Last Friday, Governor Baker signed an economic development package into law that includes, among other things, new restrictions on the use of non-compete agreements in Massachusetts.   The new law which will amend M.G.L. c. 149 §24L goes into effect on October 1, 2018 and applies to all non-compete agreements executed after that date.  It does not apply retroactively to existing agreements.

Coverage

The law applies to all employees and independent contractors who are, or have been a resident of or employed in Massachusetts for at least 30 days immediately prior to their termination and applies equally to employers based inside or outside of Massachusetts.   The reach of the law cannot be avoided through use of a choice of law provision, so the relevant question will always be the location of the employee rather than the employer.

Moreover, the new law restricts the use of non-compete agreements against the following types of employees:

1. Any employee who is classified as non-exempt by the Fair Labor Standards Act (eligible for overtime);
2. Any employee terminated without “cause” (cause is undefined in the law and, therefore, should be defined in any new non-compete agreement) or laid off;
3. Any employee who is 18 years old or younger; and
4. Any undergraduate or graduate students in an internship or other short term employment.

Finally, any action brought to enforce a noncompete agreement must be brought in Massachusetts in the employee’s county or Suffolk County’s Business Litigation Session.

Application

The law applies only to traditional noncompetition agreements prohibiting competitive activities after employment ends. It does not apply to other kinds of restrictive covenants, including non-disclosure agreements, assignment of invention provisions, and non-solicitation restrictions (as to employees, customers and vendors) which will continue to be governed by existing common law.  It also does not apply to non-compete agreements made in connection with the sale of a business or outside the employment relationship.

Importantly, the new law’s requirements do not apply to non-compete agreements that are included as part of a separation agreement, however, the employee must been given seven days to rescind acceptance (similar to existing requirements for employees over 40 to sign a release of claims) and the non-compete agreement must be supported by consideration.

Requirements for Enforceable Non-Competes

In addition to ensuring that non-compete agreements are only provided to legally eligible employees, the law mandates additional minimum requirements in order for a non-compete to be valid and enforceable:

1. The agreement must be signed by both the employer and the employee, expressly state that the employee has the right to counsel prior to signing the agreement, and must be provided to the employee on the earlier of the date of the formal offer of employment or 10 business days before the hire date.
2. If entered into during employment (after hire), there must be additional consideration (something of value) supporting it.
3. The duration of the restriction cannot exceed 12 months, except that the duration can be extended to two years in cases where an employee has breached his or her fiduciary duty or unlawfully taken employer’s property.
4. Consistent with common law, the non-compete must be reasonable in its duration, geographic scope, and the scope of the prohibited activity. The following limitations will qualify as “presumptively reasonable:”
5. Geographic Scope that is defined as the areas in which the employee “provided services or had a material presence or influence” during the past two years will be considered presumptively reasonable.
6. The Duration which does not exceed 12 months (unless an employee has breached his or her fiduciary duties or unlawfully took employer property) is presumptively reasonable.
7. Prohibited Activity must be reasonable in relation to the interests protected. If it is limited to only the specific types of services provided by the employee during the last two years of employment it will be presumptively reasonable.
8. Garden Leave or “other mutually-agreed upon consideration” must be included.  A “garden leave” clause is defined as payment during the restricted period of at least 50% of the employee’s highest annualized base salary within the preceding two years.  “Other mutually-agreed upon consideration” is not defined and it is unclear whether it can amount to something less than the Garden Leave.  We can expect to see this matter heavily litigated until we get further guidance from the courts or the legislature.  From the text of the statute, however, it does appear that an employer and employee can mutually agree to something less than Garden Leave.
9. The agreement must be consistent with public policy (as is the case under existing law).

In light of the new law, Employers should carefully review and revise their existing noncompetition agreements to ensure compliance with the requirements summarized above.

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• Misclassification hurts the individual employee by denying them protections provided to other individuals classified as employees including workers compensation, company benefits, vacation and holiday benefits and protections against discrimination and wage violations.
• Employers who misclassify individuals as independent contractors enjoy a “windfall” including the avoidance of taxes which imposes significant financial burdens on the Federal government and the Commonwealth in lost tax and insurance revenues.
• Employer who misclassifies employees as independent contractors have an unfair competitive advantage over employers who correctly classify their employees and bear the financial burden of vacation and overtime pay; Social Security and Medicare contributions; unemployment insurance contributions; and payment of workers’ compensation premiums.

Employers who are unsure how to properly classify staff should consult with an employment attorney to avoid costly litigation and strict penalties including automatic treble damages for unpaid wages, including overtime, value of benefits offered to properly classified employees, interest and payment of attorney’s fees.

Employees who believe they are being misclassified should also consult with an employment attorney to determine whether they are being properly paid and provided benefits and protections required under the law.

Whether an employee or employer, contact us by phone at 617-396-4600 or by email to info@greeneandhafer.com for a consultation on this topic.

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MEPA generally provides that “No employer shall discriminate in any way on the basis of gender in the payment of wages, or pay any person in its employ a salary or wage rate less than the rates paid to its employees of a different gender for comparable work.” The law defines “comparable work” as work that requires substantially similar skill, effort, and responsibility, and is performed under similar working conditions.

An employer that violates MEPA generally will be liable for twice the amount of the unpaid wages owed to the affected employee(s)—the differential between the employee’s wages and the wages paid to an employee of a different gender performing comparable work—plus reasonable attorneys’ fees and costs. However, the law provides a complete defense for any employer that, within the previous three years and before an action is filed against it, has conducted a good faith, reasonable self-evaluation of its pay practices

In order to determine whether jobs are comparable for purposes of MEPA, jobs should be compared based on three factors: Skill, Effort and Responsibility. These factors are defined in detail in the compliance guidance from the Attorney General.

The guidance also includes a basic guideline for employers to follow in conducting a self-evaluation as well as a checklist to help employers review their policies and practices as they prepare for implementation of the amended MEPA. Employers who conduct good-faith self-evaluations may rely on the evaluations as an affirmative defense to claims under MEPA as well as some claims under M.G.L. c. 151.

The guidance also covers a variety of other important topics, including:

• an overview of the law;
• frequently asked questions;
• important definitions, such as covered employers, covered employees, comparable work, wages;
• an explanation of permissible variations in pay;
• the prohibition against employer restrictions about employee discussion of wages;
• the prohibition against seeking salary history from applicants in the hiring process;
• retaliation; and
• a detailed section covering the affirmative defense that the amended MEPA provides to employers who conduct self-evaluations of their pay equity practices and data.

With the MEPA enactment approaching, now is the time for employers to review their pay practices and make certain that they are complying with the law.   Greene & Hafer is happy to provide assistance and guidance through this process. Contact us today to set up a consultation.

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1. Make sure your harassment policy is up to date and has been recently communicated to employees.
2. Conduct harassment training for management if you haven’t done so within the past year. We recommend that the training be live and interactive if possible, or computer-based and interactive if live training is not possible. The senior management should make an appearance at the training to show support for the initiative.
3. Conduct harassment training for non-management employees. Employee training should cover the following: (a) the type of behavior that can get an employee in trouble/ examples and guidance on what would be considered “harassment” in violation of company policy, (b) what the employee should do if the employee believes he or she may have been a victim of harassment and (c) prohibition on retaliation and how to report it.
4. Ask yourself whether the company has been tolerating, or ignoring, an employee who has a reputation for acting inappropriately. If you are aware of an employee whose bad behavior has been tolerated for years, this would be a good time to stop tolerating it and start addressing it.
5. Get outside help for investigations. In many situations, including if individuals in senior management roles are accused of harassment, a third party investigator can provide an objective investigation and legally sound guidance on whether and what remedial action should be taken.

WHAT EMPLOYEES SHOULD DO

1. DON’T QUIT!  If you quit your employer can contest your unemployment benefits and in some cases, you may be hurting your ability to recover damages for your claims.
2. DOCUMENT DOCUMENT DOCUMENT:  Employees who believe they are being sexually harassed should keep documents and a diary of the details of the unwanted conduct.
3. ADDRESS THE PROBLEM:  If comfortable, talk to the person who is engaging in the unwanted behavior and tell them to stop.  Alternatively, report the behavior to a manager or someone with authority.
4. SEEK LEGAL ASSISTANCE: In most cases, there is a strict time frame in which you can bring legal action.  Seek assistance immediately.  An attorney can assist you by working with the employer to seek a resolution or advise you on you legal rights to file a claim.

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To qualify for the outside sales employee exemption, all of the following tests must be met

-The employee’s primary duty must be making sales or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and

-The employee must be customarily and regularly engaged away from the employer’s place or places of business.

Many sales people are misclassified because they do not meet the requirement that the employee be “away from the employer’s place of business.”

An outside sales employee makes sales at the customer’s place of business, or, if selling door-to-door, at the customer’s home.  Outside sales does not include sales made by mail, telephone or the Internet unless such contact is used merely as an adjunct to personal calls.  Any fixed site, whether home or office, used by a salesperson as a headquarters or for telephonic solicitation of sales is considered one of the employer’s places of business, even though the employer is not in any formal sense the owner or tenant of the property.

The takeaway here is that if you are a sales person and you are not out on the road for a portion of the week meeting with customers or working on sales, you may be entitled to overtime and an hourly pay rate. You should seek out experienced unpaid wages lawyers.

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Summary of Final Rule

• Raises the salary threshold for the executive, professional and administrative exemptions from $455 per week to $913 a week ($47,476 for a full year worker).   This is the first increase since 2004.
• Raises the salary threshold for automatic exemption as highly compensated employee (“HCE”) from $100,000 per year to $134,004 per year.
• Allows up to 10% of the salary threshold for non HCE employees to be met by non-discretionary bonuses, incentive pay or commissions provided that the payments are made at least quarterly.
• There is no change to the exemption “duties test.” Employee who meet the salary threshold must also meet the current duties test in order to be exempt from overtime regulations.
• The salary threshold will updated every three years and will reflect the salary of the 40^th percentile of full time salaried workers in the lowest wage Census region.

The new rule will be effective December 1, 2016.

What This Means for Employees and Employers

Exempt employees who earn less than $47,476 per year will need to be reclassified as non-exempt and paid overtime (time and a half) for all hours worked over 40 in a week, as of December 1, 2016.

The post Changes to the Overtime Regulations appeared first on Greene & Hafer Employment Law.

Massachusetts Wage Act – failure to properly pay timely wages including overtime provides for automatic treble damages and attorney’s fees.

Earned Sick time Law– all employees are entitled to accrue earned sick time. Employers with 11 or more employees must provide for paid sick leave.

Parental Leave – The parental leave law is now gender neutral. Both men and women are entitled to parental leave for up to 8 weeks.

Independent Contractors: Most employment relationships in Massachusetts do not qualify as independent contractors which can give rise to claims for overtime and unpaid wages and benefits under the Wage Act.

Have questions? Contact Us!

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Under the current state of the law, Massachusetts permits the use of non-compete agreements. However, public policy favors the right of an employee to move from job to job unencumbered by restrictions. The Courts carefully scrutinize postemployment restraints to see that they go no further than necessary to protect an employer’s legitimate interests. If a non-compete restriction is not narrowly tailored to protect an employer’s confidential information, trade secrets or, good will or the employee is not in a position to disclose or utilize the company information, such the agreement may not be enforceable. Protection of the employer from ordinary competition is not a legitimate business interest, and a covenant not to compete designed solely for that purpose will not be enforced

Employees should always check with legal counsel before signing a non-compete agreement or making new employment decisions after entering into such agreement to understand their rights and the enforceability of such restrictions.

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If you are required to be available and/or perform work during your unpaid meal break, your employer is required to pay you for the work time. Employers with a practice of automatically deducting pay for meal breaks even if employees are not taking the full break are at risk of class action suits for violation of Massachusetts wage and hour laws. The penalties for such violations are steep including triple damages and attorney’s fees.

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• Minimum wage in Massachusetts increases to $10.00 per hour
• Employers are required to annually provide employees with a copy of the sexual harassment policy
• Make sure you have updated your handbook to include:
  • Sick leave policy
  • Parental leave policy
  • Sexual harassment policy
• Ensure hourly and salary employees are properly classified. Overtime violations can be costly!
• Schedule sexual harassment and EEO training to make sure managers are properly trained to handle and report complaints and requests for reasonable accommodations.

The Department of Labor is actively auditing company to ensure compliance with wage and recordkeeping laws. Legal counsel can save employers a lot of hassle and expense by making sure employers are in compliance before a legal issue arises.

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