Massachusetts Law Regarding Unpaid Interns

As noted in a prior post, Massachusetts has one of the narrowest definitions of an “independent contractor” in the country. It should come as no surprise, therefore, that Massachusetts is equally strict when it comes to whether interns must be paid.

The US Department of Labor has six criteria that must be met in order to classify someone as an unpaid intern. Briefly: (1) the internship must be similar to educational training; (2) the internship must benefit the intern; (3) the intern cannot take the place of regular employees and must be closely supervised; (4) the employer cannot derive any immediate advantage from the intern’s activities; (5) the intern is not entitled to a job at the end of the internship; and (6) the intern understands that s/he is not entitled to be paid.

Massachusetts imposes a seventh requirement: the intern must be performing services as part of “training programs in charitable, educational or religious institutions.”

Accordingly, unless your Massachusetts business is a charitable, educational or religious organization, your interns must be paid, regardless of whether they fit the federal criteria.



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Massachusetts Pay Equity Act

On August 1, 2016, Massachusetts enacted the Pay Equity Act (M.G.L. c. 149, §105A), which is intended to make it unlawful to pay men and women different amounts for “comparable work.” While one might have thought that the Massachusetts Equal Pay Act already provided such protections, that law had been interpreted such that it was limited in its application to men and women with the same job titles. The newly enacted Pay Equity Act evaluates whether two positions are comparable by examining factors such as skill, effort, responsibility and working conditions. The Act provides an affirmative defense for employers who complete a good faith self-evaluation of their pay practices and make reasonable progress towards eliminating gender pay gaps.

In addition, the Pay Equity Act prohibits employers from asking job applicants about their salary history before a job offer is made. Employers should ensure their application forms are updated.

Also, it is now unlawful for employers to prohibit employees from sharing wage information with coworkers.

The Pay Equity Act goes into effect January 1, 2018 so employers have plenty of time to evaluate their hiring and wage practices, and to adapt them if necessary.




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Job Changes and Restrictive Covenants

A Company hires an employee and has a well-drafted, enforceable written agreement containing confidentiality provisions, non-solicitation clauses, and non-compete obligations (so-called “Restrictive Covenants”). The employee stays with the Company for years, receives various promotions and then decides to leave and go to a competitor. The Company is disappointed but comforted by the written employment contract containing those Restrictive Covenants. Or so it thought. It turns out that the Company overlooked the law in Massachusetts that if an employee’s employment status “changes materially,” there is a substantial risk that those Restrictive Covenants are no longer enforceable. Instead, Massachusetts law requires that new Restrictive Covenants must be signed when certain material changes occur such as a promotion to a new position, a significant pay raise, or assignment of additional job responsibilities. The takeaway: employers should review existing agreements on an annual basis to determine whether the employee’s status has changed sufficiently to warrant the re-signing of any agreement containing restrictive Covenants.


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Massachusetts Sick Time Law

The new Massachusetts sick time law goes into effect on July 1, 2015 and requires ALL employers of any size to provide up to 40 hours/year of sick time to ALL Massachusetts employees of any status.

Fairly simple and straightforward.

But, as with all such laws, the details are numerous, and, until the Attorney General issues regulations addressing this new law, some of the details remain uncertain.

Here’s what is known so far:

  • The law applies to all employers regardless of whether they have one employee or 100. The only difference related to the size of the company is that in companies with 11 or more employees, this statutory sick time is paid. Employees in companies with less than 11 employees are entitled to same amount of sick time but that time can be unpaid.
  • The law applies to all Massachusetts employees, whether full-time, part-time or temporary. The law doesn’t address independent contractors but it seems likely that legitimate independent contractors will be excluded from this benefit.
  • The 40 hours do not accrue all at once, but rather at a rate of one hour of sick time for every 30 hours worked. Accrual starts as of 7/1 or the date of hire, whichever is later, but the sick time cannot be used until 90 days after the start of employment.
  • Sick time under this law cannot be subject to a year-end “use or lose it” policy but instead can be carried over from year to year. Nonetheless, an employee cannot use more than 40 hours of this statutory sick time in a single calendar year.

Stay-tuned as the Attorney General, affected employers and eligible employees begin implementation and enforcement of this groundbreaking new law.


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Failure to Follow Corporate Formalities Can Result in Personal Liability (we already knew that but it helps to be reminded)

Almost every businessperson understands that forming a corporation can shield you from individual liability. However, that shield can develop enormous holes if proper corporate formalities are not observed. Recently, in Massachusetts, the sole owner of a corporation was held personally liable for a debt that her corporation had agreed to pay. Her mistake? The Commonwealth of Massachusetts had dissolved the corporation for failing to file annual reports. Although any businessperson knows how easy it can be to forget to file those reports or forget to conduct annual meetings, those formalities are critical. And, there really is no excuse. Automatic annual reminders on calendars are easy to set up. Or, there’s always an attorney willing to serve as a human reminder. Before full-scale panic sets in, though, it is very easy to “fix” lapsed formalities, and the Commonwealth gives businesses at least five years to do so. The ease it takes to fix the problem suggests that that owner’s story, of course, was more complicated. And, indeed, rather than reviving the dissolved corporation, she chose to create a new company which the court construed as an effort to avoid the corporate debt. There’s no way to be sure that she would have avoided individual liability had she remedied the lapsed formalities and revived the dissolved corporation, but it’s safe to say her chances of avoiding personal liability would have been much better.

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Copyright and Trademark Symbols As Marketing Tools

Business owners are often unaware that they have an effective tool for telling the world they own their trademarks and copyrights – simply use either the trademark symbol or the copyright symbol ©.  This blog won’t attempt to explain all the nuances of trademark and copyright law, but understand that registration is not necessary to use those symbols.  The key to understand is that once you use your trade name, byline, slogan, logo, etc., you obtain some trademark rights to those.  Similarly, once you put your work in some sort of “fixed” media (e.g., paper, electronic), you have some copyright protection. Therefore, why not let the world know that you do have some rights by attaching trademark and copyright symbols to your trademarks and copyrighted materials.  Understand that mere use of these symbols does not give you the full panoply of rights you might get if you formally register those trademarks or copyrights, but it does provide a certain marketplace cache that is invaluable.


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Non-Solicitation Clauses Will Be Read Broadly and With Common Sense

Recently, the First Circuit federal appeals court ruled that Massachusetts law would not draw a hard and fast line between active solicitation and merely accepting business.  The specifics of the case are familiar: employee/sales representative signs a non-solicitation agreement prohibiting solicitation, diversion or enticement of employer’s customers or business.  Employee leaves and sends a permissible email blast announcing his new employment relationship.  The blast is directed to prospects, almost half of which were former employer’s customers.  Some of the recipients contact former employee and ultimately enter a sales relationship with the new company.  The employee argued that the new relationships were permissible since he did not technically initiate the contact.  The Court strongly rejected this argument, stating that “[o]ne could more readily believe in the Tooth Fairy than believe that this course of conduct was insufficient to ground a finding of [impermissible] solicitation.”  The Court emphasized the complex nature of the sales process at issue here, implying that initial contact in the context of sales involving off-the-shelf goods might be given more weight.


For employees:  Semantics will not carry the day.

For employers:  Why take a chance?  Draft non-solicitation clauses to say what you mean.

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Employee Handbooks Are Either Binding or They’re Not

The Massachusetts Federal Court recently reaffirmed what should be obvious by now.  If an employer issues a Handbook or similar set of policies and procedures and includes language reserving the right to unilaterally change those policies and procedures, then the employer cannot seek to bind an employee to those policies and procedures.  In this particular case, the Handbook contained a provision requiring employees to arbitrate any disputes.  There were numerous provisions in the Handbook (likely recommended by well-meaning attorneys including this one) included to ensure that the Handbook would not be deemed to be a contract or to impose any contractual obligations on the employer.  This is a wise practice.  At the same time, however, the employer wished to have any and all disputes subject to binding arbitration, also arguably a wise practice.  However, rather than create a separate arbitration agreement, the employer included the arbitration provision in its non-binding, non-contractual Handbook.  Not surprisingly, the Court was unwilling to treat the arbitration provision any differently from any other provision of the Handbook.

Takeaway:      Enforceable agreements cannot contain language to the effect that they are not enforceable.


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NLRB Clarifies Restrictions on “At-Will” Acknowledgements

As discussed in a previous blog, the NLRB created quite a stir by ruling that “at-will” statements might violate federal labor laws that protect employees’ rights to engage in concerted activity aimed to change their employment status.  Several months later, the NLRB clarified its position.  The clarification turns on a seemingly subtle distinction between waiving one’s rights and acknowledging one’s rights.  Thus, according to the NLRB, a provision that required an employee to acknowledge that his or her at-will employment status could not be altered by any oral or written statements signed by anyone other than the president of the company violated the law since the provision appeared to waive the employee’s right to seek to change that status.  However, a statement acknowledging that no one other than president of the company had the authority to agree to any employment status other than at-will did not violate an employee’s federal labor rights since the employee was simply acknowledging that any change to his or her status must be approved by the president.

This distinction suggests that employers may (and should) continue to include at-will statements in handbooks and other employment documents.  However, rather than requiring acknowledgment that that status cannot be changed, at-will statements should simply clarify how that status can be changed.

Not acceptable:          I acknowledge that no oral or written statements or    representations  regarding my employment can alter my at-will employment status, except a written statement signed by the Company’s president.

Seemingly Acceptable:          I acknowledge that no one has the authority to make an agreement for employment other than at-will, other than the president of the Company.



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Can Allegations of Breach of a License Agreement Actually Breach the License Agreement?

Most, if not all, good license agreements (and, actually, most legal agreements) include a provision to the effect that the agreement can be terminated if the other party breaches any term of the agreement.  While such a provision is not only common but also seemingly straightforward, perhaps there’s now more to it.  Recently, a company that provides typeface programs and font software programs sued one of its licensees for breach of the License Agreement.  The dispute raised issues about whether the licensee check printing company’s Internet sales and electronic proofs were prohibited under the License Agreement.  That Agreement had two key provisions: (1) the Licensor’s right to terminate the Agreement if the Licensee breached the Agreement, and (2) the Licensee’s right to “use the Licensed Products without disturbance.”

Prior to filing the lawsuit, the Licensor demanded that the Licensee “cease and desist” from exercising its rights under the License Agreement, i.e., stop using the Licensed Products.  In the lawsuit, the Licensee check maker alleged that this cease and desist demand “disturbed” its rights under the Agreement and, turning the case on its head, claimed that the Licensor therefore breached the Agreement.

The Court agreed, saying that the “[p]rovisions in the agreement which concern termination . . . do not afford [Licensor] carte blanche to make cease-and-desist demands with impunity.”  If the check making company “was acting within its licensed rights at all times and [Licensor] has asserted meritless demands or claims, [Licensor’s] actions may constitute a disturbance.

Upshot:  The same as always.  Look before you leap.  And, simultaneously, don’t overreact to this single decision.  Simply be sure that actions, allegations and threats are well thought out and carefully worded.


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