Archive for the ‘Lawsuits’ Category

$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

A recent case from the Massachusetts Supreme Judicial Court shows the importance of worker’s compensation insurance, not only for your own company, but for any person or entity who does work for you. As set forth in Wentworth v. Henry C. Becker Custom Building Ltd., ___ Mass. ___ (May 23, 2011), G.L. c. 152, §18 provides that your worker’s compensation carrier will have to cover the injuries for any worker employed by any subcontractor that is not covered by worker’s compensation insurance. This is what happened to the defendant in this case, Henry C. Becker Custom Building Ltd. (“Becker”). Becker hired a subcontractor on a construction site. An explosion on the site resulted in the tragic death of the plaintiff and the serious injuries to his son, both of whom worked for the subcontractor. The subcontractor had no insurance, so Becker’s insurer had to pay. Although not reported in the case, this likely resulted in at least a back charge and increased insurance costs to Becker. In fact, insurers routinely conduct audits and can back charge companies for utilizing workers who are not covered by worker’s compensation insurance, even where there has been no injury.

In this case, Becker faced a double-whammy. Although its insurer settled with the plaintiffs, the plaintiff still brought a separate suit against Becker under the common law, arguing that, since Becker was not their employer, they were entitled to sue Becker even though they settled with Becker’s insurer. The Supreme Judicial Court agreed, and sent the case back to the trial court for adjudication of those claims. Although the plaintiff’s employer would be immune from common law suits, Becker was not the employer, even though its insurer had to cover the plaintiffs. The Court reasoned that Becker would be subject to suit even if it hired a contractor who had worker’s compensation coverage. Thus, it should not get a benefit of hiring a contractor who did not have such coverage. Ruling otherwise could actually encourage hiring subcontractors without insurance, which is the opposite of what the Legislature intended. A link to the case is attached.

By Adam P. Whitney, 617.338.7000.

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

It’s all fun and games until someone files a lawsuit. That’s surely what one Massachusetts employer thought. In that recent case, decided before the Department of Industrial Accidents, the employee reportedly asked her boss, Mr. Grillo, for health insurance. She alleges that he agreed to provide health insurance if the employee would agree to wear a chicken head costume. The chicken head in question was apparently part of a running joke in the office. The employee refused, and was allegedly given other absurd options, such as e-mailing all of her friends that Mr. Grillo is god, or to come to work with red lipstick and to kiss another employee’s bald head. The case is reported at the DIA as In Re: Cappello, (DIA) (Board Nos. 026109-07 and 022705-07) (March 23, 2011).
In this case, the DIA granted the employee worker’s compensation benefits for emotional injury suffered at work. The claim could even be doubled if the DIA determines that the employee committed serious and willful misconduct.
The employee’s psychiatrist concluded that Mr. Grillo’s alleged harassment was the predominant contributing cause of the employee’s adjustment disorder and her major depressive disorder.
Although this case was brought under worker’s compensation, it has serious implications for other employment laws. For example, asking a female employee to wear red lipstick could easily be construed to be sexual harassment. Additionally, the employee almost certainly, at some point, became protected under the Americans with Disabilities Act and its Massachusetts counterpart, G.L. c. 151B. The employer could have created exposure to itself under these and other theories by harassing the employee and failing to accommodate the employee.
It’s difficult to not allow employees to have a sense of humor. Everyone needs a good laugh now and then, even in the workplace. But employers cannot assume that all employees will appreciate being the butt of jokes. Some employees will be more sensitive than others. Employers better be aware of this and either cease all horseplay, or make certain that every employee involved is a willing participant. Will we see horseplay contracts? This is in reference to “love contracts” which some employers require employees to sign when they are dating one another. I doubt that we will, but you never know.

By Adam P. Whitney, 617.338.7000.

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.

Many employers may think that they have the right to charge employees for things such as broken products, lost uniforms, fines for safety violations, loans, lost money, alleged theft, etc. In Massachusetts at least, an employer will face exposure for deducting such amounts from wages. Massachusetts General Law Chapter 149, Section 148 requires full and prompt payments of wages due to employees. Employers cannot contract their way out of this requirement.

There is a provision of the statute that appears to allow a “valid set-off.” A valid set-off is a little like sasquatch. Such a creature may exist, but no one can prove it. The Attorney General of Massachusetts has taken a very strict reading of what could constitute a valid set-off. And the Courts have followed the Attorney General’s lead.

The Supreme Judicial Court recently endorsed this line of thinking in the case of Camara v. Attorney General, 458 Mass. 756 (2011). In this case, a disposal service company enacted a policy whereby an employee found at fault for an accident involving a company truck could either to discipline or a fine deducted from wages earned. The policy had the laudable goal of reducing accidents. The company’s statistics showed that the policy worked.

The company argued that the fines were a valid set-off, but the Attorney General and the Supreme Judicial Court disagreed. The Court ruled that there must at least be some form of due process through the court system for such a set-off. However, the company cannot play judge, jury and executioner, as it did in this case. As fair as the company may have intended to be, there is obviously the potential for abuse by unscrupulous employers.

As a result of the ruling, the company had to reimburse the employees for the monies deducted. Additionally, it had to pay fines of $9,410. The result could have been worse. The employees could have sued for automatic triple damages and recovery of their attorneys’ fees and costs of litigation.

This is one of many examples of how employers should be very careful to not violate laws regarding wages paid to employers. There are lawyers whose entire practice area involves finding employers who have committed technical violations of wage statutes and then suing them for triple damages and attorneys fees. These claims often are brought as class actions to maximize the damages recoverable against the employer. The Attorney General also has independent enforcement power, which she uses in certain cases, such as the Camara case. If you are any employer who has any questions about any wages, salary, overtime, vacation time, independent contractor misclassification, etc., call me at 617.338.7000.

By Adam P. Whitney.

Business people who incorporate often think that the corporate form protects them from lawsuits. That is true only to a point (you are not protected for wrongful acts that you personally commit), and only if you respect corporate formalities. If you do not, you could unwittingly be inviting personal liability, or liability for a parent or sister company. The whole point of incorporating (including forming an LLC) is to limit exposure for that specific corporation. But your effort to limit exposure doesn’t end on the date of corporation. Even taking simple steps can go a long way toward limiting this exposure. Here are some simple things you can do.

1. When you sign any contract, proposal, purchase order, invoice, letter, etc, be clear that you are signing in your corporate capacity. Don’t ever simply sign “Joe Smith.” If you do, you could get personally sued and your opponent will claim that they thought they were doing business with you personally. The claim could be total b.s., but shame on you for exposing yourself like that. How should you sign it? Easy: “Joe Smith as President of J.S. Corp.” You can even add “and not personally,” to make it clear. In fact, your company should be clearly identified as the contracting party.

A short war story makes the point. I defended a law suit a few years ago where three business people started a business, duly incorporated their new business, and hired a contractor to put up a substantial commercial building. The owners then did not heed the above advice; they referred to one another as “my business partner.” The also failed to make clear that contracts were in their corporate capacity. When the corporation eventually ran out of funds, the contractor sued the business “partners” personally, claiming that he thought it was a partnership and did not know about the corporation. The claim had enough traction to make it all the way to a jury trial. We convinced the jury that the contractor knew who he was dealing with because he received checks from the corporation and some of his own invoices listed the corporation. But you don’t want to rely on a jury’s good judgment.

2. If you operate more than one corporation, such as a parent or sister corporation, or even if you have corporate partners, be very clear with whom a third party is contracting. Do not use shorthand names to describe your company. Make it clear to corporate partners and clients that each corporation is separate and one cannot bind the other, and that a contract with one does not bind the other. How you do this in practice depends on precisely how you do business.

Another short war story makes this point. I defended a company called Jones Plumbing Systems, Inc. (names changed to protect the innocent). The owners of Jones Plumbing Systems, Inc. decided to go into business with a supplier named Smith, and together they formed a new corporation called Jones Plumbing Supply, Inc. All well and good. To give the new company some recognition, they referred to the two companies collectively as “Jones Plumbing Group.” This would not really be a problem if they had followed Rule No. 2. However, Smith got sloppy and started entering contracts as “Jones Plumbing Group,” even though it was not a legal entity. Smith turned out to be a poor businessperson, and the owners of Smith Plumbing Systems cut their ties with him. However, the damage was done. Jones Plumbing Group could not pay its debts, so a creditor sued Jones Plumbing Systems, Inc., claiming that it thought it was doing business with Jones Plumbing Systems, or with a joint venture called Jones Plumbing Group. Here, the jury found for the creditor, undoubtedly thinking that this was merely a corporate shell game on behalf of Jones Plumbing. We were able to convince the trial judge that Jones Plumbing Systems committed no violation of c. 93A, so the damages were limited to single damages and the plaintiff had to pay its own attorneys’ fees.

3. Follow corporate formalities. There is a theory in Massachusetts and other states called “piercing the corporate veil.” That’s a fancy way of saying that a plaintiff can get at the assets of a stockholders or a parent corporation if the corporation did not follow corporate formalities. This theory is too complicated to explain in detail here, but generally you need to make sure that you are keeping business accounts separate and not commingling monies or assets, that the corporation has adequate insurance or assets and is not just an empty shell, and that you keep corporate records and books like one would expect of a corporation. There are twelve factors in all that a court will look to, but the key is whether the corporation is a sham and has perpetrated some wrong or fraud on a third party.

By Adam P. Whitney, 617.338.7000.

Yes. That is always my answer to a business owner’s question about whether their employee or competitor can sue them. Yes. Anyone can sue a person or a business for anything. Anyone with the $275 filing fee for the Superior Court and a drafted complaint (even handwritten) can file a lawsuit. Contrary to what some might expect, neither the judge nor anyone else at the court is going to automatically read the complaint upon filing; it will only be read if there is a particular purpose to do so, such as to assess jurisdiction or if a motion is being heard. The recently publicized case about an administrative law judge suing a dry cleaner for millions of dollars for a lost pair of pants is an example of this. It’s also an example of how meritless suits will not survive in the long term, but will cost the defending party greatly in legal fees to have the case thrown out of court. And don’t count on getting your attorneys’ fees paid by the party that sued you on a claim without merit. Other than some particular statutes that apply only in certain circumstances, you will not get your legal fees back in Massachusetts (or in most other states). This is the stark reality of the legal system, and a cost of doing business for businesses that are sued.

What is the lesson? Avoid making enemies of your employees, business partners and competitors. People rarely sue unless they are angry and feel mistreated.

By Adam P. Whitney, 617.338.7000.

The usual advice to avoid discrimination claims is to treat everyone the same. If only life were so easy. For disabled employees, you may in fact have an obligation to treat them differently.

The American with Disabilities Act (the “ADA”) and its state counterpart are a source of continual confusion and consternation for Massachusetts employers. The rules are confusing, even for lawyers. A recent case from the Eighth Circuit Court of Appeals, EEOC v. Convergys Customer Management Group, is illustrative of how an employer can make a mistake. Though not binding on any Massachusetts state or Federal Court, the ruling could be followed by courts here.

In that case, the employer, Convergys, was ruled to be in violation of the ADA when it failed to accommodate and later fired a disabled employee. The employee, who was wheelchair-bound, was often late because all of the handicapped parking was filled. He was also late returning from lunch because the layout of the office made it more time consuming for him to find an open work station (he worked as a call center representative). He explained his difficulties to his supervisors and even suggested some accommodations. The employer refused to grant any accommodations and later fired him. A jury awarded $100,000 in emotional distress damages and over $14,000 in lost wages. The Appeals Court upheld the verdict and faulted the employer for not engaging in the “interactive process” required under the ADA (the ADA is applicable to employers of 15 or more everywhere in the country; Massachusetts has a similar law applicable to employers of 6 or more employees).

The employer’s damages – and surely a great amount of legal fees and costs – could have been avoided with a five minute call to a good employment lawyer. Any good employment lawyer would have explained to the employer its duty to engage in an interactive process and to provide reasonable accommodations. Massachusetts law is particularly strict on the interactive process, so the same type of ruling could be expected here. The employer may have taken comfort in treating the employee like everyone else. But, he was not like everyone else and what makes him different is what is called a protective class.

A similar case came out of the Eleventh Circuit Court of Appeals, Holly v. Clairson Industries, L.L.C. Holly was also a wheelchair-bound employee whose employer had a strict punctuality rule. The employer tried to enforce a strict company policy which stated that disabled employees were “not exempt” from the punctuality rule. The employee was sometimes a few minutes late due to the obstructions in the break room, such as lunch tables being in his way. He was a 17-year exemplary employee and made up any missed time by working through breaks or working late. The trial court sided with the employer, but the Appeals Court reversed. It ruled that the employer could not exempt itself from the ADA by treating everyone the same. In fact, the employee’s job was not time sensitive and precise punctuality did not matter. The case was remanded to the trial court for trial.

The Holly case raises an important point: disabled employees sometimes have to be treated differently than other employees. Employers have to engage in an interactive process whenever an employee needs an accommodation to do his job. The accommodation must be provided if it is a reasonable accommodation. Reasonable accommodations can include many things, such as, as we have seen above, allowing an employee to be late. The more important lesson is to call your employment lawyer when you have any question about these issues and especially before disciplining or terminating a disabled person that may need accommodations.

These are just two of thousands of examples where disabled employees need to be treated differently. This can also apply to emotional-type disabilities, like bipolar disorder. You’ll be damned with expensive legal fees and perhaps a large verdict if you do not carefully consider these issues.

By Adam P. Whitney, 617.338.7000.