by Phil Catanzano
For several years, higher education institutions, both in Massachusetts and nationally, have faced student populations with increased mental and emotional health needs. In response, many of these institutions have provided additional resources to their clinical and counseling services centers and encouraged novel approaches to assist students who may be in crisis, such as threat assessment teams and coordinated care across different health care providers on and off campus. While clinical and legal approaches to these issues vary between institutions, the worst imaginable scenario for a campus community arises when these mental and emotional health issues result in suicide.
Until recently, Massachusetts post-secondary institutions had relied primarily upon the legal principles set forth in Mullins v. Pine Manor College, a seminal legal opinion from the Massachusetts Supreme Judicial Court (“SJC”) that laid the groundwork for the duties institutions owe their students given the unique aspects of an often all-encompassing campus life. While Mullins arose in a context other than student suicide, lower courts frequently applied it in a range of cases focused on liability and institutional responsibility in other contexts. In May, the SJC placed itself squarely back in the discussion with its decision in Nguyen v. MIT, 479 Mass. 436, 96 N.E.3d 128 (2018), holding that a university may be liable in certain circumstances when a student commits suicide. The Nguyen case also spoke directly to the duty of non-clinicians, who often play critical roles in helping at-risk students navigate the higher education environment.
I. The University-Student Relationship
Absent a clear duty of care, the general rule is that there is no duty upon individuals to take affirmative steps to protect others. When colleges and universities are involved, however, there are certain circumstances where a “special relationship” has evolved with students that requires institutions to exercise reasonable care to keep students safe from foreseeable conduct that occurs while they are engaged in activities that are part of the institution’s curriculum or related to its delivery of educational services or benefits.
Massachusetts was critical in this jurisprudential evolution to a special relationship for higher education institutions, primarily through the SJC’s holding in Mullins v. Pine Manor College. In Mullins, a student was abducted from her dorm in the middle of the night by an individual trespassing on the campus. She was then sexually assaulted on another part of campus over an extended period of time. Following a review of the then-current state of the law, the SJC held that there existed a duty upon the institution to ensure student safety to a reasonable degree and that the institution had not satisfied that duty. The court reasoned that “[t]he threat of criminal acts of third parties to resident students is self-evident, and the college is the party which is in the position to take those steps which are necessary to ensure the safety of its students.” The SJC concluded that “[c]olleges must…act to use reasonable care to prevent injury to their students by third persons whether their acts were accidental, negligent, or intentional.” Importantly, Mullins only addressed harm by others and physical security measures.
While the doctrinal impact of Mullins was seismic on campus, it remained unclear how far the duty extended when institutions are confronted with different forms of dangerous behavior. Massachusetts courts subsequently struggled to define the extent to which colleges and universities were obligated to protect students from harm. Given the individualized contexts in which these questions commonly arise – e.g., violence on campus, student mental health issues, drug overdoses, or suicide – it has been difficult for courts to apply a consistent analytical framework to assess liability. Against this backdrop, the SJC granted review in Nguyen and considered the question of whether, and under what circumstances, a university could be liable when a student commits suicide.
II. Nguyen v. Massachusetts Institute of Technology
Han Duy Nguyen (“Nguyen”) was a twenty-five year old graduate student at MIT when he committed suicide on June 2, 2009. Nguyen, 96 N.E.3d at 131-32. Nguyen had a history of mental health problems and two prior suicide attempts (in 2002 and 2005) when he was an undergraduate student at a different university. Id. at 146. He consulted with at least nine private mental health professionals, totaling more than ninety in-person visits from July 2006 through May 2009. Id. at 134. None of these professionals, including one who saw Nguyen forty-three times between 2006 and 2008, believed that he was at imminent risk of committing suicide. Id. Nguyen’s last appointment with a professional care giver was just five days before he would tragically take his own life. Id. at 135.
Nguyen’s father sued MIT in 2011, alleging that MIT’s negligence caused Nguyen’s death. After reviewing cross-motions for summary judgment, the Superior Court held that MIT was not liable for Nguyen’s negligence claim. Nguyen appealed, and the SJC heard the case on direct appellate review in 2017.
In its closely watched opinion, the SJC concluded that there are circumstances where a university has a duty of care to take reasonable measures to prevent a student’s suicide. Id. at 142-143. The court first recognized that there is no general duty of care to prevent another from committing suicide. Id. at 139, 144. The court then examined whether the special relationship between a university and its students imposes additional duties regarding suicide prevention. In particular, the SJC discussed several factors that have traditionally been used to “delineate duties in tort law” to determine “whether a duty to prevent suicide falls within the scope of the complex relationship that universities have with their students[.]” Id. at 142. These factors include:
- Whether the institution could reasonably foresee being expected to take affirmative action to protect the student;
- Whether there was “reasonable reliance by the [student on the institution], impeding other persons who might seek to render aid;”
- The “degree of certainty of harm” to the student;
- The “burden upon the [institution] to take reasonable steps to prevent the injury;”
- Whether there is mutual dependence between the student and the institution “involving financial benefit to the [institution] arising from the relationship;”
- Whether there would be “moral blameworthiness” for the institution’s failure to act; and
- The “social policy considerations involved in placing the economic burden of the loss on the [institution].”
Id. (internal citations omitted).
The SJC then applied these factors to the university-student relationship in the context of student suicide. The court reasoned that, in cases where the university has actual knowledge of prior suicide attempts or present suicidal ideations, many of these factors weigh in favor of creating a duty of care between the university and the student. In such cases, the student’s suicide “is sufficiently foreseeable as the law has defined the term, even for university non-clinicians without medical training.” Id. at 144. Moreover, students, particularly those living in dormitories, rely on universities for assistance and protection, and universities are “in the best, if not the only, position to assist.” Id. The gravity of the resulting harm – the death of a student – must also be considered along with the probability of the harm. Id. And while the burden that such a duty would impose on universities may be substantial, “so is the financial benefit received from student tuition.” Id. Finally, the SJC indicated that a university would be morally blameworthy for “failing to act to intervene to save a young person’s life when it was within the university’s knowledge and power to do so.” Id. For these reasons, the SJC concluded, universities have a legal duty to take reasonable measures to prevent student suicide in certain circumstances.
The SJC next attempted to define the scope of that duty. According to the SJC, a university “has a duty to take reasonable measures under the circumstances to protect the student from self-harm.” Id. at 143. “Reasonable measures” the court explained, “will include initiating its suicide prevention protocol.” Id. at 145. Alternatively, if no such protocol exists, reasonable measures include “arranging for clinical care by trained medical professionals or, if such care is refused, alerting the student’s emergency contact.” Id. In emergency situations, reasonable measures may also include contacting police, fire, or emergency medical personnel. Importantly, and as discussed below, the SJC extended this duty to non-clinicians, but then limited that duty.
In sum, the standard that the SJC created in Nguyen involves two distinct inquiries: (1) whether the duty of care is triggered by actual knowledge of prior attempts or present suicidal ideation; and (2) where a duty is triggered, whether the university satisfied its duty by taking reasonable measures to prevent the student’s suicide. The SJC concluded that MIT owed no such duty in the case at hand because “Nguyen never communicated by words or actions to any MIT employee that he had stated plans or intentions to commit suicide, and any prior suicide attempts occurred well over a year before matriculation.” Id. at 146. Moreover, Nguyen was “a twenty-five year old adult graduate student living off campus, not a young student living in a campus dormitory under daily observation.” Id. Even if the duty was triggered, the SJC added, MIT and the individual defendants did not breach this duty because Nguyen repeatedly rejected the services offered by the institution. See id. at 146-47.
III. Implications of Nguyen v. MIT
Above all, the holding in Nguyen generally incentivizes proactive suicide prevention and intervention measures by increasing the risk of liability for institutions that fail to react appropriately to clear warning signs. To minimize liability and protect students, institutions are well advised to develop robust suicide protocols in conjunction with health care professionals and legal counsel. In fact, the Nguyen decision suggests that one factor the courts will look to in assessing whether a duty of care was satisfied is whether the institution has a behavioral response protocol, e.g., threat assessment teams or similar, and whether it was triggered by the underlying facts. The SJC also seemed to indicate that courts will defer to reasonable suicide prevention protocols adopted and implemented by institutions.
Another important implication of Nguyen is the SJC’s expansion to non-clinicians of the duty to prevent suicide, but also the SJC’s corresponding limitation on the reasonable expectations for such non-clinicians in these difficult scenarios. As the SJC made clear, suicide is often unforeseeable and unpredictable. Nguyen’s history itself demonstrates this point: even with numerous visits right up until a week before his death, none of the medical professionals who treated Nguyen could foresee his suicide. While most institutions have some groups of trained clinicians on campus to assist with student suicide, the majority of individuals on campus who develop close relationships with students and may learn of troubling information are not clinicians, e.g., faculty, administrators, graduate and undergraduate student-employees. The Nguyen decision is a clear reminder that all individuals who work with students should be trained to some extent regarding risk factors and appropriate responses to indications of serious mental health concerns that may lead to suicide, but it also indicated that such non-clinicians could often satisfy this duty by referring the concern to a trained clinician who could work with the student as part of a protocol or a unified care team. Again, colleges and universities will be best served to develop clear policies and roles, keeping in mind the different ways that people on campus interact with students and the different resources available in difficult situations. Institutions should assess their current staffing and ensure that their clinical resources are appropriate for their population, while also ensuring that their non-clinical staff are trained as well as possible with regard to potential indicators of challenging behaviors, when to report concerns, and to whom such concerns should be reported.
Finally, despite its careful and thorough approach, the Nguyen decision leaves open several important questions. For example, Nguyen indicated that the duty of care is triggered “[w]here a university has actual knowledge of a student’s suicide attempt that occurred while enrolled at the university or recently before matriculation, or of a student’s stated plans or intentions to commit suicide[.]” Id. at 142-143 (emphasis added). Through this lens, what suffices as a suicide attempt? Is it limited to failed efforts at suicide, or does it encompass past instances of ideation or planning or even behaviors like self-harm that, while serious, may not always evolve to a risk of suicide? Further, what constitutes “recently before matriculation,” given that the SJC concluded that one year was too long in Nguyen? Do the plans have to be stated to an institutional official, or must the university act upon hearsay and other third-party reporting? If the latter, will this create additional reporting responsibilities, similar to what is in place when a report of a sexual assault is received by an institution? And what obligation do undergraduate or sending schools have when a student presents with concerning behavior on their campus but then matriculates to another school, either as the result of a transfer or a subsequent degree opportunity?
In conclusion, the SJC is again leading a national discussion with regard to the scope of institutional liability for student safety on campus. Given Massachusetts’s status as a major center of higher education, other jurisdictions will likely be confronted with similar issues in the near future. While these issues will be debated, the SJC has provided an early salvo by creating a framework in Nguyen. It will not be the final word regarding institutional liability for suicide in higher education.
 See generally, American College Health Assoc., National College Health Assessment II (Spring 2017) (in an extensive assessment surveying over 63,000 college students, it was found that, in the past 12 months, 51% of surveyed students felt that “things were hopeless,” 61% of surveyed students felt “overwhelming anxiety,” and 10% of surveyed students had “seriously considered suicide”).
 While the notion of in loco parentis is commonly used in the primary and secondary education systems, that relationship has evolved in the post-secondary system. See generally, Restatement (Third) of Torts: Liability for Physical and Emotional Harm § 40(a) (2012) (“Duty Based on a Special Relationship with Another”); Dall, J., “Determining Duty in Collegiate Tort Litigation: Shifting Paradigms of the College-Student Relationship,” 29 Journal of College and University Law 485 (2003)
 See Mullins, 389 Mass. at 49-50.
 Id. at 51.
 Id. at 54 (internal citations omitted).
 See, e.g., Bash v. Clark University, No. 06745A, 2006 WL 4114297, 22 Mass. L. Rptr. 84 (Mass. Super. Ct. Nov. 20, 2006) (granting the University summary judgment while concluding that it did not have a duty to prevent a student from overdosing on illicit drugs in a university controlled dorm room); Shin v. MIT, No. 020403, 2005 WL 1869101, 19 Mass. L. Rptr. 570 (Mass. Super. Ct. June 27, 2005) (denying MIT summary judgment on grounds that several MIT officials had sufficient information about a student who committed suicide such that special relationship existed between the university and student).
 The doctor who met with Nguyen during his final meeting noted that Nguyen “did not say anything that sounded imminently suicidal or hopeless,” discussing instead career options and a subsequent appointment. Nguyen, 96 N.E.3d at 135.
 The court’s conclusion that there was no breach even if a duty existed appears inconsistent with its earlier holding that if a student refuses care and treatment, reasonable care requires the university to notify the student’s emergency contact. See id. at 145.
 See id. at 143, quoting Pavela, Questions and Answers on College Student Suicide: A Law and Policy Perspective 8–9 (2006) (“The main obstacle to better suicide prevention on campus is underreaction…) (emphasis in original).
 See also Lannon et. al., “Students Who Pose a Risk of Self Harm: Individualized Assessments, Leave, and Conditions for Return,” National Association of College and University Attorneys, Annual Conference materials (June 24-27, 2018) (discussing best practices in the context of recent policy statements and decisions issued by the U.S. Department of Education’s Office for Civil Rights).
 Compare Nguyen, 96 N.E.3d at 144 (“[n]onclinicians are also not expected to discern suicidal tendencies where the student has not stated his or her plans or intentions to commit suicide”); id. at 146 (“[the limited duty] recognizes that nonclinicians cannot be expected to probe or discern suicidal intentions that are not expressly evident”), with id. at 145 n. 20 (“[f]or university-employed medical professionals, the duty and standards of care are those established by the profession itself”).
 See id. at 147 n. 21 (discussing the difficulty, even among trained professionals, in assessing the imminence of the risk of suicide).
 California is already revisiting college and university liability. In Regents of University of California v. Superior Court, the California Supreme Court concluded that universities have the duty to “take reasonable steps to protect students when it becomes aware of a foreseeable threat to their safety … while they are engaged in activities that are part of the school’s curriculum or closely related to its delivery of educational services.” 413 P.3d 656, 673-74 (Cal. 2018). The plaintiff in Regents was a student that was stabbed several times during class by a student whom the University knew to be potentially dangerous. Id. at 662. The court emphasized that the duty is “limited” because “it extends to activities that are tied to the school’s curriculum but not to student behavior over which the university has no significant degree of control.” Id. at 669 (emphasis added).
Phil Catanzano is Senior Counsel at Holland & Knight, LLP, where he counsels colleges and universities on a range of legal and policy issues. He would like to thank Paul Lannon for his guidance, expertise, and invaluable feedback in drafting this article.
Distinguishing Employees’ “General Skill or Knowledge” From Protectable Trade Secrets Under Massachusetts LawPosted: August 15, 2018
by Gregory S. Bombard and Adam M. Santeusanio
Trade secret claims often arise when a highly skilled employee leaves to work for a competitor. Under Massachusetts trade secret law, this fact pattern creates a tension between the employer’s interest in protecting its trade secrets and the employee’s competing interest in using his or her own general experience and abilities to foster a successful career. Though Massachusetts courts have long recognized this tension, the line between what constitutes a protectable trade secret as compared to an employee’s “general skill or knowledge” is not explicitly defined in Massachusetts case law. The inquiry is highly fact-based and does not easily lend itself to bright lines. This article examines the leading cases addressing the distinction between trade secrets and general skill or knowledge, and identifies the four factors courts most commonly use to draw the line.
I. The Legal Framework
Massachusetts law protects trade secret information, which is defined by statute as “a formula, pattern, compilation, program, device, method, technique, process, business strategy, customer list, invention, or scientific, technical, financial or customer data that (i) at the time of the alleged misappropriation, provided economic advantage, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, others who might obtain economic advantage from its acquisition, disclosure or use; and (ii) at the time of the alleged misappropriation was the subject of efforts that were reasonable under the circumstances . . . to protect against it being acquired, disclosed or used.”[i]
Although a company must safeguard the secrecy of purported trade secrets in order to seek legal protection for them, the company must, of course, disclose such secrets to at least some of its employees for use in the company’s business. That disclosure creates a legally-implied duty by the employee to maintain the confidentiality of the trade secrets. In addition, employees are often subject to contractual nondisclosure covenants, which survive the termination of employment.
However, Massachusetts courts recognize an important limitation on trade secret protection: a departing employee may continue to use his “general skill or knowledge acquired during the course of the employment” following his departure.[iii] This doctrine, which has been the law in Massachusetts since at least 1912,[iv] provides that an employer may not claim trade secret protection over an employee’s general skill or knowledge regardless of whether the employee developed it prior to or during his employment. By limiting the types of information that an employer can protect as trade secrets, the general skill or knowledge rule “effectuates the public interest in labor mobility, promotes the employee’s freedom to practice a profession, and [promotes] freedom of competition.”[v] The rule applies both when a former employer sues a former employee for misappropriation of the former employer’s trade secrets,[vi] and when an employer seeks to enforce post-employment restrictive covenants, like noncompetition agreements.[vii]
The facts of Intertek Testing Servs. NA, Inc. v. Curtis-Strauss LLC provides an example of how the doctrine plays out in practice. Intertek was a product inspection, testing and certification company that sued several of its former salespeople for having misappropriated “secret” information about “the quality of the relationship that certain customers had with Intertek,” including whether those relationships were “good,” “bad,” or “in-between.” Judge Gants, then sitting in the Business Litigation Session, granted summary judgment in favor of the salespeople, ruling that the strength of an employer’s relationship with a particular customer “certainly falls into the category of general knowledge acquired during the course of employment.” Speaking to the rule’s policy goal of promoting labor mobility, Judge Gants observed that “if this general information were deemed secret or confidential, then no salesman could ever work for a competitor, because every salesman inevitably knows this information and could not help but use it in some fashion.”[viii]
II. Distinguishing Trade Secrets from General Skill or Knowledge
Although the general skill or knowledge doctrine is widely cited in Massachusetts case law, no court has articulated a test for distinguishing between protectable trade secrets and nonprotectable general skill or knowledge. In the cases applying the doctrine, however, the courts most commonly consider the following four factors: (1) whether an employee had significant experience or expertise prior to starting their employment; (2) whether an employee assisted in the development of the alleged trade secret; (3) whether the alleged trade secrets were actually put to use or were merely inchoate “concepts” or “goals”; and (4) whether the alleged misappropriation involved the removal of documents or merely the contents of the employee’s memory. None of the four factors standing alone is dispositive.
A. The Employee’s Prior Experience or Expertise
Massachusetts courts are more likely to find that an alleged secret falls within an employee’s general skill and knowledge if the employee had significant experience, expertise, or education in the field before starting his employment. This factor is based on the policy that “the loss to the individual and the economic loss to society are both greatest when a highly trained and specialized person is prevented from employing his special abilities.”[ix]
For example, in Dynamics Research Corp v. Analytic Sciences Corp., an employer claimed its former employee misappropriated a system for managing data and providing feedback during the development of weapons systems for government contracts. Prior to his employment, the employee had been decorated by the Air Force for his management ability and had worked as a manager of an MIT laboratory. In fact, the employer hired him “in part because he [already] understood its management system concept.” The Appeals Court ruled that the alleged secret fell within the employee’s general skill and knowledge, observing he had come to the job “with knowledge and skill in the plaintiff’s area of operation” and “much of the [alleged trade secret] was known to the defendant prior to his employment.”[x] Conversely, in Junker v. Plummer, the employer’s claimed secret was a novel machine for “combining shoe cloth,” and the former employees “had never seen a combining machine” before their employment.[xi] There, the SJC ruled that the machine’s functionality was not part of the employees’ general skill or knowledge and was instead a protectable trade secret of their former employer.
B. The Employee’s Personal Participation in Developing the Secret
Massachusetts courts are more likely to find that an alleged secret falls within an employee’s general skill and knowledge if the employee directly participated in developing the alleged secret. The rationale behind this factor is that if the employee personally contributed towards the alleged secret’s creation or development, then the alleged secret may consist, at least in part, of the skill, knowledge, and experience that the employee brought to bear on the project.
Thus, in Chomerics, Inc. v. Ehrreich, the employee had been “personally actively involved in all of the inventions and discoveries made” by the employer in developing the alleged secret.[xii] Indeed, the employer’s “effort in this field was pioneered largely through [the defendant employee’s] inventions and research,” and the research into conductive plastics was “peculiarly his . . . almost private domain.” The Appeals Court ruled that the information fell within the employee’s general skill or knowledge as a scientist, despite the fact that the employer took reasonable measures to safeguard the information as a trade secret, including requiring the defendant to keep his laboratory notebooks locked up. Similarly, in New Method Die & Cut-Out Co. v. Milton Bradley Co., the employee “took part to a substantial extent in developing the [allegedly secret] process” for manufacturing cardboard toys, bringing to bear “his faculties, skill and experience.”[xiii] The SJC held that the process for manufacturing cardboard toys did not constitute a protectable trade secret, but rather was “the product of [the employee’s] knowledge,” which he developed in the course of his work for his former employer.
C. The Employer’s Unfinished Concepts and Goals
Massachusetts courts are more likely to find that information is within an employee’s general skill or knowledge where the alleged secret is merely an unfinished “concept” or “goal,” as opposed to information that has been reduced to practice in the form of a functioning devise, machine, or system. For example, in Chomerics, Inc. v. Ehrreich, the employer sought to develop electrically conductive plastics using “metal particles embedded in a plastic matrix.”[xiv] During his employment, the employee worked on a project to develop an electrically conductive gasket that contained less than 10 percent silver particles. The employee eventually quit and began working for a competitor, which soon thereafter patented an electrically conductive gasket that used less than 10 percent silver. The Appeals Court ruled that the use of a certain amount of silver represented only a “concept,” and that “when [the defendant] left [the plaintiff’s employ] he took with him nothing but possibilities and goals which had hitherto proved impossible to bring to fruition.” The Appeals Court ruled those “possibilities and goals” were part of the employee’s general skill or knowledge, not a protectable trade secret of the former employer.
By comparison, in Junker, the machine for combining shoe cloth was fully operational, in use in the employer’s manufacturing facility in “actual and substantial production.”[xv] Several of the plaintiff’s employees quit, started working for a competitor, and duplicated the machine, up to which point “there was none other faintly resembling it in use anywhere.” The SJC ruled that the machine was a protectable trade secret belonging to the employer.
D. Employees’ Memory and Nondocumentary Information
Massachusetts courts are more likely to find that an alleged trade secret falls within an employee’s general skill and knowledge if the employee allegedly used information from his memory, without taking away documents or electronically stored information. The SJC has, in several cases, “considered it significant that the former employee did or did not take actual lists or papers belonging to his former employer.”[xvi] For example, in American Window Cleaning Co. of Springfield v. Cohen, the plaintiff alleged that its former employees had misappropriated secret information regarding its customers. The SJC ruled the former employees had not breached their duty of confidentiality to their former employer because “[r]emembered information” regarding certain of the employer’s customers was “not confidential” and “a discharged employee, without the use of a list belonging to his former employer, may solicit the latter’s customers.”[xvii]
Similarly, in New Method Die & Cut-Out Co., the SJC ruled that an allegedly secret method for manufacturing cardboard toys was within the defendant employee’s general skill or knowledge, noting that “the defendant . . . when he left the employment of the plaintiff . . . took no documentary manufacturing data, cost figures, or customers’ lists and no drawing which were a part of the plaintiff’s files or were final drawings which had been used by the [plaintiff] for the manufacture of toys.”[xviii]
By contrast, in Pacific Packaging Products v. Barenboim, the plaintiff employer alleged that five of its former employees removed, among other things, sales history reports, cost books, invoices, and spreadsheets containing the employer’s information about particular customer accounts, all in order to form a competing company using the plaintiff’s customer base. In granting the plaintiff’s request for a preliminary injunction against the defendants’ use of the information, Judge Billings ruled “[m]y focus herein is almost exclusively on documentary information” alleged to have been misappropriated because “while it is theoretically possible to make the showing that a former employee used his memory to compete unfairly with the former employer, it is not―particularly where business, not technical, information is concerned―an easy task.”[xix]
Distinguishing trade secrets from general skill and knowledge is not a precise science and requires a fact-specific analysis. While Massachusetts courts have not articulated a specific set of rules to apply in making the distinction, the four factors discussed above provide an outline of the key considerations Massachusetts courts have used to decide whether certain information was within a departing employee’s general skill or knowledge.
[i] Massachusetts adopted a version of the Uniform Trade Secrets Act (“UTSA”), effective October 1, 2018. See Mass. Gen. Laws ch. 93, §§ 42-42G. Other UTSA jurisdictions distinguish trade secrets from general skill or knowledge. See, e.g., American Red Cross v. Palm Beach Blood Bank, Inc., 143 F.3d 1407, 1410 (11th Cir. 1998) (applying Florida law).
[ii] Jet Spray Cooler, Inc. v. Crampton, 361 Mass. 835, 840 (1972) (citing Restatement of Torts § 757, cmt. b.).
[v] CVD, Inc. v. Raytheon Co., 769 F.2d 842, 852 (1st Cir. 1985) (applying Mass. law).
[vii] See, e.g., EMC Corp. v. Loafman, No. 2012-3115-F, 2012 WL 3620374 (Mass. Super. Ct. 2012) (Wilkins, J.) (“Nor does general knowledge acquired on the job justify a non-compete.”) (citing Dynamics Research Corp. v. Analytic Sciences Corp., 9 Mass. App. Ct. 254, 267 (1980)).
[viii] Intertek Testing Servs. NA, Inc. v. Curtis-Strauss LLC, No. 98903F, 2000 WL 1473126, at *8 (Mass. Super. Ct. Aug. 8, 2000) (Gants, J.).
[ix] Dynamics Research Corp., 9 Mass. App. Ct. at 268 (quoting Harlan M. Blake, Employee Agreements Not to Compete, 73 Harv. L. Rev. 625, 684-85 (1960)); see also Harvard Apparatus, Inc. v. Cowen, 130 F. Supp. 2d 161, 175 n.31 (D. Mass. 2001) (applying Mass. law) (“The issue of whether the information lies within the employee’s general skill or knowledge depends, in part, upon the amount of knowledge and skill the employee had in the relevant area at the start of his employment.”).
[x] Dynamics Research Corp., 9 Mass. App. Ct. at 268; see also New Method Die & Cut-Out Co. v. Milton Bradley Co., 289 Mass. 277, 281-82 (1935) (finding no protectable secret where “much of the [allegedly secret] process was familiar to [the employee] from his [prior] experience”).
[xiii] New Method Die & Cut-Out Co., 289 Mass. at 282.
[xvi] Jet Spray Cooler, Inc. v. Crampton, 361 Mass. 835, 840 (1972) (citing cases). Like the other factors, however, this factor is not dispositive. The SJC ruled in Jet Spray Cooler that “the fact that no list or paper was taken does not prevent the former employee from being enjoined if the information which he gained through his employment and retained in his memory is confidential in nature.” Id.
[xviii] New Method Die & Cut-Out Co., 289 Mass. at 280.
[xix] Pac. Packaging Prod., Inc. v. Barenboim, No. MICV2009-04320, 2010 WL 11068538, at *1 (Mass. Super. Ct. Apr. 20, 2010) (Billings, J.). To avoid an injunction on that basis, the defendants represented to the court they had completely divested themselves of the paper and electronic versions of the plaintiff’s information. The court later found that representation to be a fraud on the court because the defendants had not in fact turned over the information; the court entered a default on the defendants’ counterclaims and awarded fees and costs in excess of $1 million to the plaintiff.
Gregory S. Bombard, a trial lawyer at Duane Morris, focuses his practice on trade secret litigation, business torts, and other complex commercial disputes. He represents pharmaceutical, manufacturing and technology companies in state and federal courts and arbitration proceedings throughout the United States.
Adam M. Santeusanio is a trial lawyer at Duane Morris. His practice focuses on intellectual property and commercial litigation.
The Privity Defense in Commercial Warranty Actions: Still Lingering Forty-Five Years After Legislative AbolitionPosted: February 2, 2018
by David R. Geiger and Richard G. Baldwin
On July 21, 2017, in Organic Mulch & Landscape Supply of New England LLC v. Probec, Inc. [i] the United States District Court for the District of Massachusetts dismissed a groundskeeping supply business’s breach of warranty claims against a manufacturer to recover the purchase price, repair costs and lost profits from allegedly defective ice bagging equipment because plaintiff bought the equipment from a distributor rather than directly from the manufacturer. The court further denied plaintiff’s motion to certify to the Massachusetts Supreme Judicial Court (“SJC”) the question of whether privity was required for a commercial plaintiff’s warranty claim for economic loss, reasoning that the “answer is clear in the case law.” In support, the court asserted that since the late 1990s courts have “uniformly” required privity under these circumstances, citing opinions from four different Massachusetts federal judges.
This authority, however, appears to be at odds with the plain language of Mass. Gen. L. ch. 106, § 2-318, which provides:
Lack of privity between plaintiff and defendant shall be no defense in any action brought against the manufacturer . . . to recover damages for breach of warranty, express or implied, or for negligence . . . if the plaintiff was a person whom the manufacturer . . . might reasonably have expected to use, consume or be affected by the goods.
As discussed below, the Massachusetts federal court’s departure from the statutory language rests on a tenuous basis, particularly in light of the statute’s history and interpretation by the SJC, and raises significant practical and policy concerns.
The Path To The Federal Court Rule
The original version of § 2-318 abolished the privity requirement only for breach of warranty claims by a “natural person who is in the family or household of [the] buyer or who is a guest in his home . . . and who is injured in person” by a warranty breach.[ii] In 1971, the section was re-written to extend the abolition to “any action . . . to recover damages for breach of warranty, express or implied, or for negligence” by “a person whom the manufacturer . . . might reasonably have expected to use, consume or be affected by the goods.” In 1973, the legislature added a two-year statute of limitations for “all actions under this section,” and in 1974 extended it to three years.[iii]
For nearly twenty-five years, the 1971 amendment to § 2-318 was consistently interpreted to have eliminated the privity defense in all warranty cases.[iv] Even the Massachusetts federal court opinions noted above agree on this,[v] but they cite the SJC’s 1989 decision in Bay State-Spray & Provincetown S.S., Inc. v. Caterpillar Tractor Co.[vi] as a turning point in the statute’s interpretation.
The issue in Bay State-Spray was not privity, however, but which of two “literally appli[cable]” statutes of limitations governed a warranty claim for repair costs and lost profits against the manufacturer of an allegedly defective engine in a ferry sold to plaintiff by a shipyard. Section 2-318 establishes a three-year statute of limitations from the date of injury for actions “under this section,” which includes warranty claims, but Mass. Gen. L. ch. 106, § 2-725 imposes a four-year limitations period generally running from the date of sale for actions “for breach of any contract,” including “breach of warranty.” The SJC viewed the legislature as having two purposes in expanding § 2-318: “to eliminate requirements of privity and to express new principles of strict liability for personal injuries and property damage caused by a seller’s breach of warranty.” Based on the latter, the court reasoned that the limitations period of § 2-318 governed “tort-based warranty claims,” in which the product causes personal injury or damage to property other than the product itself, while that of § 2-725 governed “contract-based warranty claims,” in which the product causes only economic loss or damage to the product itself. As plaintiff’s claim was contract-based and brought more than four years after the sale, § 2-725 applied and barred the claim. In a footnote, the SJC mentioned that defendant had not argued that plaintiff’s lack of privity barred the claim.
Six years later, the United States District Court for the Southern District of New York in Hadar v. Concordia Yacht Builders[vii] relied on Bay State-Spray to conclude that Massachusetts law required privity for contract-based warranty claims. In Hadar, a yacht owner sued his shipbuilder and the distributors and manufacturers of epoxy resin and fabric used to construct the ship for a cosmetic defect allegedly caused by incompatibility between the resin and fabric. The distributor and manufacturer defendants asserted that lack of privity barred plaintiff’s warranty claims. The court interpreted Bay State-Spray to hold that § 2-725—which is entitled “Statute of Limitations in Contracts for Sale”—governed all aspects of contract-based warranty claims and that § 2-318 is inapplicable to such claims. The court reasoned that although Bay State-Spray “involved” statute of limitations issues, the SJC “did not limit its discussion of the scope of section 2-318 to [such] issues.” Because § 2-725 does not address privity, the court held Massachusetts still required it for contract-based warranty claims.
Less than a month later, however, the SJC held in Jacobs v. Yamaha Motor Corp., U.S.A.,[viii] that privity was not required for the purchaser of a consumer product to recover from its manufacturer for contract-based warranty claims. The court noted that Mass. Gen. L. ch. 106, § 2-316A expressly prohibits a “manufacturer of consumer goods”[ix] from disclaiming or limiting implied warranties or remedies for their breach, thus creating the “implication” that such a manufacturer indeed “makes an implied warranty . . . to the consumer,” i.e., that privity is not required. Moreover, § 2-318 is even “[m]ore explicit” and “on its face invalidate[d]” the manufacturer’s privity argument, since the statute’s abolition of the privity requirement “is not limited to recovery for personal injury but rather refers [more broadly] to ‘damages’ for breach of warranty,”—unlike two of the three official UCC alternatives for the section. The SJC also noted that Massachusetts’ § 2-318 is “at least as broad as,” and in some respects “goes beyond,” the UCC’s broadest Alternative C, which had been interpreted by courts across the country as permitting consumers to recover for non-personal injury warranty claims absent privity.[x]
While the Jacobs Court noted Bay State-Spray’s conclusion that § 2-318 had been enacted with a tort “focus,” it reasoned that focus should not “inhibit the independent development of the law concerning warranties.” Acknowledging in dicta the possibility that “[c]ontract-based warranty claims involving commercial transactions may generally call for different treatment than tort-based warranty claims,” the SJC asserted that buyers of consumer goods “deserve separate consideration because of the special legislation affecting them.” The court explained it was responding to this treatment by interpreting sections 2-316A and 2-318 to abolish the privity requirement for a buyer of consumer products to bring a contract-based warranty claim against the manufacturer.
Following Jacobs, developments in the Hadar litigation caused the New York court to revisit its prior ruling.[xi] Acknowledging the decision in Jacobs, but noting that its holding was limited to buyers of consumer products, the court retained its original conclusion for contract-based warranty claims “arising in the context of commercial transactions.” The court did not address the fact that its original decision was premised on § 2-725, while Jacobs did not even cite that section, much less say that it governed all aspects of contract-based warranty claims. Nor did the court acknowledge Jacobs’ affirmative reliance on § 2-318’s plain language that was “explicit” in its abolition of the privity requirement, including for economic loss claims, and was at least as broad as—and in some respects went beyond—UCC Alternative C.
Seven months later, the Massachusetts federal court in Sebago, Inc. v. Beazer East, Inc.[xii] adopted Hadar’s interpretation of Bay State-Spray and Jacobs to conclude that, under Massachusetts law, “commercial plaintiffs must allege privity to maintain a breach of warranty action against a manufacturer.” Later opinions of the Massachusetts federal courts follow Sebago and its analysis, generally without citing Hadar.[xiii]
The SJC’s Subsequent Decision in Theos & Sons
The SJC has not subsequently revisited the possibility raised in Jacobs that commercial contract-based warranty claims may warrant different treatment than tort-based warranty claims or, more pertinently, whether such claims should be treated differently from consumer contract-based warranty claims, which Jacobs explicitly held did not require privity.[xiv] But at least one post-Jacobs case strongly suggests the court does not view privity as a requirement even for commercial contract-based warranty claims.
In Theos & Sons, Inc. v. Mack Trucks, Inc.,[xv] a business that bought a commercial truck second-hand from another business sued the manufacturer for breach of the implied warranty of merchantability to recover for economic losses from failure of the truck’s engine. The SJC affirmed dismissal of plaintiff’s claim because the manufacturer had effectively disclaimed any implied warranty in its sale to the first buyer, holding that the disclaimer was effective against any subsequent buyer, even one unaware of the disclaimer. In reaching its conclusion, the SJC specifically noted that “§ 2-318 extends all warranties . . . to third parties who may reasonably be expected to use the warranted product,” without making any distinction between consumer or commercial transactions, and observed that while § 2-318 itself did not explicitly address the effects of warranty disclaimers on remote plaintiffs, the section’s comments did. Theos & Sons thus strongly implies that the court may view § 2-318’s abolition of the privity requirement for contract-based warranty claims as equally applicable to both commercial and consumer products.
Practical and Policy Concerns
Although the Massachusetts federal court decisions requiring privity apply only to commercial buyers and contract-based warranty claims, the decisions nonetheless have considerable practical and policy consequences. For example, commercial buyers that purchase through intermediaries such as distributors may lack a remedy if their immediate seller becomes insolvent. Indeed, that may be the outcome in Organic Mulch, where the court dismissed plaintiff’s claims against the manufacturer for lack of privity but claims against the distributor have been stayed by its bankruptcy filing.
While insolvency may be a comparatively rare occurrence, the federal court rule will almost always have litigation consequences. For example, since the manufacturer inevitably possesses the most critical information and documents concerning any alleged product defect, a plaintiff limited to suing its immediate seller must incur the additional burden of pursuing third-party discovery from the manufacturer to obtain information necessary to prosecute its claim. In addition, the rule is likely to foster multiple litigations: each party in the sales chain would have to bring a suit against the entity with which it was in privity until liability ultimately reaches the manufacturer.
The federal court rule also has significant policy consequences. For one, preventing suits against manufacturers that sell indirectly fails to situate liability, and the corresponding economic incentive, on the truly responsible entity. The SJC has noted in the tort context that the law seeks to impose liability on the party in the best position to prevent or remedy a product defect.[xvi] This principle should be not be rendered inapplicable by the happenstance that the product caused only economic loss, creating a contract-based claim, rather than personal injury or property damage that would create a tort-based claim. Moreover, to the extent the federal court’s position diverges from that of the state court’s, a manufacturer’s liability will turn not on its culpability but rather whether plaintiff’s claims can be removed to federal court.
In addition, interpreting § 2-318 contrary to its seemingly unambiguous meaning may run afoul of the SJC’s requirement that courts must “carry out the legislature’s intent, determined by the words of a statute interpreted according to the ordinary and approved usage of the language.”[xvii]
In light of this fundamental principle, Jacobs’ statement (albeit in the context of a consumer claim) that § 2-318 is “explicit” in abolishing the privity requirement for contract-based warranty claims and Theos & Sons’ strong implication that this abolition is as applicable to commercial as to consumer plaintiffs, courts and litigants would benefit by the SJC’s finally resolving the issue. Accordingly, a future federal court may want to consider requesting such a resolution. Alternatively, a direct state court appeal may provide the SJC that same opportunity.
[i] Civil Action No. 16-10658-RGS, 2017 U.S. Dist. LEXIS 113716 (D. Mass. July 21, 2017).
[ii] See Bay State-Spray & Provincetown S.S., Inc. v. Caterpillar Tractor Co., 404 Mass. 103, 108 n.6 (1989) (quoting 1957 version of statute).
[iii] See id. at 109.
[iv] See, e.g., id. at 104 (“Our discussion will require an analysis of the unique Massachusetts treatment of G.L. c. 106 § 2-318, . . . which the Legislature has used to eliminate requirements of privity”); Cameo Curtains, Inc. v. Philip Carey Corp., 11 Mass. App. Ct. 423, (1981) (“The fundamental purpose of § 2-318, as amended, is to eliminate lack of privity as a defense in a breach of warranty action.”).
[v] E.g., First Choice Armor & Equip., Inc. v. Toyobo Am. Inc., 839 F. Supp. 2d 407, 412 (D. Mass. 2012) (“For a time, Massachusetts courts assumed that § 2-318 eliminated the privity requirement for all breach of warranty actions regardless of the kind of injury involved.” (citing cases)); W.R. Constr. & Consulting, Inc. v. Jeld-Wen, Inc., Civil Action No. 01-10098-DPW, 2002 U.S. Dist. LEXIS 18686, at *20 n.3 (D. Mass. Sept. 20, 2002) (“Throughout the early 1980s, the Massachusetts courts appeared to treat § 2-318 as covering all breach of warranty claims.”).
[vi] 404 Mass. 103, 105–11 (1989).
[vii] 886 F. Supp. 1082, 1097–98 (S.D.N.Y. 1995).
[viii] 420 Mass. 323, 327–31 (1995).
[ix] Consumer goods are those “bought for use primarily for personal, family or household purposes.” G.L. c. 106 § 9-102 (made applicable by G.L. c. 106 § 2-103).
[x] 420 Mass. at 328–29. The UCC’s § 2-318 is captioned “Third Party Beneficiaries of Warranties Express or Implied” and provides three alternatives for state legislatures. Alternative A is the version Massachusetts adopted in 1957. Compare Bay State-Spray, 404 Mass. at 108 n.6 with Jacobs, 420 Mass. at 328 n.4. Alternative B abolishes the privity requirement for “any natural person who may reasonably be expected to use, consume or be affected by the goods and who is injured in person” by a warranty breach. Jacobs, 420 Mass. at 328 n.4. Alternative C abolishes the defense for “any person who may reasonably be expected to use, consume or be affected by the goods and who is injured” by a warranty breach, the only alternative that “concerns more than personal injury.” Id. Massachusetts’ current § 2-318, captioned “Lack of Privity in Actions Against a Manufacturer, Seller or Supplier of Goods,” like Alternative C, contains no limitation either to “natural” persons or injury “in person,” but is even broader in that, for example it also governs claims “for negligence.”
[xi] Hadar v. Concordia Yacht Builders, 92 Civ. 3768 (RLC), 1997 U.S. Dist. LEXIS 11182, at *11–15, 1997 WL 436464 (S.D.N.Y. Aug. 1, 1997).
[xii] 18 F. Supp. 2d 70, 97–99 (D. Mass. 1998).
[xiii] See First Choice, 839 F. Supp. 2d at 412–13; Irish Venture, Inc. v. Fleetguard, Inc., 270 F. Supp. 2d 84, 87 (D. Mass. 2003); W.R. Constr. & Consulting, Inc., 2002 U.S. Dist. LEXIS 18686, at *18–20.
[xiv] In Canal Electric Co. v. Westinghouse Electric Corp., an opinion on certified questions, the SJC declined to address whether a commercial plaintiff would be barred from recovering purely economic losses from the manufacturer of an allegedly defective generator absent privity, as that question was not certified to the Court. 406 Mass. 369, 370 n.1 (1990).
[xv] 431 Mass. 736 (2000).
[xvi] E.g., Colter v. Barber-Greene Co., 403 Mass. 50, 57 (1988) (“We hold a manufacturer liable for defectively designed products because the manufacturer is in the best position to recognize and eliminate the design defects.”).
[xvii] Goodridge v. Dep’t of Pub. Health, 440 Mass. 309, 319 (2003).
Mr. Geiger and Mr. Baldwin are partners in the litigation department of the Boston office of Foley Hoag LLP. They are both members of the firm’s Product Liability and Complex Tort Practice Group, of which Mr. Geiger is the chair.
The On-Demand Economy Continues to Grow, but Legal Consequences Abound for Employers and Employees in the U.S. and AbroadPosted: February 2, 2018
by Nancy Cremins
The on-demand economy, which consists of independent and frequently short-term temporary employment arrangements, continues to expand in the United States and around the world. The growth of the on-demand workforce has outpaced overall U.S. workforce growth by a multiple of three since 2014, and freelancers are predicted to become the U.S. workforce majority within the next 10 years. Some surveys suggest that as many as 61% of employers plan to switch a significant portion of their full-time permanent positions to contingent jobs in the near future.
While trends indicate that companies intend to continue to move away from standard employer-employee arrangements, the legal landscape for on-demand workers is far from resolved. The classification of on-demand workers as “independent contractors” means there is a growing class of workers that do not have access to employment benefits such as vacation, sick time, and parental leave. Employers are not paying their share of employment taxes. In addition, these workers do not have access to social safety net programs such as workers’ compensation and are not making social security contributions. As more individuals rely on freelance work as their primary means of income, these workers are left without the protections traditional employment provides. As a result, the courts, legislatures, and companies both in the United States and abroad struggle with how to classify these workers and provide them with some access to benefits. This article summarizes and contrasts some of the different approaches that have been taken since the author first addressed this topic in this journal, and addresses why they matter to businesses in the Commonwealth.
Companies that used independent contractors rather than employees to fuel their global growth, such as Uber, Lyft, and Postmates, continue to face legal challenges to their business practices regarding worker classification. Several worker-misclassification claims have been settled at significant expense. In April 2017, the food-delivery business DoorDash agreed to pay $5 million to settle a 2015 independent contractor misclassification class action involving 33,744 class members. In March 2017, rideshare company Lyft’s $27 million settlement was approved by the court to resolve a misclassification suit brought by approximately 95,000 drivers. Although in both cases the companies agreed to pay money to settle claims, neither company agreed to reclassify independent contractors as employees. Instead, each company agreed to clarify its internal policies and provide additional rights for its independent contractor workforce, including limitations on when Lyft may deactivate drivers and an opportunity to be heard in an arbitration paid for by Lyft to challenge the basis for deactivation.
Given that the settlements did not require these companies to re-classify their independent contractors as employees, they may find themselves facing further litigation on this subject. For example, in another case, delivery company Postmates received judicial approval for its $8.75 million settlement of misclassification claims in September 2017 in Singer et al. v. Postmates Inc., Case No. 4:15cv01284 (N.D. Cal.). However, Postmates is facing a new misclassification action filed in state court in November 2017, meaning that Postmates will need to settle or litigate these same claims anew.
Only one misclassification suit has made it to trial so far. A six-day bench trial in Lawson v. Grubhub, Inc., Case No. 15-cv-05128 JSC (N.D. Cal.) was concluded with closing arguments at the end of October 2017. On February 8, 2017, the court issued its decision finding that the plaintiff was properly classified as an independent contractor. The court applied California’s 11-factor “economic realities” test set forth in S.G. Borello & Sons Inc. v. Dept. of Industrial Relations, 48 Cal.3d 341 (1989), under which the alleged employer bears the burden of proving that the worker in question is not an employee. The court found “While some [of the Borello] factors weigh in favor of an employment relationship, Grubhub’s lack of all necessary control over Mr. Lawson’s work, including how he performed deliveries and even whether or for how long, along with other factors persuade the Court that the contractor classification was appropriate for Mr. Lawson during his brief tenure with Grubhub.”
While the 11-factor Borello test[i] sets forth a different independent contractor test than is applied in Massachusetts,[ii] the results of this case will be felt across the U.S. because most prominent on-demand companies are based in California, and California law will likely apply to much of the worker litigation due to California choice of law and choice of venue provisions in agreements with independent contractors across the U.S.[iii]
Of on-demand businesses, ride-sharing giant Uber continues to reign supreme in both its ability to get press coverage and in the sheer volume of legal action it has faced globally for its classification of workers as independent contractors. On balance, the international results for Uber have been decidedly negative, but it is making some progress in the U.S., which reflects how Europe and the U.S. differ on their approaches to worker protection and Europe’s more skeptical view of the use of independent contractors instead of employees.
In April 2016, Uber attempted to resolve its largest worker misclassification class action in O’Connor v. Uber Technologies, Inc., C13-3826 EMC (N.D. Cal.), for $100 million covering 385,000 drivers. However, the proposed settlement was rejected by the court as not “fair, adequate, and reasonable” and because it did not make a determination of how to classify drivers. This case was complicated by the 9th Circuit’s decision in Mohamed v. Uber Technologies, 836 F.3d 1102, 1008 (9th Cir. 2016), which determined that pursuant to agreements between Uber and the drivers, the drivers’ claims against Uber must be arbitrated. Following the decision in Mohammed¸ Uber managed to persuade an arbitrator in an arbitration with a single California driver that such driver was properly classified under the Borello test as an independent contractor, and was not an employee.
Further arbitration and litigation was stayed in the Uber suits in California pending the outcome of National Labor Relations Board v. Murphy Oil USA, Inc., No 16-307, which on October 2, 2017 was argued before the Supreme Court and concerns the validity of class-action waivers that bar individuals from pursuing work-related claims on a collective or class basis.
In Europe, some courts and legislative bodies take a decidedly more protective approach for workers. In 2016, a United Kingdom employment tribunal ruled that Uber drivers should be classified as workers rather than self-employed contractors, which meant that Uber drivers would be entitled to benefits including holiday pay and minimum wage. The decision was upheld on appeal by the U.K. Employment Appeal Tribunal.
In a separate action, the European Court of Justice (“ECJ”) also found that Uber should be regulated as a transportation company, which undercuts Uber’s position that it simply operates as an intermediary between drivers and passengers.
An additional blow to on-demand companies that rely on independent contractors in Europe was delivered by the ECJ in King v. The Sash Window Workshop Ltd., which ruled that misclassified self-employed contractors who are really workers or employees could claim back holiday pay all the way back to the year that the EU’s Working Time Directive[iv] was introduced. Before this ruling, liability was typically limited to one or two years’ back pay in most EU countries.
So, what is being done in the U.S. and Europe at the legislative level to introduce protections for this growing class on freelance workers? In the U.S., an assortment of legislative efforts seek to provide them access to benefits typically provided in the employment relationship. New York City enacted the “Freelance Isn’t Free Act” to impose penalties on companies that fail to pay their contractors, which the city may enforce. New York State established the Black Car Fund, which administers safety and health programs that benefit for-hire drivers, their passengers, and other New Yorkers on the road, and provides workers’ compensation insurance to black car and luxury limousine drivers. Bills proposed in Washington State, New Jersey, and New York would require companies that rely on independent contractors (such as Uber and Grubhub) to contribute to a portable benefits fund that would provide health insurance, time off, workers’ compensation, and other benefits. On the Federal level, in May 2017, Senator Mark Warner (D-VA) and Representative Suzan DelBene (D-WA) introduced legislation to test and evaluate innovative portable benefit designs for freelance workers to give independent contractors access to benefits that to date have only been available for employees. But where the co-sponsors of this bill are Democrats in a Republican-controlled Congress, it is unlikely that this bill will gain any real traction before the 2018 election cycle.
It appears that additional initiatives in Europe would continue its seemingly more-protective stance. A July 2017 report commissioned by the U.K. Prime Minister on gig economy working practices sets forth a series of recommendations to improve working conditions for on-demand workers, including the proposal to create a new classification for workers on tech platforms, like Lyft and Postmates. In November 2017, the European Pillar of Social Rights, a set of policy priorities, was jointly signed by the European Parliament (the EU’s legislative body), the European Council (which sets EU policies), and the European Commission (the EU’s executive body) which sets forth 20 key principles, structured around three categories: (1) equal opportunities and access to the labor market; (2) fair working conditions; and (3) social protection and inclusion. These key principles will be implemented over time through legislation across the EU member states.
While Massachusetts’ strict “ABC test” to determine whether a worker is an employee or an independent contractor remains one of the toughest in the nation, other states that use similar tests are finding ways to determine that on-demand workers are independent contractors. However, there is presently no evidence Massachusetts courts are currently prepared to move in that direction.
Currently, the only new legislation in Massachusetts that impacts any on-demand companies involves the 2016 regulations on ridesharing companies that imposed a fee on ride-sharing services and established requirements for background checks, inspections, and insurance. Another new development impacting on-demand companies in Massachusetts occurred in 2017, when Uber introduced a pilot program that allows Massachusetts drivers to purchase workers’ compensation coverage that offers $1 million maximum coverage for medical costs and lost earnings due to a work-related accident.
The on-demand economy shows no sign of slowing down. As a result, innovative legislation or company-led initiatives that will protect these workers by providing new worker benefit programs are essential for the growing freelance workforce’s health and stability. Under the Trump administration, the Department of Labor rolled back Obama era guidance of the “economic realities test” leaving more room for independent-contractor classification than the prior administration. However, the outcome of still pending litigations will likely force changes in policies and the practices of on-demand businesses that will result in additional worker protection. As freelance work continues to grow, Massachusetts may follow other states in finding new ways to provide benefits and protections for these workers. Regardless, when guiding your clients in Massachusetts, the safest bet is still providing full employment benefits to all workers they retain.
- Whether the person performing services is engaged in an occupation or business distinct from that of the principal;
- Whether or not the work is a part of the regular business of the principal or alleged employer;
- Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;
- The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers;
- Whether the service rendered requires a special skill;
- The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
- The alleged employee’s opportunity for profit or loss depending on his or her managerial skill;
- The length of time for which the services are to be performed;
- The degree of permanence of the working relationship;
- The method of payment, whether by time or by the job; and
- Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.
[ii] Massachusetts applies a strict “ABC test” for properly classifying an independent contractor. Specifically, “[a]n employer who wants to treat someone as an independent contractor rather than an employee has to show that the work:
- is done without the direction and control of the employer; and
- is performed outside the usual course of the employer’s business; and
- is done by someone who has their own, independent business or trade doing that kind of work.” Massachusetts Attorney General’s Fair Labor Division on M.G.L. c. 149, s.148B
[iii] The long-standing Borello test is also undergoing scrutiny in California. Currently, in Dynamex Operations West, Inc. v. Superior Court of Los Angeles County, the California high court is considering whether to adopt a revised test to determine whether an individual is an employee or independent contractor. The California Supreme Court requested briefs addressing whether California law should use an “ABC” test similar to the one used in Massachusetts. Plaintiff’s counsel in the Grubhub case filed a Notice of Supplemental Authority with the District Court regarding the Dynamex matter, however, the court did not delay its decision in Gruhub instead opting to apply the current Borello test in its decision.
[iv] The EU’s Working Time Directive (2003/88/EC) requires EU countries to guarantee the certain minimum rights for all workers and regulates the amount of time people can spend at work in order to protect the health and safety of the European workforce.
Nancy Cremins is the Chief Administrative Officer & General Counsel of Globalization Partners, an International Professional Employer Organization helping companies expand in 150+ countries without the pain of setting up an entity.
This article was updated on March 8, 2018 to reflect the latest development in the case ofaweson v. Grubhub.
by Inez Friedman-Boyce, Jennifer Luz, Sarah J. Fischer, Alexandra Lu, and Louis L. Lobel
Less than a week after his inauguration, President Trump signed Executive Order No. 13,768 (“Order”), threatening to “crackdown on sanctuary cities that refuse to comply with federal law and that harbor criminal aliens” by cutting off federal grant money. This article examines the current political and legal landscape affecting sanctuary cities and the policies that define the “sanctuary city” designation.
What Is A “Sanctuary City”?
There is no single, legal definition of a “sanctuary city”; rather, the designation refers generally to cities and counties that have policies—whether formally or informally adopted—that are intended to further public safety by mitigating against any deterrent effects that immigration status might have on residents’ cooperation with local law enforcement officials and by distinguishing between local police and federal immigration officials. Studies that inform sanctuary policies indicate that victims of and witnesses to crimes are less likely to come forward to report and assist with the investigation and prosecution of crimes if they fear deportation as a possible result. Despite some variation, sanctuary cities share the common policy objective: to build community trust in order to “promote public safety and confidence in local law enforcement.”
What Are Sanctuary Policies?
Sanctuary policies differ across jurisdictions to accommodate local needs and priorities. Some have written policies that expressly prohibit police from inquiring about immigration status or direct local law enforcement not to comply with civil detainer requests by the U.S. Immigration and Customs Enforcement (“ICE”) to hold noncitizens for up to 48 hours to provide ICE agents extra time to take them into federal custody for deportation purposes. Others identify as sanctuary cities but have no written policies. Florida’s Miami-Dade County’s policy, until recently, was to refuse detainer requests except where the suspect had been charged with a non-bondable offense or had previously been convicted of a violent felony. Meanwhile, California’s Santa Clara County refuses to honor all detainer requests.
Several Massachusetts communities have sanctuary policies that limit local police cooperation with ICE, including Arlington, Boston, Cambridge, Chelsea, Holyoke, Lawrence, Newton, Northampton, and Somerville. Chelsea declared itself a sanctuary city in June 2007, adopting a policy that “immigration status (or lack thereof) … is not and shall not be a matter of local police concern or subsequent enforcement action by the [Chelsea Police Department] unless there exists through reliable and credible information a potential threat to public safety and/or national security.” The policy only governs civil immigration matters and does not prohibit Chelsea Police from assisting with criminal matters. Lawrence adopted its Trust Ordinance in August 2015 “to increase public confidence in Lawrence Law Enforcement by providing guidelines associated with federal immigration enforcement, arrests, and detentions.” Pursuant to the Ordinance, Lawrence police will not detain an individual based solely on an immigration hold or administrative warrant—or absent a warrant signed by a judge and based on probable cause—but will allow ICE officers with criminal warrants to use their facilities.
Since Trump’s election, more Massachusetts communities have galvanized to consider “sanctuary city” status. The Massachusetts Legislature also is considering a state-wide sanctuary policy, the Safe Communities Act, which would prohibit, inter alia, the use of state and local law enforcement resources or the Massachusetts Registry of Motor Vehicles record-keeping system for immigration enforcement purposes, and the arrest or detention of individuals solely on the basis of civil detainer requests or administrative warrants. Police would not be prevented from pursuing immigrants who commit crimes subject to applicable federal laws and constitutional standards. Because sanctuary policies have broad support across the Commonwealth, two exceptions have attracted disproportionate press attention: in January 2017,the Republican sheriffs of Bristol and Plymouth County each signed agreements with ICE to deputize their correctional officers to detain individuals for immigration violations under Section 287(g) of the Immigration and Nationality Act.
On January 25, 2017, President Trump signed the Order entitled “Enhancing Public Safety in the Interior of the United States.” By its plain language, the Order threatens “all Federal grant money” received by “sanctuary jurisdictions.” The Order includes several internally inconsistent and ambiguous definitions of sanctuary jurisdictions. Section 1 defines “sanctuary jurisdictions” as those that “willfully violate Federal law in an attempt to shield aliens from removal.” Section 9(a) defines the term more broadly as jurisdictions that “willfully refuse to comply with 8 U.S.C. § 1373” (“§ 1373”), which states that “a Federal, State, or local government entity or official may not prohibit or in any way restrict, any government entity or official from sending to, or receiving from, the [INS] information regarding the citizenships or immigration status, lawful or unlawful, of any individual,” “or which has in effect a statute, policy, or practice that prevents or hinders the enforcement of Federal law.” Section 9(b) orders a retroactive identification of sanctuary jurisdictions based on a list to be publicized weekly including “any jurisdiction that ignored or otherwise failed to honor any detainers.” The Order also gives the Secretary of the Department of Homeland Security (“DHS”) unfettered “authority to designate, in his discretion and to the extent consistent with law, a jurisdiction as a sanctuary jurisdiction.”
The impact of the Order was felt immediately nationwide, with reports of decreased utilization of police, health, and social services by immigrant communities. And cities that had enacted sanctuary policies in effort to address the very fear and community distrust the Order has revived are now faced with deciding between prioritizing community safety or abandoning their sanctuary policies to avoid potentially losing critical federal funding. In letters dated April 21, 2017 sent to nine jurisdictions, the Department of Justice (“DOJ”) demanded proof of compliance with § 1373, coupled with the threat of terminating certain grants. Confronted with the Order, some jurisdictions, including Miami-Dade County, Florida and Dayton, Ohio rescinded their sanctuary policies, and other cities like Quincy, Massachusetts, have declined to adopt a proposed policy. Yet other communities chose to fight back, declaring that challenging the Order is “just as much about protecting residents as it is about protecting federal resources.”
Legal Challenges to the Order
On January 31, 2017, San Francisco filed the first lawsuit challenging the constitutionality of Section 9(a) of the Order, which states: “jurisdictions that willfully refuse to comply with 8 U.S.C. § 1373 (sanctuary jurisdictions) are not eligible to receive Federal grants, except as deemed necessary for law enforcement purposes by the Attorney General or the Secretary [of Homeland Security].” Other suits quickly followed by Santa Clara County and Richmond in California; Chelsea and Lawrence, Massachusetts; and Seattle, Washington. Santa Clara, consistent with its long-standing position that it does not comply with § 1373, asserted only constitutional arguments, but the remaining jurisdictions sought declarations they complied with § 1373 and therefore were not “sanctuary jurisdictions” subject to the Section 9(a) sanctions.
These cases assert the following constitutional challenges to the Order:
· violation of the separation of powers doctrine (legislates a penalty and imposes new conditions on federal grants that only Congress can authorize and impermissibly refuses to spend funds already appropriated by Congress);
· void for vagueness under the Fifth Amendment (fails to specify the prohibited conduct that would subject the local jurisdiction to defunding, includes no guidance on what constitutes a “sanctuary jurisdiction” subject to penalties, and has “expansive standardless language” open to arbitrary and discriminatory enforcement);
· violation of procedural due process under the Fifth Amendment (jeopardizes local jurisdictions’ entitlement to money appropriated by Congress without administrative or judicial procedure);
· violation of the spending clause of the Tenth Amendment (imposes, without notice, vague conditions after funds have already been accepted, with no nexus between the federal funds threatened and the Order’s purpose, and uses coercive financial inducements); and
· violation of the principles of federalism and state sovereignty under the Tenth Amendment (compels local jurisdictions to administer or enforce federal immigration policies and programs through coercion, and may subject cities to Fourth Amendment liability; imposes a blanket restriction on local policymaking discretion regarding how to treat immigration status of residents and a specific restriction on the regulation of law enforcement priorities and policies to address the best interest of residents).
On April 25, 2017, Judge William H. Orrick III of the Northern District of California ordered a nationwide preliminary injunction against enforcement of the Order’s defunding provision in the Santa Clara and San Francisco cases. Judge Orrick rejected the DOJ’s arguments that: (1) the claims were not “prudentially ripe” because the harms are too contingent, and the DOJ and DHS have not determined the terms of the Order, (2) there was no loss of funds or cognizable harm because neither Santa Clara nor San Francisco had been named “sanctuary jurisdictions” pursuant to the Order, (3) the Order did not change existing law, as it would be enforced only “to the extent consistent with the law,” (4) it was restricted to three DOJ and DHS “grants that are already conditioned on compliance with § 1373,” and (5) it was therefore “merely an exercise of the President’s ‘bully pulpit’” that “highlight[ed] a changed approach to immigration enforcement.” Judge Orrick wrote: (1) “[t]here is no doubt that Section 9(a), as written, changes the law” and “purport[s] to give the Secretary or Attorney General the unilateral authority to alter [§ 1373],” a power reserved to Congress, and (2) standing is established “by demonstrating a well-founded fear of enforcement and a threatened injury that is ‘sufficiently real and imminent,’” and Santa Clara and San Francisco, are likely to be designated “sanctuary jurisdictions” under the Order given their policies, and withdrawing review would result in hardship that is more than financial loss. Further, Judge Orrick found a high likelihood of success on the merits of the constitutional claims, that there was impending irreparable harm based on budgetary uncertainty and constitutional injury, and that the balance of equities and public interest squarely tips in favor of the injunction. Finally, Judge Orrick found “a nationwide injunction is appropriate” because the constitutional violations had nationwide consequences.
The Chelsea and Lawrence Lawsuits
On February 8, 2017, Chelsea and Lawrence filed their complaint, challenging the Order on the previously discussed constitutional and declaratory relief grounds. Their motivation in filing suit underscores what is at stake for many sanctuary cities nationwide. Simply put: “[i]t is impossible [for a sanctuary city] to create a budget when it is unclear what effect the Executive Order will have on its funding.” The crippling consequence is especially stark in communities like Chelsea and Lawrence. Chelsea is a working-class city where over 60% of its residents identify as Hispanic or Latino, over 40% are foreign-born, and over 20% live below the poverty level with a per capita income of $21,722.00. Chelsea counts on the federal government for about 10%, or $14 million, of its $170 million annual budget. Similarly, Lawrence is a working class city where over 70% of its residents identify as Hispanic or Latino, over 35% are foreign-born, and over 25% live below the poverty level with a per capita income of $17,167.00. Lawrence counts on the federal government for over 15%, or $38 million, of its $245 million annual budget. The Order threatened large portions of these impoverished cities’ budgets because of policies they deemed necessary for their communities’ public safety. In early May, while the DOJ’s motion to dismiss was pending, Judge Orrick’s national injunction issued; the DOJ and Chelsea and Lawrence subsequently agreed to a stay, pending resolution of the injunction.
Where We Are Now
On May 22, 2017, Attorney General Sessions issued a “Memorandum on the Implementation of the Executive Order” (“Memo”), codifying arguments advanced by the DOJ at the preliminary injunction hearing. Relying on the Memo, in late May, the DOJ moved for reconsideration of the nationwide injunction in the San Francisco and Santa Clara cases. The DOJ then filed motions to dismiss on procedural and substantive grounds in the San Francisco, Santa Clara, Richmond, and Seattle cases. On July 20, 2017, Judge Orrick issued an order denying the motions for reconsideration and motions to dismiss in the Santa Clara and San Francisco cases, finding that the Memo did not impact his prior conclusion regarding standing, ripeness, and likelihood of success on the merits. Additionally, he concluded that San Francisco had stated a claim for declaratory relief.
While a nationwide preliminary injunction has been entered, many questions remain. The interplay between federal and state law regarding ICE detainers remains unclear; the constitutionality of § 1373 is still undecided; and future federal actions against sanctuary cities remain real possibilities. The Memo, purporting to narrow the definition of “sanctuary jurisdictions” and limit the sources of federal funding that are threatened by the Order, is arguably inconsistent with the terms of the Order itself, does not have the force of law, and is subject to change. It remains to be seen to what extent local policy makers are able to prioritize public safety over federal immigration enforcement without jeopardizing critical federal funding.
 See Benjamin Gonzalez, Loren Collingwood, Stephen Omar El-Khatib, The Politics of Refuge: Sanctuary Cities, Crime, and Undocumented Immigration, Urban Affairs Review, May 7, 2017.
For example, one study found that 70% of undocumented immigrants and 44% of Latinos are less likely to contact law enforcement if they are victims of a crime for fear that the police will ask about immigration status, and 67% of undocumented immigrants and 45% of Latinos are less likely to report crimes because of the same fear. See Nik Theodore, Insecure Communities: Latino Perceptions of Police Involvement in Immigration Enforcement (Dep’t of Urban Planning and Policy, Uni. of Ill. at Chicago, Chicago, IL), May 201, at 5-6.
 As Mayor Carlos Giménez of Miami-Dade explained, “It’s really not worth the risk of losing millions of dollars … in discretionary money from the feds.” Ray Sanchez, Florida’s Largest County to Comply with Trump’s Sanctuary Crackdown, CNNpolitics, Updated Jan. 27, 2017.
 City and County of San Francisco v. Trump et al., 4:17-cv-00485-DMR (N.D. Cal. Jan.31, 2017), County of Santa Clara v. Trump et al., 5:17-cv-00574-LHK (N.D. Cal. Feb. 3, 2017); City of Chelsea, et al. v. Trump, et al., 1:17-cv-10214-GAO (D. Mass. Feb. 8, 2017); City of Richmond v. Trump et al., 3:17-cv-01535-SK (N.D.Cal. Mar. 21, 2017); City of Seattle v Trump et al., 2:17-cv-00497-BAT (W.D. Wash. Mar. 29, 2017), The San Francisco, Santa Clara and Richmond, California cases have been related before Judge William H. Orrick, III.
 See, e.g., Creedle v. Gimenez, et al., 1:17-cv-22477 (S.D. Fl. filed on Jul. 5, 2017); Commonwealth v. Lunn, SJC-12276 (decided July 24, 2017) (holding federal civil detainers unconstitutional under Massachusetts Constitution).
 Elizabeth Ross, How Can “Sanctuary Cities” Resist Trump? This Lawsuit Could Provide a Blueprint, Public Radio International, Updated Apr. 12, 2017.
Inez Friedman-Boyce is a partner, Jennifer Luz is counsel, and Sarah Fischer, Alexandra Lu, and Louis Lobel are associates at Goodwin Procter LLP. Ms. Friedman-Boyce is a past co-chair of the BBA Class Actions Committee and the current co-chair of the Lawyers’ Committee for Civil Rights and Economic Justice. Along with the Lawyers’ Committee, they are all counsel for the Cities of Chelsea and Lawrence in litigation pending in the U.S. District Court for the District of Massachusetts challenging President Trump’s sanctuary city executive order.
by M. Patrick Moore and Kate R. Cook
The President of the United States and the Governor of Massachusetts have the implied power to issue executive orders that, in certain contexts, will have the force of law. Focusing on the federal system and the Massachusetts state system, this article will address the concept of the executive order, how it has changed over time, and why executive orders are used to further wide-ranging policy goals. The article will also address the judicial scrutiny of executive orders, including, in particular, whether they are owed any deference or presumption of lawfulness.
Throughout history, executive orders have addressed issues of profound national and local importance. Our system of classifying national security information, for example, is set by executive order. See Exec. Order No. 13526 (Dec. 29, 2009). So, too, is the process by which national security agencies determine who may have access to such information. See Exec. Order No. 13764 (Jan. 17, 2017); see also 50 U.S.C. § 3161 (instructing the President to issue such an order). Executive orders define the process by which nearly every federal and state agency may regulate. See generally Exec. Order No. 12291 (Feb. 17, 1981) (centralizing federal regulatory planning and review); Mass. Exec. Order No. 562 (Mar. 31, 2015) (synthesizing state regulatory review). And they provide the definition of an unfunded mandate, at least at the local level. Mass. Exec. Order No. 145 (Oct. 21, 1978). Executive orders have both advanced principles of equal protection and hindered them. See Exec. Order No. 9981 (July 26, 1948) (desegregating the armed forces); Exec. Order No. 10450 (Apr. 27, 1953) (excluding gay and lesbian officials from government service during all administrations from Eisenhower to Clinton); Exec. Order No. 12968 (Aug. 2, 1995) (establishing that the federal government no longer will “discriminate on the basis . . . [of] sexual orientation in granting access to classified information”).
Despite the importance of executive orders, neither the United States nor the Massachusetts Constitutions expressly grants the power to issue them. Rather, the power is implied from the executive’s core authority to administer the laws. See U.S. Const. art. II (“The executive Power shall be vested in a President . . . .”); id., art. II, § 3 (“[H]e shall take Care that the Laws be faithfully executed . . . .”); Mass. Const. pt. II, ch. 2, § 1, art. I (“There shall be a supreme executive magistrate, who shall be styled, the Governor of the Commonwealth of Massachusetts . . . .”). The scope of that power has been, and continues to be, the focus of significant debate. In this article, we focus on the legal framework of that ongoing debate.
The Supreme Court tells us that history is an important guide to the scope of executive power. See, e.g., NLRB v. Noel Canning, 134 S. Ct. 2550, 2560 (2014). On that score, the record is clear. Dating back to President Washington, each President has interpreted his executive power to encompass the authority to issue executive orders. See Phillip J. Cooper, By Order of the President: Administration by Executive Order and Proclamation, 18 Admin. & Soc’y 233, 236 (1986) (describing Washington’s use of executive orders and proclamations). Massachusetts Governors likely have exercised the same power for just as long, though Governor Saltonstall (who served from 1939-1945) was the first to track the orders formally. See Mass. Legis. Research Council, Report Relative to Gubernatorial Executive Orders, submitted as 1981 House 6557, at 22 (1981) (“Mass. H. Rep.”).
Historically, the number of presidential and gubernatorial executive orders peaked during periods of national emergency and war, most notably the Civil War, World War I, the Great Depression and World War II. See Cooper, supra, at 236-37. Governor Saltonstall, for example, began issuing a disproportionately high number of orders at the outset of World War II. See Mass. H. Rep. at 22, 80. No executive, however, used the authority with such regularity as President Franklin Roosevelt, who issued 567 orders in 1933 alone and a total of 3,727 orders before his death in 1945. See Cooper, supra, at 237. President Roosevelt averaged nearly 285 executive orders per year—a trend that increased steadily through the conclusion of World War II. See John Contrubis, Cong. Research Serv., Rep. No. 95-772, Executive Orders and Proclamations, at CRS-25 tbl.1 (1999). Since his administration, no President has averaged more than 78 per year. Id; Tara L. Branum, President or King? The Use and Abuse of Executive Orders in Modern Day America, 28 J. Legis. 1, 27-29 (2002).
Perhaps as a result of the constitutional silence on the issue, there is no codified definition of an executive order. The most commonly referenced definition is set forth in a 1957 report from a committee of the U.S. House of Representatives. It reads, in pertinent part: “Executive orders . . . are directives or actions by the President. When they are founded on the authority of the President derived from the Constitution or statute, they may have the force and effect of law. . . . Executive orders are generally directed to, and govern actions by, Government officials and agencies. They usually affect private individuals only indirectly.” H. Comm. on Gov’t Operations, 85th Cong., Executive Orders and Proclamations: A Study of a Use of Presidential Powers 1 (1957); see also Vivian S. Chu & Todd Garvey, Cong. Research Serv., RS20846, Executive Orders: Issuance, Modification, and Revocation (2014); see generally Contrubis, supra. Massachusetts law similarly lacks a statutory definition of executive order, though the Supreme Judicial Court has recognized such orders as the “formal” exercise (or delegation) of powers granted to the Governor by the constitution or the legislature. See Opinion of the Justices, 368 Mass. 866, 874-75 (1975).
Regarding the substance and reviewability of executive orders, policymakers and courts alike are guided by the three categories set forth in Justice Robert Jackson’s seminal concurrence in Youngstown Sheet and Tube Co. v. Sawyer, 343 U.S. 579 (1952). That case famously involved President Truman’s attempt to seize most of the nation’s steel mills to quell labor unrest during the Korean War, which Truman attempted to accomplish via executive order directing the Secretary of Commerce to take possession of and operate the mills. Id. at 583. In analyzing Truman’s order, Justice Jackson set forth three “practical situations in which a President may doubt, or others may challenge, his powers.” Id. at 635.
Though Justice Jackson described the “three practical situations” as “over-simplified,” they continue to be the benchmarks against which the exercise of executive power is measured. Id. at 635-38. First, when acting with express or implied legislative authorization, the executive exercises both the power vested in the executive and the authority of the legislature, and the executive’s actions are presumed valid. Second, when the executive acts in the “zone of twilight” defined by legislative silence or inaction on the issue, executive authority will be addressed on a case-by-case basis. Third, when the executive contravenes legislative action, the executive’s action is presumptively impermissible. Id. at 637-38.
The most common executive orders fall into the first category, i.e., action where the executive is expressly authorized to act. Such orders are generally directed to, and govern actions by, government officials and agencies. The reason is simple. Executive orders are not self-executing; most exist against the backdrop that an executive official who fails to comply with the order will be removed. See generally Myers v. United States, 272 U.S. 52 (1926). The majority of executive orders pertain to internal matters of government administration, the creation of task forces, and the commissioning of reports. Typically, the order will set forth clearly the basis of its authority. Cf. 1 C.F.R. § 19.1(b) (2017) (“The order or proclamation shall contain a citation of the authority under which it is issued.”).
Though the legal framework is routine, the subject matter of such orders is often rich and significant. On the state level, for example, the Governor is expressly afforded the constitutional authority to nominate and appoint judges. See Mass. Const. pt. II, ch. 2, § 1, art. 9. In 1975, Governor Dukakis established the Judicial Nominating Commission (JNC) by executive order, on the theory that the “high quality of judicial officer appointments can be best assured by the use of a non-partisan judicial nominating commission composed of outstanding laymen and lawyers.” Mass. Exec. Order No. 114 (Jan. 3, 1975). The Supreme Judicial Court upheld the Governor’s authority to create the JNC by executive order, which established “formally and publicly” the “enlist[ment] [of] such aid as he deems necessary to investigate the availability of qualified candidates for judicial office.” Opinion of the Justices, 368 Mass. 866, 874-75 (1975). Though each successive Governor has slightly revised the JNC, the tradition of a formalized nominating process continues.
Even where the executive has acted pursuant to an express grant of authority, however, there are checks. For example, when President Trump established his most recent travel ban, see Exec. Order No. 13780 (March 6, 2017), he purported to act under his express statutory authority to bar the immigration of certain individuals he “finds . . . would be detrimental to the interests of the United States.” See 8 U.S.C. § 1182(f). Subsequent litigation has focused on whether President Trump actually made such a finding and, if he did so, whether it was improperly infected with religious considerations (in violation of the First Amendment) or was otherwise arbitrary (in violation of the Fifth or Fourteenth Amendments). See, e.g., Int’l Refugee Assistance Project v. Trump, 857 F.3d 554 (4th Cir. 2017); Hawaii v. Trump, 859 F.3d 741 (9th Cir. 2017). The Supreme Court will hear these cases during the first session of October Term 2017. See Trump v. Int’l Refugee Assistance Project, 137 S. Ct. 2080 (2017) (granting the Government’s petitions for certiorari, staying in part the lower courts’ injunctions, and holding that the Executive Order cannot be enforced against foreign nationals who have a credible claim of a bona fide relationship with a person or entity in the United States).
Executive orders in Justice Jackson’s second category, where the scope of executive authority is not well-defined, are evaluated on a case-by-case basis. A reviewing court will scour the Constitution and consider “all the circumstances which might shed light on the views of the Legislative Branch towards such action, including congressional inertia, indifference, or quiescence.” Dames & Moore v. Regan, 453 U.S. 654, 668-69 (1981) (internal quotation omitted). In Dames & Moore, the Supreme Court analyzed a series of executive orders that extinguished American liens against Iranian property and barred claims against Iranian property in American courts. There, the Court recognized that a “‘long-continued [executive] practice, known to and acquiesced in by Congress, would raise a presumption that the [action] had been [taken] in pursuance of [legislative] consent.’” Id. at 686 (second and third alterations in original) (quoting United States v. Midwest Oil Co., 236 U.S. 459, 474 (1915)). In other words, the absence of legislative disapproval following executive action on uncertain terrain will be a relevant consideration. Id. at 686-88.
Sometimes, particularly regarding long-standing executive orders, legislative approval is express. President Reagan’s Executive Order No. 12333, for example, established a framework for the collection of foreign intelligence. The order itself relied on executive authority granted “by the Constitution” and by the 1947 National Security Act which, most prominently, created the National Security Council but which contained no express delegation of authority to the President. The order remains in place and, reportedly, is the legal basis for much of the National Security Agency’s data collection. See Erica Newland, Executive Orders in Court, 124 Yale L.J. 2026, 2030 (2015). The order is now expressly referenced many times in the United States Code. Indeed, Congress even requires the regular reporting of any violations of the order. See 50 U.S.C. § 3110.
Executive orders in the third category, where the executive has acted in contravention of legislation, generally are not permitted. For example, the Governor may not seize facilities of the Massachusetts Bay Transportation Authority where such action is barred by the General Laws. See Mass. Bay Transp. Auth. Advisory Bd. v. Mass. Bay Transp. Auth., 382 Mass. 569, 578-79 (1981). Nor may the President bar a federal contractor that has hired permanent replacements for striking workers where the contractor is expressly afforded by federal law the right to hire such replacements. See Chamber of Commerce v. Reich, 74 F.3d 1322, 1338-39 (D.C. Cir. 1996).
Where executive orders are well-anchored in existing law, they can be attractive tools for policymakers, in part because of the minimal process associated with them. As a senior aide to President Clinton once quipped: “Stroke of the pen, law of the land. Kind of cool.” Tara L. Branum, President or King? The Use and Abuse of Executive Orders in Modern-Day America, 28 J. Legislation 1, 1 (2002). Accordingly, an executive order may be an expeditious and tangible step towards accomplishing a policy goal. See, e.g., Elena Kagan, Presidential Administration, 114 Harv. L. Rev. 2245, 2300 (2001) (describing President Clinton’s use of “deliverables,” like announcing the issuance of an executive order, to advance his political agenda). Little is required of the executive other than publishing the order in the respective federal or state register. See 44 U.S.C. § 1505; G.L. c. 30A, § 6.
But the same qualities that make orders attractive can make them perilous, particularly where the subject matter strays beyond routine administrative or ceremonial purposes. Other types of executive action, most prominently including administrative rulemaking, include formalized stakeholder input before the action is finalized. The notice-and-comment regulatory process, for example, requires the executive branch to hear—and, where appropriate, address—stakeholder comments and concerns before a regulation is finalized. See 5 U.S.C. § 553; G.L. c. 30A, §§ 2-3. An executive order may be issued without such external input. Although robust internal legal and litigation risk analyses should be undertaken before an order is signed, that is a matter of practice rather than law. Compare 1 C.F.R. § 19.2 (setting forth typical process of Attorney General review), with Ryan Lizza, Why Sally Yates Stood Up to Trump, New Yorker (May 29, 2017) (noting that the Acting Attorney General first learned of Exec. Order No. 13768, President Trump’s first travel ban, from media reports).
Where an executive order that substantively affects the rights or property interests of stakeholders is issued, litigation is likely to follow, particularly where its legal foundation is uncertain or untested. Recent experience is illustrative. See, e.g., Int’l Refugee Assistance Project, 137 S. Ct. at 2088 (granting certiorari review of Exec. Order No. 13780, commonly referred to as the “travel ban”); County of Santa Clara v. Trump, 2017 WL 1459081 (N.D. Cal. Apr. 25, 2017) (enjoining enforcement of Exec. Order No. 13768 regarding grant funding to so-called sanctuary cities on several constitutional grounds); cf. United States v. Texas, 136 S. Ct. 2271 (2016) (per curium) (equally divided court affirming Fifth Circuit decision invalidating Department of Homeland Security memoranda regarding deferred action on certain undocumented immigrants). As Justice Jackson teaches us, that is as it should be: “Presidential claim to a power at once so conclusive and preclusive must be scrutinized with caution.” Youngstown, 343 U.S. at 638 (Jackson, J., concurring).
Executive orders can function as a formalized statement to the public regarding how executives intend to solve an administrative problem or discharge their duties. To withstand judicial review, executive orders must be rooted in constitutional or statutory authority and comply with the relevant constitution. Moreover, because executive orders lack the procedural protections that accompany administrative rulemaking and the deliberative process that shapes legislation, executive orders outside the obvious bounds of executive power deserve particular scrutiny.
Kate R. Cook is co-chair of the Boston Bar Association’s Civil Rights and Civil Liberties Section and Of Counsel at Sugarman Rogers. She previously served as Chief Legal Counsel to Governor Deval Patrick, where she assisted in drafting numerous Executive Orders.
M. Patrick Moore Jr. is co-chair of the Boston Bar Association’s Government Lawyers Forum and Counsel at Hemenway and Barnes LLP. He previously served as Associated Counsel and Advisor for Presidential Personnel in the White House of President Barack Obama, and as Deputy Legal Counsel to Governors Deval Patrick and Charlie Baker. In those roles, he assisted in drafting, analysis and review of executive orders.
The Administrative Law of Deregulation: The Long Road for the Trump Administration to Undo Obama-Era RegulationsPosted: August 9, 2017
by Daniel Lyons
Dysfunction among Washington’s elected branches has thrust the administrative state—the alphabet soup of federal agencies that together do the day-to-day work of governing the republic—into the nation’s political spotlight. Frustrated by his inability to get the Republican-led Congress to pass his legislation, President Obama governed by “pen and phone,” leaning on the administrative state to accomplish much of his second-term agenda. From immigration reform to transgender rights to climate change, agencies became the primary engines driving the White House’s policy agenda.
Unsurprisingly, President Trump has focused on undoing many of these agency initiatives. As a candidate, Trump campaigned on a platform of deregulation, arguing that agency regulations inhibit economic growth. And as president, he moved quickly to reverse certain Obama-era administrative initiatives and established agency-level task forces to identify others for repeal. White House advisor Stephen Bannon described these efforts as a fight for the “deconstruction of the administrative state.”
But how, precisely, can an agency conduct an about-face and reverse a policy decision that it only recently adopted? The answer is surprisingly complex, turning in part upon the way the agency formulated its policy and how long it has been in effect. The answer is also extremely important. Each year, agencies enact more rules than Congress and hear far more cases than the federal court system. Administrative process is the primary legal check on what is often called the “headless fourth branch of government.” The Trump administration’s deregulation campaign will withstand court challenges only to the extent that it gets agency process right.
The easiest agency decisions to reverse are so-called interpretive rules and policy statements. These are agency statements that, in theory, create no new rights or responsibilities for regulated entities, but rather simply clarify what the agency currently believes that existing law already requires. Because these so-called “nonlegislative rules” do not change the law, they are exempt from the Administrative Procedure Act’s notice and comment process. As a result, agencies are generally free to issue or revoke these statements at will, subject only to the agency’s own procedures for doing so.
Perhaps the most high-profile interpretive rule in President Trump’s crosshairs was the Education Department’s guidance regarding transgender students. In January 2015, the Department of Education’s Office of Civil Rights issued an opinion letter explaining that under the agency’s regulations implementing Title IX, schools are permitted to separate bathroom facilities by sex, but “must treat transgender students consistent with their gender identity.” The agency followed this with a second letter, in May 2016, explaining that a student’s sex under the statute equates to his or her gender identity. The opinion letters had legal consequences. The Fourth Circuit deferred to the first letter in G.G. v. Gloucester County School Board, a 2016 decision reversing the dismissal of a transgender student’s suit for bathroom access. Four months later, a federal district court in Texas enjoined the letter on the ground that it changed the law and therefore was not merely an interpretive rule. In October 2016, the Supreme Court granted certiorari in Gloucester County.
On February 22, 2017, the agency issued a new opinion letter that withdrew and rescinded the earlier two letters. It explained that the earlier letters “do not contain extensive legal analysis or explain how the position is consistent with the express language of Title IX, nor did they undergo any formal public process.” The Supreme Court then vacated and remanded Gloucester County back to the Fourth Circuit to reconsider its decision in light of the new letter. In the meantime, several states including Massachusetts have stepped up to fill the void in transgender rights left by the agency’s most recent action.
Recent Regulations: The Congressional Review Act
Regulations enacted during the final months of the Obama administration were susceptible to rescission via the Congressional Review Act, a 1995 law enacted as part of Newt Gingrich’s Contract with America to encourage greater legislative oversight of agency rulemaking. The Congressional Review Act requires agencies to report to Congress whenever enacting a rule with a $100 million impact on the economy. Congress then has 60 legislative days to pass a joint resolution disapproving the rule. The Act provides expedited debate procedures, including a prohibition on filibusters. If both houses pass the resolution and either the president signs it or Congress overrides a presidential veto, the rule is voided and the agency is prohibited from issuing any rule “substantially the same” as the rejected rule.
In theory, the Congressional Review Act gives Congress greater oversight of agency action, restoring some of the power lost in INS v. Chadha (which invalidated the legislative veto, a process that permitted the House or Senate to unilaterally invalidate certain agency action). But in practice, a successful joint resolution is exceedingly difficult to achieve, because absent a veto-proof majority, it requires the approval of the president, who is unlikely to agree to repeal one of his agencies’ major rules. In fact, prior to President Trump’s inauguration, the Congressional Review Act had been successfully deployed only once, to invalidate a 2001 Department of Labor ergonomics rule passed in the twilight moments of the Clinton administration and repealed shortly after President George W. Bush’s inauguration.
But the current Congress successfully passed, and President Trump signed, a record fourteen resolutions of disapproval. One of the most far reaching of these was the voiding of the Department of the Interior’s Stream Protection Rule, which took effect on the final day of Obama’s term. The rule would have prohibited mining practices that adversely affected streams and water supplies and would have required mining companies to restore streams and mined areas such that they could support all uses that they could have supported prior to mining activities. Congress passed a resolution of disapproval in January 2017 and President Trump signed it on February 16. As a result, the agency reports, the rule was nullified and “the regulations that are now in effect are the same as those that were in effect on January 18, 2017,” the day before the new rule would have taken effect. The agency is “in the process of amending all the regulations altered by the Stream Protection Rule back to the form in which those regulations existed on January 18, 2017. When complete, these amendments will be published in the Federal Register.”
Older Regulations: Notice and Comment Rulemaking
Older regulations may be rescinded primarily via the notice and comment process outlined in the Administrative Procedure Act—the same process the agency went through to enact the regulation. First the agency must promulgate a notice of proposed rulemaking, which usually includes an explanation why the agency seeks to take action and the text of the rule the agency proposes to adopt (but in the deregulatory posture, it could instead identify the text the agency proposes to delete). The agency then must invite public comment, which occurs in two rounds: an initial comment period and a reply comment period. After the comment period has closed, the agency must review the comments filed and will ultimately issue a final rule, which becomes binding after publication in the Federal Register (and expiration of the 60-day Congressional Review Act clock).
Deregulation via notice and comment rulemaking differs in two important ways from the other avenues discussed above, both of which can potentially derail the agency’s plans. First, the public has the opportunity to provide input into the agency’s process. One need not be a lawyer to comment on a proposed rule, including a proposal to rescind an existing rule. Most open agency proceedings are listed at www.regulations.gov, where one can file a comment by uploading a document or even simply by typing into a text box and pressing “submit.” This comment process is not merely window-dressing. By law, agencies must review and respond to these comments in its final rule. More specifically, while an agency need not address every point in every submission, it must respond to significant comments in a reasoned manner to show that the major policy critiques were considered by the agency.
Second, opponents can seek judicial review of the agency’s decision. Like all final agency action, a decision to revoke or modify an existing rule is subject to review under the Administrative Procedure Act’s “arbitrary and capricious” standard. In the deregulatory context, the touchstone case is Motor Vehicle Manufacturers Association vs. State Farm Insurance Co., in which petitioners challenged the Reagan administration’s rescission of a Carter-era rule mandating that cars contain either automatic seatbelts or airbags. The Supreme Court explained that both adopting a new rule and repealing an existing rule change the legal baseline, and therefore in both cases the agency must “examine the relevant data and articulate a satisfactory explanation for its action.” Furthermore, because repeal involves a reversal of the agency’s previous views on the issue, this explanation should include a discussion of why the agency had changed its position.
In State Farm, the Department of Transportation justified the repeal by arguing that, contrary to the agency’s original estimate that 60% of cars would have automatic seatbelts and 40% would have airbags, the agency now believed that over 99% of cars would choose the seatbelt option. And this was problematic because new studies showed that most Americans would deactivate the automatic seatbelts, meaning the regulation would not measurably improve automobile safety. The Supreme Court unanimously vacated this repeal because the agency failed to explain why it did not simply adopt an “airbags only” rule instead, which, from a safety perspective, would seem to be a logical response if automatic seatbelts were deemed ineffective. The Court explained that the agency could repeal the rule completely, but it had to explain why it chose that path rather than the other options that were on the table.
Learning from State Farm, the Trump administration is beginning the notice and comment process to repeal select Obama-era regulations. One of the first out the gate is the Federal Communications Commission’s notice of proposed rulemaking to repeal the classification of broadband providers as common carriers. In a series of orders between 2002 and 2005, the Commission had classified broadband access as a lightly-regulated “information service” under the Communications Act. In 2015, to bolster its legal arguments in support of net neutrality, the agency reversed those orders and instead classified broadband access as “telecommunications service” subject to common carriage regulations. The Commission’s 2015 decision was a 3-2 party-line vote. The two dissenting Republican commissioners now constitute a 2-1 majority, and have proposed to repeal the 2015 decision. Consistent with State Farm, the notice of proposed rulemaking stresses the unintended consequences of the 2015 order, including a decline in broadband investment and a weakening of privacy laws. It also stresses that repeal would restore the agency’s original classification, and thus draws upon the agency’s prior deliberations to justify its current decision. Unsurprisingly, many of the comments have challenged these factual assertions, and the final rule must address these comments if the Commission decides to proceed with the repeal.
Politics and the Administrative Law of Deregulation
Of course, adhering to State Farm is a bit of a fiction. Ultimately, in these cases the agency has not suffered a change of heart, but of personnel. The Trump administration’s decision to repeal Obama-era regulations stems from a change to a political regime that favors less regulation. The same was true of the Reagan administration’s deregulation efforts, which drove the agency’s position in State Farm. In partial dissent in that case, then-Justice Rehnquist suggested that the Court should call a spade a spade and allow politically driven reversals. He would have held that “[a] change in administration brought about by the people casting their votes is a perfectly reasonable basis for an executive agency’s reappraisal of the costs and benefits of its programs and regulations.” The majority did not directly respond to this point, although one might argue that if it worked reciprocally, such an explanation would eviscerate judicial review of agency action. A general regulatory or deregulatory mood may explain an agency’s broad goals, but it says nothing about why any particular rule is justified on the facts relevant to its merits. The Court was right to require a policy, rather than political, explanation for an agency’s action.
Lessons for the Trump Administration
By reversing policy statements with which it disagreed and passing Congressional Review Act resolutions against Obama’s eleventh-hour initiatives, the Trump administration has identified the low-hanging fruit in its deregulatory project. The lesson of State Farm is that repealing other, longer-standing policies will not be as easy. It will require agencies to undergo the same time-consuming process as they did to enact the rules that they seek now to undo—and to overcome similar opposition from those who support the status quo.
And this is where the Trump administration’s focus on short-term gains may hurt its longer-term goals. As an initial volley against the administrative state, President Trump announced a government-wide hiring freeze. As Obama-era employees departed, this attrition has left agencies short of the personnel needed to do the blocking and tackling required under State Farm. His proposed agency budget cuts compound the problem, by denying agencies the resources they need to implement deregulation.
As he left office, President Harry S. Truman remarked of his successor, “He’ll sit there and say, ‘do this’ and ‘do that’ and nothing will happen. Poor Ike—it won’t be a bit like the Army.” The Trump administration may soon learn a similar lesson the hard way. If the White House is serious about achieving lasting deregulatory change, it must do so methodically, on an agency-by-agency, regulation-by-regulation basis, and avoid securing minor budget victories at the expense of losing the agency resources necessary to effect that change.
 G.G. ex rel Grimm v. Gloucester County School Board, 822 F.3d 709 (4th Cir. 2016), vacated and remanded, Gloucester County School Bd. v. G.G. ex rel Grimm, 137 S.Ct. 1239 (2017).
 Texas v. United States, 201 F. Supp. 3d 810 (N.D. Tex. 2016).
 Gloucester County School Bd. v. G.G. ex rel Grimm, 137 S.Ct. 369 (2017).
 See Massachusetts Session Laws 2016 c.134, available at https://malegislature.gov/Laws/SessionLaws/Acts/2016/Chapter134https://malegislature.gov/Laws/SessionLaws/Acts/2016/Chapter134.
 5 U.S.C. § 801 et seq.
 462 U.S. 919 (1983).
 Pub.L. 115-4 (Feb. 14, 2017) (SEC Disclosure Rule); Pub.L. 115-5 (Feb. 16, 2017) (Stream Protection Rule); Pub.L. 115-8 (Feb. 28, 2017) (SSA Rule implementing NICS Improvement Act of 2007); Pub.L. 115-11 (Mar. 27, 2017) (NASA rule on government contracts); Pub.L. 115-12 (Mar. 27, 2017) (DOI rule on land use plans); Pub.L. 115-13 (Mar. 27, 2017) (Education Department accountability rule); Pub.L. 115-4 (Mar. 27, 2017) (Education Department teacher preparation rule); Pub.L. 115-17 (Mar. 31, 2017) (DOL Drug Testing Rule); Pub.L. 115-20 (Apr. 3, 2017) (DOI Rule on Alaska Wildlife Refuges); Pub.L. 115-21 (Apr. 3, 2017) (DOL employee injury recordkeeping rule); Pub.L. 115-22 (Apr. 3, 2017) (FCC Data Privacy Rule); Pub.L. 115-23 (Apr. 13, 2017) (HHS Title X rule); Pub.L. 115-24 (Apr. 13, 2017 (DOL rule on municipal savings plans); Pub.L. 115-35 (May 17, 2017) (DOL rule on state savings plans).
 See 5 U.S.C. § 553.
 463 U.S. 29 (1983).
 Id. at 30.
 Id. at 59 (Rehnquist, J., concurring in part and dissenting in part).
 See Presidential Memorandum Regarding the Hiring Freeze, January 23, 2017, available at https://www.whitehouse.gov/the-press-office/2017/01/23/presidential-memorandum-regarding-hiring-freeze.
 See President Trump’s Taxpayer First Budget, available at https://www.whitehouse.gov/taxpayers-first; see Gregory Kreig and Will Mullery, Trump’s Budget By the Numbers: What Gets Cut and Why, CNN.com, May 23, 2017, available at http://www.cnn.com/2017/05/23/politics/trump-budget-cuts-programs/index.html.
Daniel Lyons is an Associate Professor of Law (with tenure) at Boston College Law School, where he specializes in administrative law, telecommunications, and Internet law.