Category Archives: Employment

Non-Competition Agreements for Business Transactions

By Jordan Scott on November 18, 2015

We have previously discussed non-competition agreements in the employer/employee context, but non-compete agreements arise in other scenarios. One of the most common events that leads to a non-compete is the sale of a business. The basics are the same as for employers and employees: the non-compete must be reasonable in duration and geographic scope, and for a legitimate business purpose. The difference lies in what is deemed reasonable. A recent Superior Court case, Annunciata v. VPS Services, LLC, et al. (Civil Action No. 15-2985 BLS2) addressed some interesting points on this topic.

The plaintiff, Annunciata, sold her business in return for cash and an equity stake in a new company formed from the sale, known as “VPS LLC.” As part of the sale, Annunciata entered into several agreements. Two of them, the Asset Purchase Agreement governing the sale, and a Service Agreement by which Annunciata was hired to work for VPS LLC, each contained a restrictive non-compete, barring her from competing for five years (which would be reduced to one year if she was terminated by VPS LLC without cause).

Shortly after the sale was completed, Annunciata had disagreements over the direction of the new company with a manager of the company that held the majority of VPS LLC’s shares. The disagreements rose to a point that the other managers (and co-defendants) voted to terminate Annunciata’s employment with VPS LLC. Annunciata filed suit against VPS LLC and the other managers for wrongful termination, who in turn counterclaimed, seeking an injunction to bar Annunciata from competing with VPS LLC, an intention Annunciata had made clear.

The court ruled in favor of the defendants, granting them an injunction. The court reasoned that when a non-compete is negotiated as part of a business sale, the court is inclined to honor such agreements, provided they are reasonable. Here, the plaintiff intended to compete directly with VPS LLC, which would deprive the defendants of a key portion of what they purchased: the good will of the recently purchased business. Further, the plaintiff still owned a portion of VPS LLC, and the specific terms of her non-compete allowed her to work, just not to form a competing company.

The takeaway from this case is that Massachusetts courts will honor non-compete agreements of a longer duration, if such non-competes are negotiated as part of a sale of a business. Any person contemplating buying or selling a business should consult with a qualified Massachusetts business attorney to protect their interests.

Loyalty Duties for Corporate Executives

By Jordan Scott on October 13, 2015

In certain circumstances, an effective non-competition agreement can help protect company assets and interests. However, the law recognizes some protections that exist even outside of a signed agreement. A recent Massachusetts appellate court case, AGERO, INC. v. RUBIN, addressed some of these protections. Agero involved a company suing two former employees who were alleged to have taken confidential information from their employer to start a competing business. One of the employer’s claims was that, in the absence of a contractual obligation, the employees still owed the company a “duty of loyalty” that prevented the employees from leaving the company with confidential information to start a competing business.

The law has long recognized that employees occupying positions of confidence and trust owe a duty of loyalty to that employer, which requires the employees to protect the employer’s interests. Employees subject to the duty of loyalty are not mere common employees who are easily replaceable. The courts will only impose such a duty on high-ranking executives and individuals with access to truly sensitive, proprietary information. This includes officers and directors although the individuals in question need not be officers and directors to trigger the duty (corporate directors are also subject to other legally imposed duties beyond the scope of this article).

The duty of loyalty means such employees are bound to act solely for their employer’s benefit during their employ, and among other things are barred from actively competing with the employer during the term of employment. Access to confidential information can also trigger the duty of loyalty, but such confidential information must be of high value and truly confidential, meaning the employer has taken measures to protect the information.

In Agero, the trial court sided with the employees, and that decision was upheld on appeal. Although the courts acknowledged the duty of loyalty argument, the employees in question were not subject to the duty. The two employees were best categorized as “rank and file,” both answering to higher level managers and lacking the authority to move forward on the projects discussed in the suit. Further, the information the employees possessed had minimal value and was not particularly secret.

There are a few takeaways from Agero. Even absent contractual agreements, high-ranking employees are still legally bound to loyalty to their employer. However, only employees occupying positions of trust and confidence will be bound by such a duty, so employers should consider non-competition agreements for lower-ranking but still valuable employees, assuming that employers can demonstrate legitimate business interests. Finally, merely labeling information as “confidential” does not necessarily make it so; the information must be truly valuable and affirmative steps must be taken to preserve its secrecy. Employers should still seek to have non-competition agreements with high-level employees, but even absent such an agreement, employers may still have recourse against a rogue former executive. Under either scenario, employers should contact a Massachusetts employment attorney to maximize their protection.

Massachusetts Non-Compete Agreements – What Are Your Business Interests?

By Jordan Scott on September 9, 2015

Non-competition agreements (often referred to as “non-competes”) continue to generate much discussion in the business world, particularly in Massachusetts. Non-competition agreements are usually found in two contexts: between an employer and employee, and in a sale of a business. Most of the press surrounds the employer/employee context, as that is the far more common non-compete scenario that potentially impacts businesses and employees throughout the state. Some states have a non-compete statute that sets forth the legality and requirements, but Massachusetts does not have such a statute (although Massachusetts does have a few statutes that bar non-competes for specific professions, such as physicians, nurses, and social workers). Instead, the Massachusetts non-compete scheme has developed via case-law.

Many people have heard of non-competes and are familiar with the basic idea, but as with many legal concepts, the devil is in the details. At a basic level, in order for a non-compete to be enforceable, it has to be reasonable. What is meant by “reasonable”? In addition to being no more restrictive than necessary to protect the employer’s legitimate interest, courts will look at three metrics: duration, geography, and purpose. For duration, Massachusetts courts have enforced non-competes with a one or two-year duration. Anything longer will be viewed with judicial skepticism and require a truly compelling reason. For geography, Massachusetts courts will generally enforce limitations related to the employee’s territory, the employer’s operating area, and the employer’s current clients. Although a nationwide restriction has been upheld, the business must actually operate nationwide. The final metric is purpose. Despite the title, merely avoiding ordinary competition is not a good reason to have a non-compete. Instead, the non-compete has to be necessary to protect a legitimate business interest. Courts need to see the protection of confidential information, such as customer lists, customer data, customer good will, business plans, marketing strategies, proprietary data and processes, and the like.

Non-competes can be a useful tool for employers, but non-competes must be drafted carefully in order to maximize the chance of a court enforcing it. Both employers seeking an effective non-compete, and employees subject to a non-compete, should seek the advice of a competent Massachusetts employment attorney to ensure legal compliance.

DOL’s New Interpretation Regarding Classification of Workers: “Most Workers Are Employees.”

By Strang Scott on August 13, 2015

Many Massachusetts employers are subject to two different legal schemes regarding the proper classification of employees: Massachusetts state law, and federal law. It is important for employers to be familiar with both schemes in order to avoid a state or federal misclassification investigation. The Department of Labor Wage and Hour Division (“DOL”) recently issued an Administrator’s Interpretation addressing the legal standard used to determine if an individual should be classified as an “employee” or an “independent contractor” under the Fair Labor Standards Act (“FLSA”).

The Supreme Court and lower courts have developed an “economic realities” test which examines the actual relationship between the employer and the individual. The DOL’s interpretation attempts to clarify that test, to answer the question of “whether the worker is economically dependent on the employer or truly in business for herself.” Although the court system is not strictly bound by DOL interpretations, courts usually find such interpretations persuasive, and this interpretation is consistent with case-law. Under the test, each factor must be analyzed in relation to the other factors, and no single element of the test outweighs the others. While the elements of the test vary slightly under case law from different courts, they generally consist of the following six factors:

Whether the Work is an Integral Part of the Employer’s Business

Where the work performed “is integral to the employer’s business,” as it is more likely than not that the worker is economically dependent on the employer, and therefore an employee. This factor is considered a compelling factor and exists “even if the work is just one component of the business and/or is performed by hundreds or thousands of other workers.” Along those lines, the work can be considered integral if it is the same as the work of many other employees, such as at telemarketing call center, or even if the work is performed outside of the employer’s premises, such as at an employee’s home or at a customer’s location. For example, in a construction company that builds residential homes, a carpenter is integral to the business, while the accountant that handles the company’s annual tax returns is not.

Whether the Worker’s Managerial Skills Affect Their Opportunity for Loss or Profit

The next factor is whether the worker’s profit or loss is affected by their level of managerial skills and input. An analysis of the worker’s “managerial skills” focuses on that worker’s ability to affect the profitability of the employer’s business based on the managerial role the worker has. “Managerial skills” are those normally associated with operating an independent business, e.g. the individual’s ability to make hiring decisions, to determine what materials and equipment to purchase, how and where to advertise, and what location should be rented for the business. Merely working more hours does not demonstrate managerial skill. The corollary to the ability to increase profit is the risk of suffering loss. A true independent contractor is in business for themselves and may directly profit or loss based on the business’s success.

How the Worker’s Relative Investment Compares to the Employer’s Investment

Next is the value and degree of investment by the worker. The worker’s investment must be considered against the investment made by the employer. Independent contractors typically make investments that support a business as an independent going concern beyond the current job, and affect that businesses’ growth, its cost structure, and its presence in the applicable marketplace. Workers who make substantial monetary investments, even in tools or equipment used for the employer’s business, may still be classified as employees. To weigh in favor of an independent contractor, an investment must be a legitimate “business investment” or “capital expenditure,” not merely a tool or piece of equipment necessary to do the job, and such investment must be substantial. Even a seemingly large expenditure such as a vehicle may pale in comparison to the investment made by an employer which includes land and heavy machinery.

Whether the Work Performed Requires Special Skills and Initiative

In weighing this factor, the DOL is not assessing the specialty of the worker’s technical skills, but determines whether the worker utilizes “special skills,” involving business judgment and initiative. In other words, the skills of building and running the business, not technical skills. To be properly classified as an independent contractor, those skills must demonstrate that the worker is in business for themselves. A true independent contractor performs independent judgments beyond the current project, has autonomy in deciding the sequence of the work performed, has control over whether additional work is performed, and is responsible for acquiring the next job. An electrician is a technically skilled worker, but is only an independent contractor when actually running his or her own electrician business, not merely reporting to work as an electrician for another company.

Whether the Worker’s and Employer’s Relationship is Permanent and Indefinite

The “permanence” of the relationship is not tied to the actual length of employment. Rather, a court will examine whether the relationship is only tied to the length of one project, or is to be continuous and repeated until either the worker or the employer elects to terminate the engagement. An independent contractor often handles one job or project for an employer, and does not work continuously or repeatedly for the same employer. This evaluation must also be made with consideration to the type of industry the work is being performed in. A lack of permanence or indefiniteness may be due to “operational characteristics intrinsic to the industry,” e.g. the use of part-time workers, seasonal workers, or staffing agencies, which still weighs on the side of employee if, for example, a particular worker works every applicable season for the same employer. True independent contractors function under their “own business initiative” and are running a business separate from that of the employer.

The Nature or Degree of Control the Employer Assert Over the Worker

The final factor of the “economic realities” test involves a determination of the type of control exercised over the worker by the employer. Employers who control the meaningful portions of the work performed by the worker are utilizing employees, not independent contractors. The “independent” work performed must be more than mere theory; the worker must actually exercise control over the meaningful aspect. Additionally, lack of direct supervision by the employer will not necessarily be indicative of independent contractor status where the worker performs work from home or at offsite locations. Examples of control indicating an employer-employee relationship includes regulating aspects of the worker’s job; setting work schedules; standardizing a dress code; and directing what tasks are carried out by the worker. The DOL’s interpretation cautions against giving the “control” factor an oversized role and states that this factor must be analyzed in the context of whether the worker is economically independent from the employer.

Impact of the DOL’s Interpretation

The DOL’s interpretation sets forth its official position on how employment relationships should be evaluated under the FLSA. Although the DOL’s interpretation is not binding on courts, it is persuasive and should be considered by employers. Businesses will benefit from reviewing their use of independent contractors, both in regard to the current legal standard and under the changes in the DOL’s interpretation, to evaluate any potential misclassifications. Federal investigations are time-consuming and the monetary penalties for misclassification can be severe.

The foregoing information is a general summary of the Administrator’s Interpretation published by the DOL. If you are operating your own company or are concerned about your rights as an employee, contact a knowledgeable employment attorney to review your classification scheme.

Employee Handbooks: Have you covered the basics?

By Jordan Scott on August 3, 2015

Many companies use an employee handbook or manual, which can be a useful management tool when properly utilized. An effective handbook sets forth company policies in plain English and covers every important company policy. Clarity is vital when implementing any kind of policy, and employees will benefit from understanding both what the company offers and what it expects in return. Although an employee handbook is recommended for most businesses, it is possible to do more harm than good, particularly when policies are poorly presented, or if the company sets forth a series of policies but fails to follow them.

There is no one-size-fits-all employee manual. Some manuals that just cover the basics may be ten to fifteen pages long, while some large corporations have manuals numbering into the hundreds of pages. In general, an employee handbook should serve as an employee resource, a convenient way for a company to communicate with its employees.

Most handbooks set forth employer commitments, which are useful to provide clarity to employees and as a partial defense to some employment-related claims. For example, employers should include policies relating to discrimination, sexual harassment, workplace bullying, drug and alcohol use, and violence, and then state how complaints are handled. This ensures that employees know that the company will not stand for any kind of dangerous and illegal conduct. Employees will feel safe in the workplace, and should a problem occur, the employer will be prepared to handle the problem and minimize the impact. For example, should an employer face a claim from an employee regarding sexual harassment, an anti-sexual harassment policy in a handbook will demonstrate that the employer has taken proactive steps to comply with the law and provide a safe environment, which can be helpful in resolving the claim with a minimal cost.

Employers and employees will also benefit from clearly stated internal policies and procedures related to the day-to-day operations of the company. For example, employees should be well aware of the company’s dress code, the company’s standard business hours, what sort of lunch breaks and other breaks are permitted, as well as how the company handles tardiness and unexcused absences. It is also wise to set forth how the company handles various kinds of leave: paid vacation is considered a “wage” in Massachusetts, and the Commonwealth recently enacted the Earned Sick Time law. There are also laws governing time off for holidays and jury duty. The various employment-related laws provide benefits and obligations to employers and employees, and so it is in everyone’s best interest to set forth how the company handles these matters in writing.

Today’s technology focused world has many traps for the unwary. Companies of all sizes have begun implementing policies related to the use of social media in (and sometimes outside of) the workplace, the use of company email, and the requirement to maintain the confidentiality of sensitive company information. Although risk can never be eliminated, an effective handbook can minimize the company’s exposure to lawsuits and costly government investigations.

An effective handbook can aid with both hiring and firing. On the hiring side, there is a real cost to bringing on a new employee, as that person must spend time learning the ways in which matters are handled by the company. A good handbook will ease the transition, minimizing the time that must be spent learning the company’s system and also acting as a resource for questions the employee has regarding company policy. On the firing side, an effective handbook will set forth grievance and termination procedures, so both the managers in charge of firing and the employees understand what is expected of them. A handbook also aids an employer in fighting off wrongful termination lawsuits by showing that a particular policy was in place, an employee was warned about violating such policy, and then the employee was ultimately terminated for violating the policy. Further, fired Massachusetts employees are entitled to unemployment assistance unless the employer can demonstrate one of a few factors, including the employee’s deliberate violation of a company policy. A handbook, read and signed by each employee, is evidence of the existence of company policies.

Any company with more than a handful of employees should consider developing an employee handbook. Consulting with a qualified employment attorney will ensure that the handbook complies with current law and does not expose the company to unnecessary risk.

Transgender Inclusion in the Massachusetts Workplace

By Jordan Scott on June 10, 2015

Massachusetts has long been a leader in civil rights, and several years ago Massachusetts joined the minority of states that provide explicit protection against discrimination on the basis of gender identity. Massachusetts’ anti-discrimination law was amended to add “gender identity” to the list of protected categories which extend to the workplace, housing, and government agencies. While that law provides much needed protections, employers are increasingly concerned about workplace issues specifically affecting transgendered people.

One question facing employers is harassment. As gender identity is part of the broad anti-discrimination statute, harassment and similar conduct is handled the same as it would be for race, gender, or other protected categories. Employers should include gender identity as part of their regular anti-harassment workplace training. The anti-discrimination statute also impacts the hiring of employees, and employers should refrain from asking any gender identity-related questions unless the gender of the employee is relevant to a bona fide occupational qualification. The law does permit such exceptions, but employers must ensure the qualification is legitimately needed and cannot be viewed as a pretext.

Another question facing employers is how to handle restrooms. The best practice would be to have one gender neutral bathroom, which appears to be a growing trend. The White House recently opened a gender neutral bathroom, as have several universities. When having a gender neutral bathroom is not possible for financial or other reasons, employers must defer to the employee’s choice of restroom, which is consistent with just-announced federal best practices issued by the Department of Labor. Forcing an employee to use a certain restroom would likely be considered discriminatory.

Some of the country’s largest companies have already implemented policies that acknowledge and respect gender identity issues. By one count, over half of Fortune 500 companies have included gender identity in their nondiscrimination policies. While protecting transgendered people is law in Massachusetts, it is also good business. Every business should strive to employ the most talented people it can, and gender identity (just like race, religion, and other personal categories) is simply irrelevant to the quality of the employee. Employers should work with their human resources staff and employment counsel to craft and implement policies that maximize the available workforce. Should you have questions or concerns regarding Massachusetts’ anti-discrimination law or your company’s practices, consult with your employment attorney.

Proposed Bill Targets “Wage Theft” in Massachusetts

By Jordan Scott on May 26, 2015

Strang Scott has previously written about both the Wage Act, the Massachusetts law protecting the earnings of workers, as well as the independent contractor statute, which governs the classification of workers as either employees or independent contractors. Violating the Wage Act and independent contractor statute can have significant real-world consequences. One consequence is a state investigation of wage theft. “Wage theft” is a broad term signifying an employer’s illegal retention of earned wages. The Boston Globe recently reported that “wage theft” is rampant throughout the construction industry. Wage theft often incurs in conjunction with the misclassification of workers as independent contractors, particularly at the subcontractor level where many workers are paid in cash. According to the Globe, the Massachusetts attorney general’s office has issued 253 wage-related citations to the construction industry alone over the last eighteen months, totaling more than $1.6 million in penalties and unpaid wages. The Attorney General’s office views investigating and prosecuting wage theft as a priority.

Employers who commit wage theft or misclassify their workers do so at substantial risk. Any worker is free to file a complaint with the Attorney General’s office, which will conduct a preliminary investigation or allow the worker to file a private law suit. Should the Attorney General ultimately find that a violation occurred, penalties start at $10,000 for non-willful violations, and $25,000 for willful violations. Repeat violations incur higher penalties, and willful violations may be further punished by debarment, preventing offending companies from seeking public contracts.

Current Massachusetts law holds the employer and the employer’s owners and/or managers liable for wage-related violations, but the legislature is considering expanding on current law. State Senator Sal DiDomenico has filed a bill to address the wage theft problem. Among other provisions, the bill (currently known as S.966) will hold “lead companies” responsible for wage violations. “Lead companies” are defined as any business entity that obtains or is provided workers directly from a labor contractor or indirectly from a subcontractor. In other words, should this bill become law, first tier subcontractors and general contractors would share liability for wage issues, include wage theft and independent contractor misclassification. Opponents of the bill have highlighted the potentially unfair burden the legislation would place on honest general contractors, and it is unknown if the bill will ultimately become law. However, all employers (particularly subcontractors, general contractors, and other entities operating in the construction industry) should properly classify all of their existing workers and be advised that the legislature may increase their direct liability for unpaid wages and misclassified workers. Employers should consult with their counsel to ensure that all workers are properly paid and classified.

Massachusetts Supreme Judicial Court Interprets the “Tips Act”

By Jordan Scott on April 16, 2015

Massachusetts law protects the “tips” or gratuities that waiters and similarly employed individuals typically receive from customers. That law is commonly known as the Tips Act (M.G.L. ch. 149, sec. 152A). The Tips Act provides that all tips must be given to the employees that earned the tips, and that tips cannot be shared with managers or the employer itself. The Tips Act applies to three categories of employees: “wait staff employees,” “service employees,” and “service bartenders.” “Wait staff” includes waiters, waitresses, bussers, and counter staff who serve food or beverages (or bus tables) in a restaurant or banquet facility and who have no managerial responsibility. “Service employees” is a catch-all definition that includes any employees who provide services directly to customers and who customarily receive tips, but also have no managerial responsibility. “Service bartenders” are employees who prepare beverages to be served to customers by other employees.

A recent Supreme Judicial Court case, Meshna & others vs. Scrivanos & another, interpreted some key provisions of the Tips Act. In Meshna, current and former Dunkin’ Donuts employees filed suit over a “no-tipping” policy found at some individual stores that prohibited employees from receiving tips from customers. The plaintiffs argued that the Tips Act prevented employers from instituting a “no-tipping” policy. The defendants prevailed, with the Court finding that the Tips Act allows employers to have a “no-tipping” policy so long as the policy was clear to customers.

The Court went on to consider the scenario where an employer has a no-tipping policy, but does not communicate that policy to customers. The Court held that if the policy is not communicated, then any tips left at the store belong to the employees, as customers have a reasonable expectation that the money left as tips will be given to the wait staff. As long as the policy is explicitly stated by the employer, however, even money left by customers may be retained by the employer without violating the Tips Act, regardless of the customer’s intent. The Meshna holdings are consistent with existing interpretations of the Tips Act.

Some restaurants and banquet halls impose an additional “administrative” fee on their invoices and contracts. Under the Tips Act, employers are permitted to impose an “administrative fee,” or something similar, but such fees must be clearly stated to all customers (in a contract or on the bill itself) that the administrative fee is paid to the employer or management. Because the Tips Act defines “service charge,” “tip,” and “gratuity” as synonyms, employers that desire to include an additional charge beyond the cost of the food, should avoid the term “service charge” and use “administrative fee” or “management fee” as a best practice. Massachusetts Courts want to see evidence that the employer informed customers that any extra fees do not represent a gratuity for employees. Should you have questions regarding whether your invoices or current practices comply with the Tips Act, consult your employment law attorney for a definitive answer.

Social Media Policies

By Jordan Scott on April 6, 2015

Social media is a part of everyday life, regularly used by both individuals and businesses. Businesses from start-ups to Fortune 500 companies use social media for advertising and marketing purposes, and many of their employees use social media on their own time. The term “social media” includes communicating information of any sort on the internet, via a website, blog, chat room, or social networking site. Facebook, Twitter, and LinkedIn are all popular, and many employers maintain an account on each service. With the ability to reach millions of potential customers without any intermediary, particularly when customers can opt in to the receiving the information, the business benefits are real and growing. Given the ubiquity of social media, it is wise for employers to develop a written policy governing its employees’ use of social media. However, employers must be careful, as there are several pitfalls to avoid, coupled with a new and rapidly evolving legal landscape.

Employers may have stand-alone social media policies, or may incorporate their policies into an employee handbook. An effective policy will provide employees with a clear understanding of the employer’s social media expectations. Employers should consider addressing both social media use in the work place and social media use outside of the work place. As with any set of legal policies and procedures, the language should be tailored to reflect the employer’s specific business.

Guidelines for a Social Media Policy

Although a social media policy should be tailored to fit the specific employer, there are general guidelines that any company should consider. With respect to the company’s use of social media generally:

– Explain who is empowered to maintain the social media accounts, including access to account passwords;

– Remind employees that the employer owns both the social media accounts and all social media-related intellectual property posted by the employer;

– Provide internal channels for employees to ask questions and clarify what is permitted;

– Remind employees that every social media post is a public statement directly attributable to the employer.

With respect to the content of the company’s social media updates:

– Prohibit use of discriminating, harassing, or similarly unacceptable language;

– Provide guidance on use of the company name and trademarks;

– Provide guidance on protecting trade secrets and other confidential information;

– Avoid liability for misleading advertising statements or product descriptions;

– Ensure that any statements are honest and accurate;

– Avoid referencing any of the employer’s vendors, suppliers, customers, or other third-parties without receiving express permission to do so from a manager;

– Avoid speaking to the media on behalf of the employer without receiving express permission to do so;

– Avoid violating any state or federal laws.

Employers should also consider whether they already have related policies in place, regarding topics such as harassment, ethics, trade secrets, and confidentiality. If so, it is important that the policies be consistent to ensure that expectations are understood. It should also be made clear that improper use of social media can lead to formal discipline, up to and including termination. Employers should have all employees sign the policy, acknowledging that it was read and any questions were asked. As with any legal policy, it is important that the policy be applied consistently across all employees; few actions lead to lawsuits faster than unequal treatment of similarly situated employees. Employers should contact an attorney for assistance in drafting or updating their social media policy.

Enforceability of Massachusetts’ New Earned Sick Time Act

By Strang Scott on March 2, 2015

By Michael T. Mullaly

On November 4, 2014, Massachusetts voters approved the Earned Sick Time Act (“Act”). The Act is codified at G. L. c. 149, § 148C and becomes effective on July 1, 2015. The application of the Act to unionized employees, however, raises complex legal issues and is already the subject of active litigation in Massachusetts.

The Act applies to all private-sector employers in Massachusetts, including individuals, and requires employers to credit each employee with one hour of earned sick time for every thirty hours worked by such employee. In the case of an employer with eleven or more employees, each employee is entitled to accrue and use up to forty hours of earned sick time — with pay — per calendar year. In the case of an employer with ten or fewer employees, each employee is entitled to accrue and use up to forty hours of earned sick time — without pay — per calendar year. Additionally, the Act provides for the limited “carrying over” of unused earned sick time into the following calendar year.

Under the Act, earned sick time may be used for a broad range of purposes relating to the mental and physical health of, or the effects of domestic abuse upon, the employee and certain of his or her relatives.

The Act provides strong protections against employer retaliation. Moreover, any violation of the Act, even an unintentional one, entitles the aggrieved employee to recover three times his or her actual damages, together with reasonable attorneys’ fees.

The administrative burden and considerable exposure that arise from the Act demand the attention of every employer in Massachusetts, irrespective of its size or sophistication. Indeed, the above description sets forth only a brief summary of the Act, which must be analyzed in its entirety and with careful attention to the circumstances of each employer.

Particularly complex legal questions arise where the Act must be applied to unionized employees. The source of this complexity is federal preemption, a legal term used to describe the situation that results when Congress demands, or the Constitution itself indicates, that only federal law may govern a particular matter. (Ordinarily, there is no prohibition against states enacting legislation addressing the same subject matter as federal law, provided that the state law does not conflict with or undermine the policy aims of the federal law.) Although preemption is, relatively speaking, somewhat rare, labor-management relations is one of the principal areas in which it does appear.

There are three distinct types of federal preemption in the realm of labor law. The Act implicates one type in particular, which is generally called “Section 301 preemption” in reference to its origin in § 301 of the Labor Management Relations Act (“Section 301”). See 28 U.S.C. § 185. Section 301 would appear simply to confer a right to sue in federal court upon a plaintiff alleging the violation of a contract between an employer and a labor union representing an employee (i.e., a collective bargaining agreement). The United States Supreme Court, however, has long read Section 301 to articulate a strong policy interest in favor of having all such contracts interpreted according to a single, nationally uniform body of law (i.e., federal law). As a result, the actual effect of Section 301 is to “preempt” — that is, extinguish — any state-law claim that requires the interpretation of a collective bargaining agreement. Some preempted state-law claims (e.g., for breach of contract) can be construed as claims under Section 301 and then be adjudicated under federal law. In other cases, however, the complaint must be dismissed for failure to state a claim.

Notably, the Act contains many provisions that, in the case of a unionized claimant, appear to require an interpretation of the underlying collective bargaining agreement. For example, in cases where the Act requires an employee to be paid for his or her use of earned sick time, the employee must be “compensated at the same hourly rate as the employee earns from the employee’s employment at the time the employee uses the paid sick time.” The Act also provides that “nothing in [the Act] shall be construed to diminish or impair the obligation of an employer to comply with any contract, collective bargaining agreement, or any employment benefit program or plan . . . that provides to employees greater earned sick time rights.” Further, the Act states that an employer may satisfy its obligations by means of “a paid time off, vacation or other paid leave policy” that makes “available an amount of paid time off sufficient to meet the accrual requirements of [the Act],” provided that such policy permits time off “for the same purposes and under the same conditions as earned paid sick time under [the Act].” Determination of the applicable rate of pay, of the comparative generosity of the labor contract and the Act, and of the compliance of any alternate paid time off policy all seem to depend upon an analysis of the collective bargaining agreement applicable to the claimant. For this reason, there is a strong possibility that unionized employees seeking to bring actions under G. L. c. 149, § 50 for violation of the Act will be thwarted by Section 301 preemption.

Section 301 preemption may likewise preclude the Attorney General from pursuing civil sanctions against employers alleged to have violated the Act with respect to unionized employees. In fact, this is among the relief sought in a recent petition for declaratory relief filed by a group of employer associations in the construction industry. See Labor Relations Division of Construction Industries of Massachusetts et al. v. Commonwealth of Massachusetts, No. 1:15-cv-10116 (D. Mass.). The litigation remains in its beginning stages, but may ultimately provide a greater measure of certainty in this area before the Act becomes effective on July 1, 2015.