstances of the relationship between the individual and the entity.  The four factors considered under the FLSA include: “whether the entity (1) had the power to hire and fire the individual, (2) supervised and controlled the individual’s work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.” 

In Jinks, plaintiffs were salespersons directly retained by DFW Consultants Inc. (“DFW”), an entity that Credico subcontracted to provide regional direct sales services for its national clients. The SJC applied the four-factor framework from the FLSA to the facts of Jinks and concluded that Credico could not be held liable for violations of wage laws as Jinks’ joint employer because Credico did not exercise the type of control over plaintiffs’ employment necessary to conclude it was their joint employer.

Although the SJC’s holding clarified that the ABC Test does not apply to the determination of joint employer status under Massachusetts law, employers should be aware of the FLSA’s totality of the circumstances test and be cautious when exercising control over workers employed by other entities.  As our firm has previously reported, in Could You be Liable for the Sins of Your Staffing Agency, employers can indeed be liable for the legal violations committed by their staffing agencies.

If you have any questions regarding the FLSA joint employer test or any other concerns regarding wage & hour law, please contact a member of our Labor & Employment Group.

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OSHA Exercising Discretion in Enforcing the ETS Until January 10

As posted here, the Sixth Circuit Court of Appeals lifted the stay of the Vaccination and Testing Emergency Temporary Standard (the “ETS”) issued by OSHA. The Department of Labor announced on Saturday, December 18 that OSHA is exercising enforcement discretion with respect to the compliance dates of the ETS. Accordingly, OSHA will not issue citations for noncompliance with any of the requirements of the ETS (apart from the testing requirements) before January 10, and OSHA will not issue citations for noncompliance with the ETS’ testing requirements before February 9, so long as an employer is exercising “reasonable, good faith efforts to come into compliance with the standard.”

The parties challenging the ETS have reportedly filed an application with the United States Supreme Court to reinstate the stay.

Importantly, employers may choose to implement a vaccination policy regardless of the ultimate outcome of the ETS-related litigation. We will continue to keep you updated, but please feel free to reach out with any questions.

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Court Lifts Stay on OSHA’s Emergency Temporary Standard Regarding COVID-19

On Friday, December 17, 2021, the United States Court of Appeals for the Sixth Circuit lifted the stay on OSHA’s Emergency Temporary Standard that mandates employers with 100 or more employees to require unvaccinated workers to wear a mask on the job and test for COVID-19 weekly (the “ETS”).

In dissolving the stay, Judge Jane B. Stranch wrote that “COVID-19 has continued to spread, mutate, kill, and block the safe return of American workers to their jobs.  To protect workers, OSHA can and must be able to respond to dangers as they evolve.”   In its 37-page Order, the Court held that: (1) “there is little likelihood of success for the challenges against” the ETS; and (2) the parties challenging the ETS did not demonstrate that they would suffer an irreparable injury if the stay was lifted; in contrast, the “costs of delaying implementation of the ETS are comparatively high” as OSHA conservatively estimated that the ETS will “save over 6,500 worker lives and prevent over 250,000 hospitalizations” in just six months.

Accordingly, the ETS is now back in effect and employers with 100 or more employees must comply with its requirements, which we previously discussed here. If you have any questions about the ETS or any other COVID-19 or vaccination related issues, please do not hesitate to contact any member of our Firm’s Labor, Employment and Employee Benefits Group.

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