In an effort to keep our newsletter readers abreast of recent developments and legal trends, we are beginning a new feature – a “top five to ten” list of cases of importance to executives and professionals. This quarter, we are covering cases in the following fields: contract, discrimination, executive compensation and wage act litigation. Included in our list are “heads up” regarding important cases likely to be decided soon.
CONTRACT – THERE IS NO SUCH THING AS BOILERPLATE, PART II
MACCURTAIN v. NASON, No. 17-P-1482 (Mass. App. Ct. July 17, 2018)
We previously wrote about the Massachusetts Appeal Court’s decision in MacDonald v. Jenzabar, Inc., wherein an executive, in signing a severance agreement, inadvertently waived his post-termination equity rights. We cautioned that there is no such thing as “boilerplate” and that legal counsel should be obtained to review anything you are asked to sign in exchange for severance.
The same is true for anything you are asked to sign when you begin employment – whether you are an employee or an employer.
In the MacCurtain case, an employer bound itself to pay an employee a percentage of fees generated by work the employee brought to the employer – even after the employee had left the firm. As in the MacDonald case, the Appeals Court found no ambiguity in the language of the agreement and, therefore, did not delve into what the parties may have or have not intended because, in such situations, the words “alone determine the meaning of the contract.”
Furthermore, the Appeals Court held that, even if there were ambiguity in the language, it would be construed against the drafter (here, the employer) and the Court would not add terms that the drafter could have but did not include, e.g., that payments would end upon the end of employment.
CONTRACT –ENFORCING COMPENSATION TERMS
GROL v. SAFELITE GROUP, INC., 297 F. Supp. 3d 241 (2018)
Employment relationships, like other business relationships, are contractual – and even contracts terminable at will include fully enforceable terms, e.g., regarding compensation. In Grol, a terminated employee asserted both discrimination and contract claims, including that she was entitled under contract to a 13% commission, one year of severance and a bonus to which she was entitled because her termination was not “for cause.” The employer denied the existence of contract for both the 13% commission and the one year of severance, and asserted that there was “cause” for the termination so no bonus was owed. The employee also alleged breach of the implied covenant of good faith and fair dealing, alleging that the termination was timed to rob her of future bonuses, which the employer also denied. Finally, the employer argued that contract claims were preempted by the anti-discrimination laws.
The United States District Court held that genuine issue of material fact existed as to whether there were enforceable contract compensation terms, and as to whether the termination was not for “cause” or was otherwise timed so as to rob the employee of future bonuses. The Court also held that the employee had every right to pursue both contract claims and discrimination claims – and that the former were not preempted by the latter. In conclusion, the Court denied the employer’s efforts to derail the employee’s case before it was tried to a jury.
DISCRIMINATION – GETTING TO THE JURY IS GETTING EASIER FOR EMPLOYEES
SCARLETT v. CITY OF BOSTON, No. 17-P-998 (Mass. App. Ct. July 19, 2018)
We have written at length about the anticipated sea-change following the Supreme Judicial Court’s 2016 decisions in Bulwer v. Mt. Auburn Hospital and Verdrager v. Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C. As anticipated, lower courts have gotten the reiterated message that summary judgment is a disfavored remedy, that the burden is on the employer as the moving party in a pre-trial dispositive motion (such as for summary judgment), that Massachusetts is a “pretext only” state, and that most discrimination cases should be decided by a jury after a full trial. When the message has gotten lost, the Appeals Court is stepping up as it did in Scarlett to repeat the message and protect the employee’s right to trial by jury by reversing the lower court’s award of summary judgment to the employer.
DISCRIMINATION – WHAT CONSTITUTES AN ACTIONABLE ADVERSE ACTION?
HEADS UP – In the case of Yee v. Massachusetts State Police, SJC-12485, the Supreme Judicial Court is soliciting amicus briefs (friend of the Court briefs) regarding the following question: Whether and in what circumstances the denial of an employee’s request for a lateral transfer constitutes an adverse employment action that is actionable under G. L. c. 151B.
EXECUTIVE COMPENSATION – RESTRICTIVE COVENANTS DO NOT SAVE THE DAY IN THE BANKRUPTCY COURT
IN RE: COSI, INC., Nos. 16-13704-13708-MSH (Bankr. D. Mass. June 28, 2018)
When, as here, an employer files a voluntary petition for relief under Chapter 11 of the Bankruptcy Code, a claim may be made for the payment of “administrative expenses” which are actual and necessary costs of preserving the bankruptcy estate and are therefore given payment priority. In this matter, a former executive sought payment of his pre-filing negotiated severance based on this post-filing compliance with certain covenants, e.g., those restricting competition and the disclosure of confidential information. However, the Bankruptcy Court held that continuing to abide by restriction to which one had agreed pre-filing is not the kind of benefit or service contemplated by the Code as being entitled to payment priority.
WAGE ACT – WHAT IS A WAGE?
MUI v. MASSPORT, 478 Mass. 710 (2018)
Under the Massachusetts Wage Act, an employer may be liable for treble damages and attorneys’ fees for non-payment of wages. Therefore, the question of what constitutes a wage under Massachusetts law is very important and heavily litigated. In Mui, the Court determined that sick time was not a wage, even if the employer allowed employees to “bank” unused sick time and paid out a percentage of it upon termination from employment, provided the termination was not for cause. In Mui, the employer took that position that the termination was for cause and did not pay the sick time. The termination was ultimately reversed in arbitration but the employee had retired. The employer then, a year later, paid the sick time and the employee sued for the earlier non-payment. The Court found that the designation of sick pay as wages under such circumstances would put the employer in an impossible position and reversed the lower court’s judgment in favor of the employee.
WAGE ACT – WHAT IS A WAGE? PART II
HEADS UP – The Supreme Judicial Court has before it a case involving notice pay (compensation paid in lieu of notice), and whether notice pay is a wage under the Wage Act. The case is Calixto v. Coughlin, Delahunt, Dion and Coughlin, No. SJC-12515.