Of Note (Legally Speaking)

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.

Takeaway:

For employees:  Semantics will not carry the day.

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

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.

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.

In recent months, the NLRB* has decided to crack down on some fairly typical and widespread employer policies which, on their face, have hardly seemed suspect and some of which most lawyers, including this one, have advised their clients to have in place.  The NLRB has asserted that the following practices may interfere with an employee’s right to engage in protected activity under the NLRA:

1. statements that employment is “at will”
2. requests that employees refrain from discussing on-going investigations of     employee misconduct
3. policies that prohibit employees’ use of social media to criticize the employer

Without delving into the merits, or lack thereof, of such assertions, it would seem wise for companies to add language to these types of written policies to the effect that such policy “does not and is not intended to undermine or interefere with an employee’s right to engage in protected concerted activity under the NLRA.”

(*The National Labor Relations Board (“NLRB”) is responsible for enforcing the National Labor Relations Act  (“NLRA”), a set of federal labor laws which apply to most employers whose businesses impact interstate commerce.)

It’s been several years since Massachusetts enacted the country’s most restrictive standards for classifying someone as an independent contractor, and yet frustration still arises any time I try to counsel clients on compliance. Many assumed that the law would quickly be “corrected” or, at least, interpreted in such a way as to permit the continued use of independent contractors. By issuing various advisories and interpretations, the Attorney General’s Office and the courts have squashed those assumptions. And, to date, despite periodic flurries of activity, the Legislature has not seen fit to change the law to bring it back into line with the 49 other states and the needs of the business and freelance communities.

There is ample reason for the “anti-independent contractor” moniker attached to the Massachusetts law. The law identifies three criteria for properly classifying someone as an independent contractor: (1) freedom from control; (2) unique skills; and, (3) outside the expertise of the business. It is this third requirement that gives fits. Short of the plumber that your company hires to fix the bathrooms, most people you hire to help your business run more smoothly, efficiently or completely, will be by definition, people that are providing services that your company is in the business of providing. So, for example, if you are a web-site designer and need someone to provide some technical expertise for a particular functionality that you want to add to the site, that person cannot properly be treated as an independent contractor. Even if this is a one-shot, 10 hour assignment, technically the person must be brought on board as an employee.

I pride myself on working with companies to ensure legal compliance in the most practical, effective and cost-conscious manner. Imagine that web-site designer’s reaction when I try to explain that Massachusetts law will not consider that consultant to be an independent contractor. That being said, companies faced with this issue need to assess their business needs and the penalties for noncompliance before blindly waiving the white flag. Creativity in this area may be severely constrained but it is not dead.