Employment Law Bits

Individual liability- can an employee be held liable for contracts signed on behalf of employer?

Overturning a district court ruling, the Massachusetts Court of Appeals held that an employee could not be held liable to a vendor when the employer fails to abide by the terms of a contract because the contract, as it relates to the employee, lacks consideration.

In Yellow Book, Inc. v. Tocci, the plaintiff was the publisher of a printed phone book that sold advertising spots to businesses. The defendant, Tocci, was the office manager for the company, and on three separate occasions executed a preprinted contract for advertising services. The contract listed the company (employer) as the customer and required it to pay for the advertising in monthly installments rather than a lump sum payment. Below each signature line, were the words "Authorized Signature Individually and for the Customer” and, in fine print, was a reference to specific paragraphs in the terms of sale that were on the back of document. The terms contained language to the effect that the signer of the agreement by his or her execution, personally, and individually, assumes full performance including payments of amounts due.

The employer failed to pay Yellow Book for the advertising services, and Yellow Book sued both the employer and Tocci personally for the outstanding debt under the theories of breach of contract, unjust enrichment, and quantum meruit. Accordingly, Yellow Book contended that Tocci is individually liable under the executed agreements and the fine print.

On appeal, Tocci submitted that there was no consideration because she received nothing in return for signing the agreement. In contrast, Yellow Book argued that Tocci did receive benefits from the agreement.

The Appellate Court stated that an owner, investor, or principal of a company "who signed would certainly have a benefit from the deferred obligation, and consideration would thus be received by that person." However, here, Yellow Book failed to prove how Tocci would receive any benefit from the right of deferred payment given to her employer. The Appellate Court held:

“True, by her signature, Tocci promised to be individually liable for Pro Insulator's debt. And her misreading or failing to read the agreements is no defense. One who signs a writing that is designed to serve as a legal document, as this and its enclosure were, is presumed to know its contents . . . . But she received no compensation, from either [her employer] or Yellow Book, for this promise. No enforceable contract can be rested on such a promise as it was without consideration.”

Therefore, Tocci's motion for summary judgment that rested on the failure of consideration was allowed and the trial court reversed.

The holding in Tocci is helpful for several reasons.

1. It should serve as a reminder to all that in order for a contract to be binding there must be consideration, a bargained for exchange. Without consideration, there is no enforceable agreement. 
   
   
2. Employees can rest easy knowing that without a personal benefit, the employee is not liable for their employer’s obligations when executing contracts on the employer’s behalf.
   
   
3. Finally, if companies would like those who execute a contract on behalf of an organization to be personally liable, then the individual signing must receive a benefit.

Image credit: Francesco under Creative Commons license 

Non-solicitation agreements: beware of enticing former clients

Violations of non-solicitation agreements are not limited to situations where the former employee who signed an agreement reaches out to the other party first. In Corporate Techs., Inc. v. Harnett, the First Circuit affirmed the district court’s ruling that the issue is not who made the first call, but whether the employee was involved in helping his new employer entice his previous clients.

In Corporate Technologies, the non-solicitation agreement prevented the defendant salesperson from soliciting, diverting, or enticing away his old clients from his previous employer. The agreement was to last for one-year post-employment.

Subsequently, the salesman accepted a job with a new employer, who sent out announcements to more than 100 potential clients. 4 of the salesman’s previous clients responded to the announcement, and soon thereafter, one of the clients signed a contract with the new company.
The former employer, Corporate Technologies, successfully sued for a preliminary injunction because the district court was not convinced by the “first-to-contact” defense raised by the salesman and his new employer. See Corporate Techs., Inc. v. Harnett. “Neither the plain meaning of the word, “solicit,” nor the plain meaning of the word, “entice,” requires some kind of first contact.” The agreement “does not allow a salesman to take active steps to persuade the client and actually solicit business.”

The First Circuit affirmed, where a former employee began working for a former employer's competitor, the former employer was properly granted a preliminary injunction as to its claims for breach of a non-solicitation agreement and tortious interference because a per se rule regarding initial contact by a customer was not appropriate under Massachusetts law, the identity of the party making initial contact was just one factor among many, and the former employee's persistent pattern of pursuing patronage permitted a plausible inference that he was urging customers to do business with the competitor rather than the former employer.

Care should always be exercised when hiring a competitor’s former employee. While the injunction did not prevent the new company from doing business with market segments so long as the salesperson was not involved in the initiative, the cost of working through potential issues can be expensive.

 

Image credit: Victor1558, under Creative Commons license

New MA court decision establishes that retirement benefits, bargained for during employment, are enforceable once the employee is no longer employed

A recent decision from the Massachusetts Supreme Judicial Court, O’Neill v. School Committee of North Brookfield, reaffirms that fringe benefits contained in an employment contract are enforceable even after the employee is no longer employed.

Robert O’Neill was the superintendent of the North Brookfield schools from 1998 to 2005. During that time he had a number of employment contracts, however, his final contract contained a provision that entitled him, upon retirement, to be reimbursed annually for a percentage of his individual health insurance plan. The percentage was tied to his number of year of service and was not allowed to exceed that of the reimbursement rate for retired town employees.

The town argued that this provision was a violation of state law because it was an award of a contract for greater than the six year cap under Massachusetts law. However, the court saw it differently. Holding that it was “simply a benefit provided for in O’Neill’s final employment contract, and the fact that it was to be paid annually after the contract expired does not mean that the contract itself extended beyond the stated three-year term.”

The court found that the reimbursement provision was a bargained for fringe benefit and not part of any other benefits that the law would impose limitations on. The court made it clear that this contract was different from an unenforceable ‘evergreen clause,’ which operates to extend all of the contract terms beyond the end date of the agreement. This was different, much like a severance, except that it was to be paid over the course of O’Neill’s lifetime.

The important thing for employers to remember is that retirement benefits, bargained for during employment, are enforceable once the employee is no longer employed. 

 

Photo credit: Microsoft

Can my employer change my job description?

First, it is important to understand that Massachusetts, courts consider employment to be “at will.” This means that employment is presumed to be voluntary and indefinite for both employers and employees in the absence of contracts that specify otherwise. 

Consequently, unless you work under a collective bargaining agreement or another employment contract that specifies otherwise, generally, your employer may “legally” change your job description, (job duties, title, or position,) at any time, just as you may quit your job at any time.Your employer generally may also change other aspects of your job at any time, such as your work location, shift, number of work hours, and pay. 

Your employer may not, however, violate a law when changing your job description, job duties, pay, or other terms or conditions of your employment. Under an employment, labor, or whistleblower law, an employer may not adversely change the job description of an employee as retaliatory “punishment” because the employee reasonably exercised his or her rights under the law. Some of the laws have full retaliation protection covering any aspect of employment, but others have only limited protection, such as for wrongful termination alone. 

If an employee quits shortly after his employer so-intolerably changed his job duties that it would have compelled any reasonable employee to soon resign, then the employee might have a case for constructive discharge, a form of wrongful termination. Constructive discharge is a legal concept developed by the National Labor Relations Board (NLRB,) a government agency that protects workers’ union rights, and it renders the doctrine of employment at will inapplicable. The NLRB developed the concept to right the wrong when employers coerced employees to resign because the employees were legitimately involved in union activities. 

Constructive discharge generally means an employee resignation that was caused solely by an employer implementing or allowing an extraordinary change that made working conditions so intolerable that they would have compelled any reasonable employee to resign. Constructive discharge is effectively a form of wrongful termination, even though the employee quit. In other words, if an employer implements or allows such an intolerable change that it compels a reasonable employee to resign, then, under the constructive discharge doctrine, it might be akin to the employer illegally firing the employee. 

If an employee quits because of something that has always annoyed him or her, that is not likely to constitute constructive discharge. Quitting because of a petty change or one that most reasonable employees would tolerate is also not likely to constitute it. The same goes if an employer made a change for a justifiable business reason and an employee quit simply because he or she didn't like it. 

If your employer has adversely changed your job description, contrarily to the terms or conditions specified in the employment contract under which you work, then you might have a case for breach of contract. Consult a lawyer to discover whether or not you might have a legal case if your employer has adversely changed your job description, job duties, pay, or any of the other terms or conditions of your employment. If you’re working under a collective bargaining agreement, then it might be a good idea to also consult your union representative.

 

 Photo credit: Microsoft 

Office love contract policy: What does this mean to you?

Danny Zuko and Sandy Olsen of the box office musical hit, Grease, teach us that summer lovin’ may happen so fast. But if, unlike these high school sweethearts, you find yourself falling for an office co-worker, you may need to declare your love to your employer before you ever utter those three little words to your significant other.

Many offices have “love contract” policies aimed at limiting sexual harassment liability, should an interoffice romance go south. These policies require disclosure, where two co-workers are involved in a consensual romantic relationship. Love contracts may regulate acceptable displays of affection within the workplace. They also frequently require arbitration of any potential sexual harassment claims, and also eliminate the employer’s liability for any sexual harassment claims related to the relationship.

In addition to making office love birds squirm, love contracts may not be as effective as strict sexual harassment policies when it comes to limiting employer liability. After all, it may be difficult to determine when interoffice dating rises to the level of disclosure. Also, some couples may fear the consequences of disclosing their relationship – for example, same sex couples may worry that disclosure would lead to discrimination or retaliation.

The shortcomings of love contracts may be solved by alternative measures. While policies prohibiting inter-office relationships altogether are on the downslide, they are being replaced by clear guidelines in the employee handbook regarding conflicts of interest and sexual harassment claims that may arise from an office romance. These policies often draw stricter guidelines for relationships between managers and staff members, requiring managers to transfer positions to avoid allegations of differential treatment.

Well-drafted policies will protect the interests of employers and employees alike, limiting the employer’s liability exposure, and allowing summer lovin’ to span the seasons. 

 

Photo credit: Microsoft 

 

Employees should beware verbal commitments to extend maternity benefits under MMLA

The Massachusetts Maternity Leave Act (MMLA) guarantees eligible employees 8 weeks of unpaid leave for giving birth, adopting a child under the age of 18, or adopting a child under the age of 23, if the child is mentally or physically disabled. The bounds of this legislation and maternity rights in general were recently challenged in the case of Global NAPs v. Awiszus.

In Awiszus, an employee-plaintiff became pregnant and informed her supervisor of her intention to utilize her guaranteed 8 weeks of unpaid maternity leave. Her employer promised her an additional 3 weeks of unpaid leave if she required a Cesarean section. The employee required a Cesarean section and tried to return to work after taking 11 weeks of unpaid leave. The employer reneged on its promise and informed the employee that she no longer had a job. The employee sued and was awarded compensatory and punitive damages. 

The decision was appealed to the Supreme Judicial Court (SJC) where they overturned the lower court’s decision. Specifically, the SJC held that the employee "was not entitled to the protections afforded by the MMLA, given that she was absent from employment for more than eight weeks." The SJC noted, however, that the employer's broken promise may give rise to a claim "for breach of contract." 

In light of the Awiszus decision, employees need to be sure that they understand their rights under the MMLA. Employees should not assume that verbal commitments from employers that claim to extend their rights under MMLA actually give the employee any addition rights beyond those that would exist in an ordinary contract. The SJC has clearly stated that employees who rely solely on the word of an employer that promises more maternity leave than the MMLA guarantees can only seek a breach of contract remedy.

 

Photo credit: Microsoft

'Tis the season for online shopping (at work)

With the benefits come the burdens: requisite technological access necessarily increases employee productivity. Alternatively, however; it can decrease productivity, along with bogging down workplace networks and leaving those networks vulnerable to attack. This time of year, many employees bundle their productivity - both the work and shopping variety. 

So, how should employers handle employees who shop online at work? 

Employer responses range from terminating an employee, blocking internet shopping sites entirely, monitoring employee internet usage, or simply trusting that their employees are working hard. 
No matter what response an employer chooses, they must choose wisely. Considerations such as employee morale, contractual terms of employment, and network/internet access agreements, for example, should be at the top of the list. 

Ultimately, if an employee signs an agreement preventing or restricting personal use of company equipment or the use of the internet, an employer may legally enforce the provisions of that agreement, likely protecting them from wrongful termination lawsuits. Conversely, however; for the benefit of morale, no employer wants to be a Scrooge. Clearly articulating expectations and policies to employees at this time of the year sends a clear message of expected and accepted workplace conduct.

 

Photo credit: Microsoft

NLRB proposes changes that would aid unionization efforts

On June 22, 2011 the National Labor Relations Board (NLRB) proposed several changes to the existing regulations governing union elections. The changes seek to streamline procedures and eliminate the impact of litigation. The proposed rules would alter the way in which representation cases are administratively handled and change the way in which an employer can respond to unionization efforts following the filing of an election petition.

Specifically, the proposed amendments would allow election petitions to be transmitted electronically, require that legal disputes involving less than 20% of the bargaining unit be deferred until after the election, direct employers to provide a preliminary voter list no later than the pre-election hearing, require employers to provide a final voter list in electronic form within two days after an election is scheduled, and would eliminate pre-election requests for review of regional director rulings by consolidating all such requests into a post-election process. 

If enacted, the changes would significantly reduce an employer’s ability to discuss the impacts of unionization and collective bargaining with workers prior to an election. According to NLRB Member Brian Hayes, “elections will be held in 10 to 21 days from the filing of the petition.” Hayes is an opponent of the proposed regulations and has said that the purpose underlying the amendments “is to minimize, or rather, to effectively eviscerate an employer’s legitimate opportunity to express its views about collective bargaining.” 

Employers should watch closely as the NLRB prepares to rule on these regulations. Passage of these rules would mean less of an opportunity for employers to rebut the arguments made by employees attempting to unionize. The comment and reply period for these regulations ends on September 6, 2011. At that time the NLRB will determine whether the proposed amendments should become final. 

 

Photo credit: Microsoft

Attention MA municipal workers and administrators: collective bargaining rights likely to be limited

The Massachusetts House of Representatives recently voted to curtail collective bargaining rights for municipal workers. The bill allows local officials to unilaterally set health insurance co-payments and deductibles for their employees. The bill also allows municipalities to opt out of the option and takes veto power away from unions where a municipal entity wishes to enact the option. The measure was lauded by supporters as a law that could save cities and towns $100 million in the 2012 fiscal year. 

The fate of the bill is now in the hands of the senate. Senate president, Therese Murray, said she was happy that house democrats had “moved the needle,” however, she has yet to endorse the plan. Governor Patrick, whose signature is needed before the bill can become law, proposed a similar plan earlier in the year and is expected to endorse the legislation.

 

Waivers in employee contracts - Beware: courts are changing their views

Many employers, especially those in higher-paying industries, require that newly-hired employees sign contracts that waive certain rights. These rights often include an employee’s waiver of their right to sue and arbitrate any disputes, waivers of right to sue in severance agreements, waivers of rights to pursue claims as part of a class, et cetera. 

There is an almost infinite list of waivers that may be included in standard employee contracts, which are included for the purpose of protecting the employer from liability.

Historically, the courts would enforce the terms of a validly-signed employment contract as long as its terms were not ambiguous. This is a basic tenet of contract law, and the ability to enter into contractual relations, even if the bargain was not entirely equal, was viewed as an essential aspect of freedom of contract.

Recently, however, there is a growing trend among courts to more closely scrutinize employee waivers of rights. Courts now often require provisions of an employment contract to “knowingly, willingly, and voluntarily” waive their rights. Despite the at-will employment doctrine, some courts have even gone so far as to hold that requiring an employee to sign a contract or lose their job compromised the “voluntariness” aspect of intelligent waiver.

This is a developing area of the law, and it is not uncommon for employers to have questions about the language and conduct that should be used in reaching an agreement. If you have any questions, you should consult an employment law attorney.

 

Photo credit: Microsoft