Archive for the ‘Hiring and Firing’ Category

They say that the cover up is worse than the crime. It’s equally as true that retaliation is worse than the original alleged discrimination. The City of Cambridge, Massachusetts learned this lesson the hard way, according to a recent reported decision, Monteiro v. City of Cambridge, Mass. Appeals Court, 10-P-1240 (August 15, 2011). How hard was the lesson? The total award that was affirmed by the Appeals Court was roughly $6.7 million. By some estimates, that City’s total exposure will be $10 million when additional interest and attorneys’ fees and the City’s own attorneys’ fees are added.

In 2011, virtually every employer knows and appreciates that discrimination based on race, national origin, etc. is prohibited and will subject the company to suit and damages. I have never met a manager or owner of a company who thinks that such discrimination is okay. It is obvious to all fair-minded people that such discrimination is wrong and has no place in our society.

What is less obvious to employers is that retaliation claims are at least as great a concern as discrimination cases, even where no discrimination has actually taken place. You read that right; an employer can be liable for significant damages for retaliation of a complaint, even when the original complaint itself could not be proven. Another surprising thing to employers is that an employee could recover for retaliation even if they did something else wrong prior to their termination.

You may now be scratching your head and asking, how can this be? Let’s back up a bit. Employees of employer’s of six or more employees have a right to make both internal and external (to the MCAD or EEOC) complaints about perceived discrimination. By law, employers must take those complaints seriously and they cannot retaliate against the employee for making the complaint. So long as the employee has a good faith basis for the complaint, which is a low standard, the complaint is protected activity. The complaint does not need to be ultimately meritorious. This makes sense because, in fact, most discrimination cases result in a finding of no liability. The employee still has every right to make a good faith complaint and cannot be punished for doing so.

In the Monteiro case, the jury never determined that the City engaged in prohibited discrimination, but it did find that there was retaliation that led to Ms. Monteiro’s termination. A complete description of the trial is not readily available, but based on one news report the City alleged that Monteiro falsified timesheets. Surely, if true, that would give the City a right to fire Monteiro, right?

Wrong. Monteiro’s attorney presented evidence where other employees (who did not file a complaint) committed comparatively equal wrongful acts and were not punished or terminated. This together with other evidence allowed the jury to determine whether the adverse employment actions were the result of Monteiro’s alleged wrongful acts or the result of prohibited retaliation. The jury determined the latter.

The takeaway should be obvious. You want to avoid any actions or an atmosphere that could lead to discrimination complaints in the first place, but if you do get complaints, take them very seriously. It’s important to tell your managers and maybe even co-workers not to take any adverse employment action until you consult with counsel. You may need to err on the side of giving a poorly performing employee more breaks because they filed a discrimination complaint, even if bogus. Do employees abuse the complaint procedure to avoid an expected termination? Sure, some do. But get counsel involved and tread cautiously when you have any discrimination complaints. If you have any questions about how to respond to discrimination complaints, call me at 617.338.7000.

By: Adam P. Whitney

Change in the law alert! Under a new Massachusetts statutory scheme, you can obtain some information, but if you do it the wrong way or ask for the wrong information, you can buy your company a lawsuit and potentially a judgment of significant damages.

Here’s the skinny. You can’t ask candidates to fill out an application asking for any information about convictions, arrests, imprisonment, etc. You’d better check that application you created 5 years ago, or even 5 months ago, as some parts of the law just went into effect in the last few months.

The new law isn’t all bad for employers. In fact, it is now easier to obtain CORI information. And employers can even be protected from certain liability if they rely on the information and it is either (i) not accurate (protection from candidate who were not hired), or (ii) third parties (protection from negligent hiring cases).

Once you do obtain the information, which you can get with a release from the candidate after checking their identification, you can only disseminate it on a need to know basis. And if you decide not to hire a candidate based on the CORI information, you must tell the candidate this and provide a copy of the CORI documents. You can only keep the documents yourself for seven years.

You can also ask about certain information at the interview, but you must be very precise and careful. You cannot ask about arrests, detentions or dispositions for which there was no conviction (e.g., continued without a finding). You cannot ask about convictions of certain misdemeanors: drunkenness, simple assault, speeding, minor traffic violations, affray (whatever that is), or disturbance of the peace. You cannot ask about a conviction of a misdemeanor where the conviction or incarceration occurred more than five years prior, with some exceptions. Other than all that, have at it.

You also must be careful to not exclude a protected class of people by not hiring anyone who has a criminal record. The EEOC is investigating whether to promulgate rules regarding criminal background checks, and there have been some cases where the EEOC has sued employers based on such background checks, because they can be discriminatory in their effect.

As always, the above is not legal advice. There are details and exceptions that are not covered here. If you have any questions about this issue, call me at 617.338.7000.

By Adam P. Whitney

$363,570. That’s the cost to one Massachusetts employer for not participating in the MCAD hearing against it, and being found liable for discrimination based on gender and age. The full decision is set forth in the attached case report from the Massachusetts Commission Against Discrimination.

MCAD v. BG New England

The employee alleged that the company hired a less qualified, 30-year old male instead of her. She was 48 at the time. The employee suffered emotional distress because the company did not value her as an employee, even though she had worked for the employer’s predecessor, and had a long history at the job site and in the industry.

We don’t know the employer’s defense, because the employer took the position that, because it filed for bankruptcy, the automatic stay required the MCAD to postpone its procedures. The MCAD did not agree with that contention, and adjudicated the case without the employer’s involvement.

The MCAD awarded the employee lost wages of $167,380 and emotional distress damages of $75,000. Interest at 12% per annum adds about 50% to the judgment, for a total damages award of about $363,570 by my calculations. The MCAD issued the award against the respondent employer, as well as its successors.

Whether the employee will ultimately collect on the judgment remains to be seen. But the lesson for employers is clear. Ignore the MCAD (or EEOC) at your peril. There are many reported cases of employers ignoring an MCAD complaint, which they have only 21 days to which to respond, and being defaulted. The MCAD will then only hear one side of the story, the employee’s side, and act accordingly.

If you get a complaint, letter or demand from the MCAD, call me at 617.338.7000 to discuss your immediate obligations.

By Adam P. Whitney

Failure to meet your obligations could cost your company dearly. How dearly? Is $1 million dearly enough for you? That’s what I estimate it will cost one Massachusetts company, in the recent case described below.

The Federal Uniformed Services Employment and Reemployment Rights Act (“USERRA”), which augments the Veteran’s Reemployment Rights Act (“VRR”), provides for broad protections to military and reserve personnel with respect to civilian job rights and benefits. The entire scope of protections is beyond the scope of this article, which merely scratches the surface of the statutory considerations.

One basic protection is that an employee called to active duty cannot lose their job. In general, an employee may be eligible for reemployment rights even if absent from work for military duty for up to five years, with some exceptions. The statutes also require employers to make reasonable accommodations to disabled veterans, including up to two years time off for convalescence. USERRA provides that the returning employee must be provided the same status, pay and seniority he would have achieved had he not been absent for military service (the so-called “escalator” requirement). USERRA also prohibits discrimination against employees based on military service. Massachusetts anti-discrimination statute, Chapter 151B, also provides that it is unlawful for an employer to deny employment, reemployment, retention, promotion or any benefit of employment to any employee who is a member of or applies to the military or national guard. Violations of these statutes can result in significant damages, as will be seen from the attached case report.
Fryer v. A.S.A.P.

The attached case report, Fryer v. A.S.A.P. Fire and Safety Corp., provides a cautionary tale for employers. The employer had its rear end handed to it at trial and in post-trial motions. The best I can calculate, the total awarded to the plaintiff former employee, including interest and an award of attorneys’ fees, amounted to somewhere north of $800,000, with interest and attorneys fees continuing to accrue while the matter is on appeal (unless the employer wins the appeal, which I doubt will happen).

Fryer was employed at ASAP working on sprinkler systems and the sales and service of systems. He received a modest base pay plus commissions on sales, a company vehicle and other benefits. He loved his job and was very good at it.

In 2007, out of a sense of duty as well as for certain benefits, Fryer reenlisted in the Massachusetts National Guard. His expectation was that it would involve weekends, but would not interfere with his employment. However, he was unexpectedly deployed to Iraq.

Inexplicably, according to the Court’s findings, ASAP then slowed or withheld payments of commissions owed to Fryer. Fryer expected that ASAP would pay the overdue commissions to his wife, who remained home with the children, but ASAP failed to do so (this resulted in a small part of the award being tripled, as it was a violation of the Massachusetts Wage Act). Fryer expected to return to ASAP, and left his tools there.

Fryer kept in touch with ASAP while on active duty in Iraq. In 2008, he arrived home “positive, upbeat and very excited to be back.” Fryer promptly went to ASAP and stated that he was available to start work almost immediately. However, ASAP told him that there were no open positions, even though it had purchased another sprinkler company. ASAP had hired another employee in Fryer’s stead, but that is not a defense under USERRA. The regulations provide a right to reinstatement, even if reemployment might require the termination of a replacement employee.

After contacting government officials, Fryer sent ASAP a certified letter formally requesting reinstatement. ASAP eventually gave in and instructed Fryer to report to work in 2008. The supervisor told Fryer that ASAP had to give him a job, implying that it was only doing it because it had to do so. The job was not an “escalator” position, but a lesser position as a sprinkler’s helper. The position did not offer a reasonable opportunity to make commissioned sales, and did not offer a company vehicle or gas card.

A few months later, ASAP terminated Fryer, purportedly for being late for work twice and calling in sick three times, all within a thirty day period. Fryer was shocked, and later suffered depression and other emotional difficulties. Fryer sued, and proved at trial that these reasons were a pretext, “with the real reason being plaintiff’s military service and his complaints about not having the benefits and responsibilities of his preservice position.” The facts for the pretext are set forth in the decision.

The jury hammered ASAP and its owners personally, finding them liable for discrimination. The jury awarded $289,000 in emotional distress damages, back pay and front pay of nearly $150,000, and various smaller amounts that were trebled. Attorneys’ fees and interest were later added by the Court, nearly $200,000 in attorney’s fees and $100,000 in total interest. Based on my calculations, if Fryer prevails on appeal, the total calculations could be over $900,000 if more attorneys’ fees and interest are added. That’s before considering ASAP’s own attorneys’ fees and costs, which one assumes has to be well over $100,000, making the total exposure over $1 million.

Don’t make a $1 million mistake for your company if you could avoid it for small dollars with a consultation with a knowledgeable employment lawyer. While this case presents an extreme example, even well-intended mistakes could subject your company to significant exposure.

As stated above, the protections under these statutes are complex and detailed. The above is merely a small amount of general information. If your company has questions on how to make sure it complies with these statutes, give me a call at 617.338.7000.

By Adam P. Whitney

Rogue employees are like pornography, they are hard to define, but you know them when you see them. (I’m paraphrasing U.S. Supreme Court Justice Potter Stewart, who described his threshold test for pornography in Jacobellis v. Ohio)

There are a lot of different types of Rogue Employees and not one defining characteristic, but the recurring theme is that they are selfish people and they do not care about the company at all. The company exists to give them a paycheck, and whatever else they need. They are not interested in your company’s success. Rogue employees are neither predictable, nor obedient.

I will write a lot about Rogue Employees, who can be so damaging to a business in such a number of ways. They steal, lie, cheat and otherwise cause problems for you. They are scoundrels who resent their employer and the company owners. See my blog post about firing Rogue Employees once you identify them. But can you avoid hiring Rogue Employees in the first place? Maybe. It’s worth the effort to try. One or two Rouges can literally destroy a small company and do significant harm to larger companies. So, it’s worth trying to keep them off of your payroll.

Obviously, do as much background checking as is economically reasonable, within the bounds of the law. Really check references, especially work references. Don’t settle for the name, rank and serial number approach from the former employer’s Human Resources. Try to speak to an actual supervisor of the candidate and ask about the employee’s work performance and attitude. Ask the candidate to sign a waiver allowing the former employer to give a candid assessment. With so many good people looking for jobs in this economy, you should fully vet the candidates to make sure you’re hiring one of the good ones. Strongly consider older candidates who have a long history of being loyal to an employer (although this sounds discriminatory, being young is generally not a protected class in Massachusetts). A loyal employee is the opposite of a Rouge Employee, and is worth her weight in gold.

Also, try to ask the right questions. Ask the candidate to tell you what he thinks his former supervisor would say. You may get a surprising answer. You may see that the candidate is someone who has a lot of excuses and blames others for failures. That could be the type who turns into the dreaded Rogue Employee. Ask the candidate where they fit into the success of their previous employer, and how they see themselves contributing to your firm. Ask them what things their previous employer did right, and did wrong, and see if you get a constructive answer. Listen to what your instincts are telling you and use common sense. Of course, you may need to be able to articulate a non-discriminatory reason for not hiring someone.

And of course, you should do some checking on the internet, including Google and social networks. You have to be careful not to exclude an employee based on a protected class (race, religion, disability, etc., etc.), but there is no prohibition against learning that someone is a scoundrel and refusing to hire them, as long as you are not basing your decision on an illegal, discriminatory reason. This can be tricky, so if you have any questions on whether you can refuse to hire an employee, call me at 617.338.7000.

By Adam P. Whitney

Much of what you may think you know about employment contractual issues could be wrong. Is your company exposing itself to liability because of misinformation or a lack of information about contracts? Employment law creates traps for unwary employers. For example, you could be damned by a poorly drafted commission plan, which could subject you to triple damages, costs and attorneys’ fees even where you think an employee is owed nothing. You could be damned by your own personnel manual, which inadvertently creates contractual rights in employees. You could be damned by firing a minority owner of your business (stockholder, partner or LLC Member) without legal advice. Here is a brief guide, which just scratches the surface of these complex issues.

Does a Contract Have to Be in Writing?

Yes and no. Ideally, every employment agreement should be in writing to clarify the rights and obligations of both parties. Sometimes, a simple offer letter will do. To some extent, oral contracts can be enforceable if they can be performed within one year. If the contract cannot be performed within one year, then it must be in writing to satisfy the statute of frauds. Like many things in the law, there are exceptions to these rules. For example, if an employee relied on an oral promise of a contract for a term of years, the employee might be able to enforce the oral promise using the court’s equitable powers? Also, a promise of employment for life can be performed within one year because anyone can die within a year. Thus, an oral promise of employment for life can be enforceable.

Does a Partner in a Partnership, a Shareholder in a Small Corporation, or a Member of an LLC Have Rights Against Being Terminated by the Majority Owners?

Yes, to an extent. This is a very complicated area of the law and depends on the specific facts of each case. In general, if the owner-employee has a reasonable expectation of continued employment, he cannot be fired unless there is a business purpose for the firing and no less harmful alternative. This is because the majority owners owe the minority owner the utmost duty of good faith and fair dealing. Thus, majority owners should seek sound legal advice before terminating or taking other action against a minority owner employee.

Can Other Employees Be Fired Without Cause?

The general rule is that, if an employee is “at-will,” which means that the employment is not for a specified period of time and there is no contractual protection to employment, the employer can fire the employee for any reason or for no reason. If an employee has a specific contract (or if a personnel policy creates rights against termination, as set forth below), usually the employer can terminate the employee only if there is “cause” to do so. Well-drafted contracts define the specific “for cause” reasons for termination.

Also, there are dozens of statutory and common law protections which protect employees from discrimination and other matters. Thus, if the employer terminates the employee without cause, the employee may believe that there is a discriminatory or other reason for the termination.

Does the Employee Manual or Personnel Manual Create an Employment Contract Giving Rights to the Employee?

Yes, no, maybe. Typical lawyer answer, I know, but it is the right answer. A well drafted manual usually will not create contractual rights in favor of employees. However, there are reported cases where a poorly drafted manual inadvertently gives rights to employees that prevent their termination without cause. Employers should have their manual reviewed by a qualified employment lawyer to protect themselves from suit.

Can an Offer Letter Create an Employment Contract for a Term?

Yes. Employers can unintentionally create an implied contract for a term by the wording in an offer letter. Employers should have their offer letters reviewed by a qualified employment attorney before sending them.

Should Employees Be Told of the Reason for Termination?

Probably, but it depends on the situation. What employers should not do is lie or tell a half-truth, even to save the employee’s feelings. This does not mean that the employer has to be harsh or intentionally hurt an employee’s feelings, but if you do not tell the truth at termination and you are then sued, it’s hard to change your story later. The employee’s lawyer will accuse you of changing your story and that your real reasons were discriminatory. Also, you should document the reason for the firing. Employment lawyers have a saying – if it is not in writing, it didn’t happen.

Additionally, there are new statutory requirements about what employers must put in an employee’s personnel file and how the employer must inform the employee of any negative information. All employers should review these new requirements with a competent employment attorney.

Can an Employment Contract Control over Statutes and Common Law?

Generally, no. Although parties are free to set forth the terms of the employment in writing, there are limitations. For example, employees must be paid minimum wages and must be paid either weekly or bi-weekly. These rights cannot be contracted away. An employer also could not have an employee waive an employee’s rights under anti-discrimination or other protective statutes, such as the Family and Medical Leave Act. However, unless there is some statutory or public policy prohibition, parties are free to tailor their agreement as they see fit.

Are Contracts Requiring Arbitration Enforceable?

To some extent, yes, if the contract is well-drafted, fair and reasonable. An employee is always allowed to challenge whether there is a valid arbitration provision, which is an issue for a court, not an arbitrator. Arbitration can also be waived by the party seeking to enforce it. Also, arbitration clauses cannot prohibit employees from filing with the Massachusetts Commission Against Discrimination, or from filing wage claims or other claims with the Attorney General or other governmental entities. Arbitration issues are complex, so if you are an employer who seeks to enforce an arbitration clause, make sure you have it reviewed by a competent employment attorney.

Can an Employer Make Sure that a Worker Is Not Classified as an Employee by Entering Into an Independent Contractor Agreement?

No. In Massachusetts, there is a strict three-part test for determining whether someone providing services for your company is an employee or independent contractor. This is a complex legal and factual question, but in general, if the individual is providing services within your line of business, or you have some control over the individual’s work, or if the employee does not have his own business or profession, the individual will likely be deemed to be an employee. There can be severe penalties and liabilities for misclassifying a worker as an independent contractor, so have a competent employment lawyer review this issue for you.

Does an Employee Have any Rights and Remedies if a Contract Has Been Breached?

Usually, but it depends on the wording of the contract and whether the employee has suffered damages. Employees will normally have a duty to mitigate damages. Thus, an employee must seek another comparable job after termination. The normal damages would be the loss of earnings during the contract term, minus amounts earned or which could have been earned in mitigation. There could be other damages, depending on the wording of the contract and the situation.

Does an Employer Have to Provide Severance Pay?

Generally, no, unless there is a contractual right or a specific, enforceable policy to do so. There may be exceptions to this general rule, but the exceptions do not apply to most employers and employees.

Does an Employee Have a Contractual Right to Bonuses and Commissions?

Yes, no, maybe. Commissions and bonuses are creatures of contract, but can potentially be enforced through payment of wages statutes. One must first look at the specific wording of any written contract or compensation plan, and also examine the course of dealing of the parties and the standards in the industry. If an employer has a vague commission plan or one that favors the employee, the employee may have a contractual right to commissions, even after termination. Worse yet, the employee could be entitled to triple damages and attorney’s fees, litigation costs and interest. Thus, any commission or bonus plan must be very carefully crafted by a competent employment attorney. A “bonus” is usually thought of as being wholly discretionary and, thus, not subject to contractual or statutory rights. However, “bonus,” is just a word used and the word itself does not control. Employers can inadvertently create employee rights to a “bonus” by a poorly worded compensation plan or a course of dealing.

Can an Employer Make any Employee a Salaried Employ by Putting that in the Contract?

No. There are specific guidelines under federal and state law regarding who is an “exempt employee” and who is a “non-exempt employee” for overtime purposes. Contrary to the belief of some employers, you cannot simply pay any employee a salary and not expect to keep track of their hours and pay overtime. You must first determine whether the employee meets the exempt guidelines, which can be very complicated. For example, lawyers and doctors are professionals and can be paid on a salaried basis, as can some (but not all) executives, managers and computer programmers.

The above is not meant to be legal advice, but merely general information. Employment law is extremely complex, and legal advice cannot be given without a full review of the facts and the law. The above may or may not apply to any particular employer or employee.

By Adam P. Whitney 617.338.7000.

If you are a for-profit business, you generally cannot have volunteer workers who work for no pay, whether you call them interns, clerks, angels or unicorns. In most cases, they are really employees, in spite of what you call them. Companies make this mistake all of the time. Surprisingly, even law firms make this mistake. They think that they can get away with having a student or new graduate work for free for the summer or for some other time period. And sometimes they might get away with it, but if your “intern” decides to sue, you could be liable for at least minimum wage for all hours worked, time and half for any overtime, and possibly triple damages and attorneys’ fees under Massachusetts law and other damages, such as benefits not provided. Your quest for cheap labor could backfire. In spades.

A genuine internship for a for-profit might actually exist, but so might Bigfoot. Both are, at best, rare, elusive, and hard to prove. The U.S. Dept. of Labor has put out a bulletin with specific factors, which can be found here:

As provided by the DOL, “[t]he following six criteria must be applied when making this determination:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;

2. The internship experience is for the benefit of the intern;

3. The intern does not displace regular employees, but works under close supervision of existing staff;

4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;

5. The intern is not necessarily entitled to a job at the conclusion of the internship; and

6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.”

Any company being honest with itself will find these standards extremely hard to meet. The factors describe something that is burdensome to the company, not a benefit. Which begs the question, why the company would want to do this in the first place. Sure, some large corporations may have some legitimate intern programs. But your smaller or mid-size employer or law firm, not so much. And don’t think that paying a “stipend” will make things okay, unless the stipend happens to be at least minimum wage and paid weekly or biweekly.

If you hire a new employee from a competitor, you should make damn sure that the employee did not bring any trade secrets or proprietary information from the former employer. Otherwise, you could face significant exposure to your company, especially if others at your company participated in use of the trade secrets (the term “trade secrets” can be broad to include any proprietary business information, including customer lists and customer information).

This is the lesson of the attached case report, People’s Choice Mortgage, Inc. v. Premium Capital Funding d/b/a Topdot Mortgage. In the interest of full disclosure, I was the trial attorney for People’s Choice Mortgage (“PCM”), the prevailing party in the case.

The following is a summary of the case report, which is a public record: PCM employed Mr. Bodden, who turned out to be a dreaded Rogue Employee. Mr. Bodden then went to work for Topdot while still employed at PCM, and kept working for PCM for an additional five weeks. Bodden had access to PCM’s customer information. Because his commission structure was better at Topdot, Bodden used the PCM documents at Topdot to solicit and close loans. The Court concluded that Topdot had constructive knowledge that Bodden was using PCM documents. The case report makes for an interesting read.

The awards themselves against Topdot and Boddon were not large. PCM prevailed against Bodden in the amount of $39,005 ($64,589.20 after interest). PCM prevailed against Topdot for $12,279, which was doubled to $24,558 under Chapter 93A, which became $31,773 with interest. The bigger award was the attorneys’ fees and costs award against Topdot of $88,170.57.

That comes to a total of $184,532 against Topdot and Bodden for their use of PCM’s trade secrets. Not to mention the costs that they incurred on their own attorneys and other legal costs, which could bring the total exposure to a quarter million dollars.

If you have any questions regarding how to protect your trade secrets, what to do if a former employee is using your trade secrets, or how to make sure a new hire is not exposing your company, call me, Adam P. Whitney, at 617.338.7000.

Findings of Fact, Rulings of Law, and Order for Judgment

Firing employees is hard. It’s usually the last thing any employer wants to do. Corporations are people too (ask the Supreme Court), and they don’t want to put someone out of work, especially in a tough economy, and especially an employee who has a family. I’ve seen time and again employers thinking that they are doing a good deed by keeping an employee on when they know they should terminate the employee. In addition to the title of this blog, I have another cliché truism in employment law: no good deed goes unpunished. The employee for whom you are doing a favor turns around to bite you in the ass.

Some of these employees may even mean well. They think that they are doing a fine job, but really are not. If you fire them after two years of poor, but not declining performance, the employee will wonder why you suddenly fired them and look for a discriminatory motive (human nature being what it is, no one wants to think that they are a poor performer). Employers make this situation even worse when they try to ease the pain of the employee and tell a “white lie” that the company is eliminating the position or something of that nature. As innocent as that may be, a plaintiff’s attorney will turn that around on you and call it a pretext for discrimination.

Potential lawsuits aside, there is one type of employee who must be fired because he can cause great injury to your company. This is the Rogue Employee, who is disgruntled for some perceived injustice and/or plans to steal your clients and otherwise compete with you. A clever Rogue Employee who is hell bent on hurting her employer can do a great deal of damage. Rogue Employees can do any of the following: destroy computer files; bad mouth you to clients; destroy documents; report you to authorities; steal from the company; cause the company to incur expenses or liability; etc., etc. I cannot completely define a Rogue Employee, but (like the famous quote on pornography) you know them when you see them. Actually, that’s not true, because the most destructive Rogue Employee is the one you don’t identify as such.

Especially dangerous are Rogue Employees in positions of trust or authority. The more power they have, the more damage they can do. Some war stories and examples make this clear, which will be a recurring topic in my blog. I’ve had several cases where Rogue Employees embezzled from the company, stole proprietary business information, stole clients, exposed the company to liability, and exposed the company owners to personal financial liability. I’ve even seen Rogue Employees who are actively working for a competitor at the same time they were receiving a paycheck from my client – and funneling business away from my client, causing a double injury.

Employees who have the authority to write checks have the potential to do great mischief. Employee embezzlement is much more common than people think. The ABA Journal recently reported that a Chicago law firm office manager embezzled $884,000 over a seven year period. If it can happen to a law firm, do you think it can’t happen to your business? The office manager was a trusted employee; the firm didn’t know she was a Rogue Employee.

Another example is from Massachusetts and is set forth in the reported decision of Bank of America, N.A. v. Prestige Imports, Inc., 75 Mass. App. Ct. 741 (2009). The case report describes a “sophisticated and complex scheme” whereby an employee stole hundreds of thousands from his employer, a Weymouth, Massachusetts auto dealership, Prestige Imports, Inc. The employee manipulated deposits that Prestige intended to make into accounts at the employer’s bank. This caused loans to Prestige to default, which also impacted the owner who had personally guaranteed the loan. Even after warning signs, he employer did not fire the Rogue Employee. The case report reads as follows:

“[The Bank] called [the company owner] to express concern about a $90,000 Prestige check made payable to [the employee]. Suspicions aroused, [the owner] asked his accounting firm for advice. An accountant investigated the matter and told [the owner] that someone had made unusual adjustments to Prestige’s records. He also advised [the owner] not to allow [the employee] to continue his daily banking transactions and suggested that [the employee] might be stealing money. Despite this advice, [the owner] did not fire [the employee], change his duties, or remove him as a signatory on an account Prestige had opened at another bank that November and utilized for used car transactions.”

A copy of the case report is attached.

It’s hard to believe in hindsight that Prestige would not only keep the employee, but keep him as a signatory on a bank account. But this extreme example shows that employers do not want to believe that trusted employees could so turn against them and cause them such harm. If you have any concern that one of your employees may be a dreaded Rogue Employee, call me, Adam P. Whitney, at 617.338.7000 and I can guide you through what to do about it.

As a recent decision from the Massachusetts Commission Against Discrimination (“MCAD”) shows, allowing an unwelcome sexualized atmosphere at the workplace can be very costly. And firing an employee who complains of sexual harassment is downright foolhardy, as shown in MCAD, et al. v. Sleek, Inc., et al. (Docket No. 06-BEM-01275) (March 15, 2011). A copy of the decision is attached.

In this case, the Complainant, a male, went to work at the all female Sleek Medspa in Burlington. He was soon exposed (no pun intended) to sexualized comments and joking about clients’ genitals and other body parts (the spa did a lot of body waxing), and an incident of a female superior flashing her breasts or bra to the owner of the company over an internet camera (the Complainant saw only her back). The sexualized comments and joking are really not that surprising, and was likely how the aestheticians blew off steam. It really doesn’t sound that bad, but the Complainant found it unprofessional and was very sensitive to it.

If that were all there was to the story, it would hardly be notable, and may not have resulted in litigation. When the Complainant complained about the behavior, he was promptly fired. This was a big no-no. The Company took a marginal sexual harassment complaint that could have and should have been addressed by cleaning up the atmosphere, and turned it into a significant loss for the Company.

How significant? The MCAD awarded the Complainant $150,000 for emotional distress alone. The emotional distress was not so much from the original incidents, but from the termination and everything that went along with that. The Complainant had been (correctly) advised by an attorney that complaining of a sexually hostile work environment was protected, and that he could not be fired. The company stupidly fired him the next day for a reason that was clearly pretextual. He was devastated by the termination and the resultant loss of income.

The Complainant also recovered over $41,000 in lost wages. And the MCAD fined the Company owner $50,000 because he and/or his companies were repeat offenders of employment discrimination laws. That’s over $241,000, without including interest and costs. Interest on the $191,000 owed to the Complainant is significant, at 12% per annum from the date of filing in 2006. By my math, it adds almost 60%, or roughly $110,000. We’re up to $341,000.

And don’t forget that the company paid its own attorneys, which surely added tens of thousands more to the loss. Let’s conservatively call it a $350,000 loss for a dumb termination that any good lawyer would have vigorously counseled against had they been called. (The company was lucky that the MCAD provided counsel for the Complainant; had he hired private counsel, the Company would have been on the hook for tens of thousands for the Complainant’s legal fees).

Don’t make a $350,000 mistake like this company did. If you have any questions about sexual harassment, a hostile work environment, or terminating an employee, call me at 617.338.7000. By Adam P. Whitney.