Director Liability Under the Massachusetts Wage Act: The Supreme Judicial Court Clarifies the Law but Traps May Remain for the UnwaryPosted: May 14, 2018
by Mark D. Finsterwald
In Segal v. Genitrix, 478 Mass. 551 (2017), the Supreme Judicial Court (“SJC”) addressed whether members of a company’s board of directors may be personally liable under the Massachusetts Wage Act, G.L. c. 149, §§ 148, 150, for the company’s failure to pay wages to employees. In Segal, the SJC interpreted, for the first time, language in the Wage Act defining “employer” in the context of directors. The SJC held that the Wage Act does not impose liability on directors acting only in their capacity as directors. Even so, the Court did not fully insulate directors from Wage Act liability. There remains a possibility that directors could, perhaps unwittingly, become subject to personal liability in the event a company fails to pay wages.
The Wage Act
The Wage Act enables employees to sue employers who do not pay earned wages, with mandatory awards of treble damages and attorney’s fees for successful claims. Liability is not limited to the business entity, as the Wage Act defines “employer” to include “the president and treasurer of a corporation and any officers or agents having the management of such corporation.” This definition does not mention directors. Nor does it explain how to assess whether a person is an “agent having the management of such corporation.” G.L. c. 149, § 148.
Facts and Procedural History
Plaintiff Andrew Segal was the president of Genitrix, LLC, a biotechnology startup that he cofounded with defendant H. Fisk Johnson, III. Johnson was also an investor in Genitrix, and he appointed his representative, defendant Stephen Rose, to the company’s board of directors. Johnson funded Genitrix through a company called Fisk, which Johnson and Rose co-owned. Segal, as president, managed all of Genitrix’s day-to-day operations, including payroll.
In 2006, Genitrix began to have difficulty making payroll. Starting in 2007, Segal stopped taking salary to enable the company to meet its other financial commitments. Rose later declined to direct Fisk to invest enough money in Genitrix to pay Segal. In early 2009, Segal initiated Wage Act litigation against Johnson and Rose.
At trial, the judge instructed the jury that “a person qualifies as an ‘agent having the management of such corporation’ if he … controls, directs, and participates to a substantial degree in formulating and determining policy of the corporation or LLC.” The judge did not instruct the jury that the defendants needed to have been appointed as agents. Nor did the judge instruct the jury that defendants needed to have assumed responsibilities functionally equivalent to those of a president or treasurer. The jury found both defendants liable for Segal’s unpaid salary. Johnson and Rose moved for judgment notwithstanding the verdict, the trial court denied the motion, and Johnson and Rose appealed.
The SJC’s Analysis
At the outset, the Court stated that it viewed as significant the Legislature’s omission of directors from the Wage Act’s definition of “employer.” Segal, 478 Mass. at 558. Parsing the statutory language, the SJC dismissed the possibility that either defendant could be liable as president, treasurer, or any other officer, because neither of them held an office at Genitrix. Johnson and Rose could be liable only if they were “agents having the management” of the company. The Court explained that this language establishes “two important requirements: the defendant must both be an agent and have the management of the company.” Id. at 559. The Court differentiated between having some management responsibility and “having the management” of the company. “Having the management” means assuming responsibility similar to that performed by a corporation’s president or treasurer, the Court reasoned, “particularly in regard to the control of finances or payment of wages.”
As to agency, common law agency principles—set forth in the Restatement (Second) of Agency—counsel that directors are not typically considered agents. Restatement (Second) of Agency § 14C (1958). The SJC observed that “[a] board generally acts collectively, not individually.” Segal, 478 Mass. at 561. Such collective action does not confer individual agency authority on directors. Nevertheless, the Court explained that individual directors still could be “considered agents of the corporation if they are empowered to act as such, but any agency relationship stems from their appointment as an agent, not from their position as a director….” Id. at 563. An agency appointment could result from a board resolution, but also could “arise from either express or implied consent.” The Court gave as an example a scenario in which “a particular board member had been empowered to act individually as the functional equivalent of the president or treasurer of the corporation.” Genitrix, however, made no such appointment with respect to either defendant, instead delegating executive management authority (including dominion over wages) to Segal. Segal signed the checks, oversaw the payroll, and suspended the payment of his salary. Defendants had no such authority.
Moreover, just as a board’s collective authority over a corporation does not confer agency authority on an individual director, a board’s collective “oversight and control over management, finances, and policy is not oversight and control by individual board members.” Id. at 565. The Court noted that, since corporate statutes vest all management responsibility in a corporation’s board, if board members were to be considered agents and normal board oversight were considered “management,” then all directors would be personally liable under the Wage Act. That result would be inconsistent with the plain wording of the statute.
The Segal defendants’ participation in difficult board decisions that affected the company’s finances were not the acts of individual agents, did not involve the type of ordinary decisions left to individual managers, and did not confer Wage Act liability. Accordingly, the SJC determined that the trial court should have allowed defendants’ motion for judgment notwithstanding the verdict.
In addition to adjudicating the claim against Johnson and Rose, the SJC also provided guidance for instructing future juries. The Court explained that judges should instruct juries that there are two requirements for a defendant to qualify as an employer under the Wage Act: (1) the defendant must be an officer or agent; and (2) the defendant must have the management of the company. The Court cautioned that juries should be instructed that directors are not agents simply by being directors, and the collective powers of the board are distinct from the powers of individual directors. As to “having the management,” courts should instruct juries that the Wage Act imposes liability on the president, the treasurer, and other officers or agents who perform management responsibilities similar to a president or treasurer, “particularly in regard to the control of finances or the payment of wages.” Id. at 570.
Lessons for Directors and Corporate Advisors
After Segal, it is difficult, but not impossible, to establish Wage Act liability on the part of individual directors. Directors should be aware that they still may face personal liability (with attendant mandatory treble damages and fee shifting) if they are found to be agents of the corporation who performed responsibilities similar to that of a president or treasurer. Consequently, boards and their advisors should take precautionary measures to reduce the risk to directors.
Corporate counsel would be wise to include in companies’ governing documents language stating that individual directors are not authorized to speak or act on behalf of the company. Counsel should then advise boards to abide by such language in practice. While it is common for boards to delegate tasks and authority to particular directors or committees, counsel should screen such delegations carefully to ensure that they cannot reasonably be construed as conferring management or agency authority. Counsel also would be wise to monitor initiatives that might not expressly delegate agency authority but could be deemed to do so by implication.
To the extent a board bestows management or agency authority on individual directors or committees of directors, that authority should be limited to discrete issues. More importantly, that authority should not encroach on officer control over finances and wages. For example, individual directors should not have check-writing authority, control over payroll, or authority to approve or deny wage payments.
Overall, counsel should be vigilant in ensuring that boards and board committees, including compensation committees, exercise their oversight function collectively, with such collective action formally recorded. These steps would help directors perform their fiduciary responsibilities with less risk of personal liability under the Wage Act.
Mark D. Finsterwald is an associate at Foley Hoag LLP and a member of the firm’s litigation department. He focuses his practice in the area of complex business litigation.
Barbuto v. Advantage Sales & Marketing, LLC: Employers May Risk Disability Discrimination Claims by Prohibiting Use of Medical Marijuana by Qualified Disabled EmployeesPosted: October 26, 2017
by David B. Wilson and Jason McGraw
Since 2013, Massachusetts has allowed qualifying patients with certain medical conditions to lawfully obtain and use marijuana for medical purposes under the Medical Marijuana Act. St. 2012, c. 369, §1 et seq. Even so, the possession of marijuana remains a federal crime. 21 U.S.C. §§ 812(b)(1), (c), and 844(a). Thus, many Massachusetts employers maintain strict drug-free workplace and testing policies that prohibit the use of all “illegal drugs” and make no exception for the use of lawfully prescribed medical marijuana. In the landmark decision Barbuto v. Advantage Sales & Marketing, LLC, 477 Mass. 456 (2017), the Supreme Judicial Court (“SJC”) held that an employer with such a policy may be subject to a disability discrimination claim under Massachusetts law if the employer takes an adverse employment action or otherwise discriminates against a “qualified handicapped employee” based on the employee’s off-site, off-duty use of lawfully-prescribed medical marijuana. Id.
In 2014, Cristina Barbuto was hired for an entry-level position with Advantage Sales and Marketing, LLC (“Advantage”), contingent upon her passing a mandatory drug test. Barbuto disclosed to her soon-to-be supervisor that she would test positive for marijuana because she used lawfully-prescribed medical marijuana to treat her Crohn’s disease. Id. at 458. She also told the supervisor that she did not use medical marijuana daily and would not use medical marijuana before or at work. Although the supervisor initially told Barbuto that her use of medical marijuana “should not be a problem” and called later to “confirm that her lawful medical use of marijuana would not be an issue with the company,” Advantage terminated Barbuto’s employment after her drug test results came back positive for marijuana. Id.
Barbuto filed suit alleging the mandatory drug test was an invasion of her privacy and that her termination was unlawful. The SJC addressed the termination claim.
Key Holdings In Barbuto
Massachusetts Disability Discrimination Law Applies to Qualified Handicapped Employees Who Use Medical Marijuana as Treatment
Under the Commonwealth’s anti-discrimination law, a “qualified handicapped employee” has: (1) a right to reasonable accommodation for a handicap to enable the employee to perform the essential functions of their job, and (2) a right to be free from discrimination because of their handicap. Id. at 460 & n.4. In Barbuto, the SJC held for the first time that these protections extend to qualified handicapped employees who lawfully use medical marijuana to treat their handicaps. Id. at 464. Therefore, where an employer’s drug policy prohibits the use of marijuana and a qualified handicapped employee requests an accommodation to use medical marijuana, the employer has an obligation to: (1) participate in an interactive process, and (2) provide a reasonable accommodation, unless such an accommodation would impose an undue hardship on the employer’s business.
Advantage, which had not engaged in an interactive process, argued that Barbuto was not a qualified handicapped employee because the only accommodation she sought (the continued use of medical marijuana) was a federal crime, and was therefore unreasonable. Id. at 462. The SJC disagreed, and held that under the Medical Marijuana Act “the use and possession of medically prescribed marijuana by a qualifying patient is as lawful as the use and possession of any other prescribed medication.” Id. at 464.
Advantage also argued that even assuming Barbuto was a qualified handicapped employee, it had not engaged in handicap discrimination where Barbuto had been terminated not because of her handicap, but rather because she had failed a drug test that all employees were required to pass. Id. at 462. The SJC disagreed, holding that termination for violating such a policy “effectively denies a handicapped employee the opportunity of a reasonable accommodation, and therefore is appropriately recognized as handicap discrimination.” Id. at 467.
Failure to Engage in the Interactive Process Is Sufficient to Support a Claim of Disability Discrimination
The SJC permitted Barbuto’s claims for disability discrimination under Massachusetts law to survive the defendant’s motion to dismiss because the employer had wholly failed to participate in the interactive process. The Court emphasized that the “failure to explore a reasonable accommodation alone is sufficient to support a claim of handicap discrimination” where an employee can prove that a reasonable accommodation existed that would have enabled that employee to perform a job’s essential functions. Id. at 466.
An Employer’s Undue Hardship Defense Can Be Proven in a Number of Ways
Although the Court did not need to reach the defense of undue hardship in this case, the Court provided guidance for employers as to when an accommodation would not be required because it would cause the employer undue hardship. An undue hardship may be proven where the use of medical marijuana would: impair the employee’s work performance; pose an unacceptably significant safety risk to the public, the employee, or fellow employees; or violate an employer’s contractual or statutory obligations, thereby jeopardizing its ability to perform its business. Id. at 467-68. The Court also noted that the Medical Marijuana Act does not require employers to permit on-site medical use of marijuana as an accommodation to an employee. Id. at 464–65.
No Cause of Action under the Medical Marijuana Act or for Wrongful Termination in Violation of Public Policy
The SJC rejected Barbuto’s other claims – that her termination amounted to a violation of the Medical Marijuana Act and wrongful termination in violation of public policy. The Court held that aggrieved employees do not have a private right of action under the Medical Marijuana Act, “where such employees are already provided a remedy under our discrimination law, and where doing so would create potential confusion.” Id. at 470. Similarly, the Court declined to recognize a cause of action for wrongful termination in violation of public policy, “[b]ecause a competent employee has a cause of action for handicap discrimination where she is unfairly terminated for her use of medical marijuana to treat a debilitating medical condition.” Id. at 471.
More to Come on Marijuana and the Workplace
While Barbuto provided employees and employers with much guidance, many questions remain.
For example, nothing in Barbuto requires employers to tolerate the recreational use of marijuana by an employee. But what about accommodating a qualified handicapped employee without a medical marijuana card who lawfully uses marijuana purchased at a recreational dispensary to self-treat their handicap? That question remains unanswered in Massachusetts.
May employers require post-offer, pre-employment drug testing for all employees, regardless of their job duties or the potential safety risks to the employer, the employee, or the public? Although the issue has not yet been addressed by the SJC (the issue was stayed in the Superior Court while the unlawful termination claims were appealed), Barbuto’s claim under the Massachusetts Privacy Act survived the defendant’s motion to dismiss. Barbuto alleged that Advantage’s “drug test was unreasonable and not commensurate with her [entry-level, non-safety sensitive] job duties or with the type of business and industry in which [it] is engaged.” Barbuto v. Advantage Sales & Marketing, LLC, 2016 WL 8653056, at *2 (Mass. Super. May 31, 2016). In denying the motion to dismiss, the Superior Court noted that “[t]he only time the Supreme Judicial Court has held that a drug testing procedure violated [the Massachusetts Privacy Act] was in a case where the employee being tested was not engaged in a dangerous or safety-sensitive occupation.” Id. (emphasis added and citation omitted).
Whether the Medical Marijuana Act is preempted by federal law is another interesting question that has yet to be addressed, although other state courts have dealt with the issue of preemption of their state medical marijuana laws. See, e.g., Noffsinger v. SSC Niantic Operating Co. LLC, — F.Supp.3d –, 2017 WL 3401260 (D. Conn. Aug. 8, 2017) (holding that the Connecticut medical marijuana statute is not preempted by the federal Controlled Substances Act, the Americans with Disabilities Act, or the federal Food, Drug, and Cosmetic Act).
David B. Wilson is a Partner at Hirsch Roberts Weinstein LLP where he practices labor and employment law. Dave is also an active member of the Boston Bar Association.
Jason M. McGraw is an Associate at Hirsch Roberts Weinstein LLP where he practices labor, employment, and higher education law. Jason is also an active member of the Boston Bar Association.
The Rise of the On Demand Economy: The Tension between Current Employment Laws and Modern Workforce RealitiesPosted: January 13, 2016
Over the last several years, startups brought convenience to the masses by providing virtually anything on demand. Rides, groceries, takeout service, house cleaning, and more are all accessible with a few taps on your smartphone. The sheer volume of human capital needed to make these on demand businesses function, along with the unpredictable demands of consumers, caused companies such as Uber, Lyft, Postmates, and Instacart (to name a few) to make the business decision to classify these service workers as independent contractors.
Building the infrastructure for an on demand business that serves many customers in multiple cities, or even multiple countries, is an incredibly expensive endeavor. For example, Uber has gone through 13 rounds of funding and raised over $6.6 billion to support its large-scale operation. By necessity, these startups must be cost conscious with their capital or risk failure. Classifying their workers as independent contractors saves them substantial sums of money on employment taxes and benefits. These businesses claim that independent contractor status is also beneficial for the workers who are permitted to retain flexibility to work on their own terms as often as they want. For valid reasons, some (though not all) on demand workers do not agree.
Workers classified as independent contractors do not have access to company-provided benefits and protections such as paid time off. They are not given the payment protections of minimum wage, and overtime pay. Nor do they have the safeguards of worker’s compensation and unemployment insurance. These workers also shoulder the cost of the business expenses incurred in performing their jobs, such as their tools, supplies, or the cost of vehicle operation (though those are deductible business expenses). In addition, workers are responsible for paying all taxes on pay, which means the company is not contributing to employment taxes, Social Security, or Medicare. Opponents to the present on demand economy practice of classifying workers as independent contractors argue that tight standards on employee classification provide better protections and more financial security for workers.
Around the country, workers, businesses, and localities are approaching the shift to the independent contractor model in a variety of ways. A host of lawsuits were filed by workers against a number of on demand businesses asserting claims for worker misclassification. These lawsuits are costly and place tremendous pressure on the companies, often resulting in stagnating growth or even closure of the business. For example, in July 2015, on demand home services business, Homejoy, shut down because it ran out of money defending worker lawsuits and could not raise an additional round of investment due to pending litigation.
Some on demand businesses are attempting to avoid or prevent additional misclassification lawsuits by preemptively classifying their workers as employees. Instacart (which is defending its own misclassification lawsuit) announced, in June 2015, that it would be commence classifying its workers as employees. Other companies are maintaining their practice of classifying workers as independent contractors while they wait for the outcome in the bellwether case on the issue, O’Connor v. Uber Technologies et al, C13-3826 EMC, pending in the Northern District of California.
In general, things have not gone Uber’s way in the litigation. On March 11, 2015, the Court denied Uber’s motion for summary judgment. On September 2, 2015, the Court certified the case as a class action. What’s more, during the pendency of the lawsuit, the California Labor Commission ruled that a specific Uber driver was an employee, and not an independent contractor. While the ruling was non-binding and impacted only one driver, it received considerable attention. The trial is set to commence on June 20, 2016 and the outcome will have a substantial impact on the freelance economy.
In another approach, the Seattle City Council voted in December 2015 to approve a bill that would permit drivers for Uber, Lyft, and other ride-hailing apps to form unions and negotiate wages. Such a city ordinance is unprecedented as it would be the first to allow independent contractors to engage in collective bargaining. Still, the ordinance may face legal challenges based on the contention that it is preempted by federal law and, if not preempted, that collective bargaining by independent contractors could constitute illegal price-fixing under antitrust law.
Here in Massachusetts, there is a presumption that a worker who provides services to a business is an employee unless all of the following are met:
- The worker is free from the company’s control and direction;
- The services provided are outside the company’s usual course of business; and
- The worker is customarily engaged in an independently established trade, occupation, or business of the same nature that is involved in the services performed for the company. M.G.L. c. 149, § 148B.
Given such stringent guidelines, the safe default position is that a company should classify its workers as employees, not independent contractors. However, in April 2015 the Supreme Judicial Court took a narrower approach than some anticipated in Sebago v. Boston Cab Dispatch, Inc., 471 Mass. 321 (2015).
In Boston Cab, the Court found: (i) taxi drivers did not provide services to the cab companies or garages; (ii) drivers were free from the direction and control of the cab companies; (iii) services provided by drivers were not in the ordinary course of business of cab companies; and (iv) drivers were engaged in an independently established trade, occupation or business. As a result, the Court found that the drivers were properly classified as independent contractors. In reaching this decision, the Court determined that the cab companies “are not concerned with the results of plaintiffs’ operations, as drivers are not required to remit a percentage of their revenues, which includes both fares and tips.” Id. at 334.
What sets the Boston Cab case apart from the Uber case is the existence of a regulatory framework that applies to cab companies and drivers that does not (at least not presently) apply to Uber drivers. The Court specifically stated that its conclusion rested in large part on the existence of the regulatory framework of Boston Police Department Rule 403, Hackney Carriage Rules and Flat Rate Handbook (2008) (Rule 403), which creates a system whereby drivers can “operate as either employees or entrepreneurs with their own separately defined and separately regulated business.” Boston Cab, 471 Mass. at 338. In holding that drivers were properly classified as independent contractors, the Court found that the “harmonious reading” of Rule 403 and the independent contractor statute as set out in M.G.L. c. 149, §148B led to the outcome that the Legislature intended to preserve the ability of cab drivers to operate either as employees or independent contractors. Id.
There is no denying that regardless of the still-unresolved employment classification issue, there has been a cultural shift to more independent contractors as more people want to be their own bosses. In fact, the number of freelance workers in the U.S. grew from 20 million in 2001 to 32 million in 2014. A recent poll conducted by Time Magazine finds that now 22% of American adults—45 million people—have picked up some form of “gig” work for these on demand companies.
Some are advancing the position that perhaps there needs to be a new path forward to balance the realities of the rise of freelancing and the on demand economy. On November 10, 2015, a number of stakeholders, including startups, more established companies, labor activists, and academics, published on open letter advocating that “we must find a path forward that encourages innovation, embraces new models, creates certainty for workers, business, and government and ensures that workers and their families can lead sustainable lives and realize their dreams.”
To that end, these stakeholders advocate for the creation of a universal set of benefits accessible to all workers, whether independent contractor or employee, that would be portable and flexible. Following that open letter, many of the letter’s signatories participated in a policy discussion that included the Secretary of Labor, Tom Perez to discuss possible solutions.
Given the volume of worker misclassification lawsuits, the rise of freelancing as an increasingly popular choice for U.S. workers in lieu of more “traditional employment,” and the public interest in ensuring that the large number of independent contractors are provided certain basic protections, an innovative approach that provides more safeguards for independent contractors and more certainty to businesses regarding proper classification may be the right path to protect both workers and businesses.
Nancy Cremins is a partner at Gesmer Updegrove, LLP, assisting entrepreneurs with a range of issues, including employment matters and dispute resolution. She is the co-founder of SheStarts, which helps women entrepreneurs start and grow their businesses.
On August 8, 2014, Governor Patrick signed into law “An Act Relative to Domestic Violence.” The law, passed in the wake of the brutal murder of Jennifer Martel by Jared Remy, focuses primarily on criminal justice system reform in the area of domestic violence. It also, however, creates Section 52E of Chapter 149 of the General Laws, which requires covered employers to provide up to 15 days of job-protected leave to an employee who, or whose family member, is a victim of “abusive behavior,” including domestic violence.
Who Is A Covered Employer?
The law, which became effective immediately, applies to “employers who employ 50 or more employees.” An Advisory from the Office of the Attorney General (“OAG”) states that the 50 employees must be “in Massachusetts.”
Who Is A Covered Employee?
The statute defines an “employee” as any individual who performs services for and under the control and direction of an employer for wages or other remuneration. Unlike other federal and state leave laws, there is no required minimum hours of service or length of employment for eligibility. It is unclear whether the employee must live and/or work in Massachusetts. In the wage-and-hour context, Massachusetts courts have applied Massachusetts law to certain individuals living and working outside of the Commonwealth. See, e.g., Taylor v. Eastern Connection Operation, Inc., 465 Mass. 191 (2013) (individuals living and working in New York could bring wage-and-hour claims where the written employment contract called for the application of Massachusetts law); Dow v. Casale, 83 Mass. App. Ct. 751 (2013) (Florida resident could bring a Massachusetts Wage Act claim where employer was headquartered in and there was a substantial connection between the employment relationship and Massachusetts).
When Is An Employee Entitled To The Leave?
An employee is entitled to the leave when the employee or a “family member” (which is broadly defined) is the victim of “abusive behavior” and the purpose of the leave is to address issues related to the abusive behavior. “Abusive behavior” is any behavior constituting “domestic violence,” stalking, sexual assault or kidnapping. “Domestic violence” is “abuse” directed against an employee or his or her family member by a current or former spouse; a relative by blood or marriage; a person with whom the employee or the family member shares a child; a current or former cohabitant of the employee or the employee’s family member; or a person with whom the employee or family member had a dating or engagement relationship. “Abuse” encompasses a wide range of conduct, such as causing or attempting to cause physical harm, forced sexual activity, mental abuse, and restraint of liberty. An employee is not entitled to the leave if he or she is the alleged perpetrator of the abusive behavior.
The employee must use the leave to address issues relating to the abusive behavior. The statute provides a non-exhaustive list of permissible reasons for a leave, which includes to seek medical treatment, counseling, victim services or legal assistance; to secure housing; to appear in court or obtain a protective order; to meet with law enforcement officials; and to attend child custody proceedings.
A covered employee is entitled to up to 15 days of leave in any 12-month period. The employer has sole discretion as to whether the leave is paid or not. Regardless, an employee must exhaust all paid leave, such as vacation or sick time, before using the new statutory leave unless the employer waives this requirement.
How Must An Employee Request Leave?
An employee must provide advanced notice of the need for a domestic violence leave unless there is a threat of imminent danger to the employee or a qualifying family member. In such case of emergency, notice may be provided within three workdays of the leave, and may be provided by either a family member or a professional assisting the employee.
An employer may require documentation supporting the need for a domestic violence leave. Qualifying documents include a protective order, a court or public agency letter, a police report, medical records, witness statements, or a sworn statement by either a professional or the employee. An employer may not require documentation of an arrest, a conviction or a police report. In general, documentation must be supplied within a reasonable time after it is requested by the employer. If, however, the absence is unscheduled (such as when there is a threat of imminent danger), an employee has thirty days from the last unauthorized absence to supply sufficient documentation before he or she may be disciplined.
What Are Employers’ Obligations Under The Statute?
An employer must allow an eligible employee to take the requested leave, and is prohibited from discharging or discriminating against an employee for exercising his or her statutory rights. Employers also may not coerce, interfere with, restrain or deny the exercise of any rights under the statute. When an employee returns to work, the employer must reinstate the employee to his or her original job or an equivalent position. Moreover, the statute imposes strict confidentiality obligations on an employer and permits disclosure of information relating to a leave only under limited circumstances. Covered employers must notify employees of their rights under the statute. The OAG has not mandated a particular manner or form for such notice.
What Are The Enforcement Provisions?
The OAG is empowered to enforce the law and may seek injunctive or other equitable relief. The Fair Labor Division has developed a form for employees to report an employer’s failure to provide leave under the statute.
Employees may also bring a private civil action. The law amended the Massachusetts Wage Act, G.L. c.149, §150, to include claims relating to domestic violence leave. As a result, a plaintiff who establishes a violation of the domestic violence leave law is entitled to automatic treble damages for any lost wages or other benefits, and reasonable attorneys’ fees.
What Are Some Best Practices for Employers?
The new domestic violence leave law creates challenges for employers. Most importantly, employees seeking leave may need to disclose to their employer information that is highly personal and that involves difficult and potentially life-threatening situations. Employers may not want to know the details of the employee’s situation and thus may decline to request supporting documentation. Further, many employers may need to revise the way in which they address employee absences to ensure that requests for domestic violence leave are treated with sensitivity and confidentiality. Finally, employers may want to maintain a written policy regarding domestic violence leave. In addition to notifying employees about whether the leave is paid or unpaid, the policy might address whether employees will need to exhaust paid leave first and might designate an employee as being responsible for processing leave requests.
Robert A. Fisher is a partner in the Labor and Employment department of Foley Hoag LLP. Rebecca Sivitz is an associate in the Labor and Employment department of Foley Hoag LLP.
by Matthew L. Mitchell
Scenario: An employer’s Information Technology department performs a routine software update on an employee’s office computer. During the course of the maintenance, an Information Technology professional discovers what appears to be child pornography saved on the hard drive.
This nightmare scenario raises several very difficult questions for the employer:
- Should the matter be resolved through internal discipline procedures, or should (or must) the employer involve local police or other law enforcement authorities?
- What should the employer do with the offending images or materials?
- Should the employer conduct a further investigation?
The answers to these questions depend on a rapidly evolving body of case law and statutes, including statutory mandates that impose specific, affirmative duties on employers who discover child pornography in the workplace. Employers must be aware of their duties and responsibilities, and be prepared to act when violations occur. Failure to adhere to these mandates may subject employers to significant penalties and criminal sanctions.
Possession of Child Pornography Is a Crime
Under both Massachusettsand federal law, it is a crime to “knowingly possess” child pornography. See M.G.L. ch. 272, §29C ; 18 U.S.C. § 2552. As such, if child pornography is discovered in the workplace or on company computer networks, the employer is in violation of these laws. Under the federal law that criminalizes possession of child pornography, 18 U.S.C. § 2252, an employer that discovers child pornography in the workplace may limit its liability if it “promptly and in good faith” (a) destroys the offending materials; or (b) informs a law enforcement agency that it has discovered illegal child pornography and affords that agency the opportunity to access the materials. See 18 U.S.C. § 2252(c). This “safe harbor” may, however, be at odds with other statutory and regulatory mandates. For example, as discussed below, there are federal and state statutes, potentially applicable to some employers, which expressly prohibit the destruction of evidence of child pornography.
In addition, most jurisdictions, including Massachusetts, recognize that willful or deliberate ignorance is tantamount to actual knowledge of the wrongdoing. See, e.g., United States v. Guerrero, 114 F.3d 332, 343 n. 12 (1st Cir.1997) (“Where ‘the facts suggest a conscious course of deliberate ignorance,’ a jury is warranted in finding the defendants’ deliberate ignorance of criminal events, which is tantamount to knowledge.”) (internal citations omitted). Accordingly, if an employer has reason to suspect that an employee is storing child pornography at the worksite or within employer’s computer systems, the employer may not avoid liability by simply ignoring the situation. Rather, depending on the circumstances, the employer may have a duty to investigate the employee’s activities, including searching its computer files or monitoring employee’s computer usage, and taking prompt remedial action if offending material is discovered. This duty may trump any privacy rights of the employee. See, e.g., Doe v. XYZ Corporation, 887 A. 2d 1156, 1158 (N. J. Super. 2005) (“[An] employer who is on notice that one of its employees is using a workplace computer to access pornography, possibly child pornography, has a duty to investigate the employee’s activities and to take prompt and effective action to stop the unauthorized activity, lest it result in harm to innocent third-parties. No privacy interest of the employee stands in the way of this duty on the part of the employer.”).
Under both Massachusettsand federal law, penalties for knowing possession of child pornography include substantial fines and prison sentences. See M.G.L. ch. 272, § 29C (imposing state prison terms of up to 5 years, and fines up to $30,000 for knowing possession of child pornography); 18 U.S.C. § 2252 (imposing up to 20 year prison sentences for knowing possession of child pornography).
A Duty to Report?
There are several federal and Massachusettsstatutes that may impose affirmative duties on Massachusettsemployers to report child pornography to law enforcement authorities. For example, federal statute 18 U.S.C. § 2258A requires “whoever, while engaged in providing an electronic communication service or a remote computer services. . ., obtains actual knowledge of any facts or circumstances [concerning child pornography] . . . [must] provide to the CyberTipline of the National Center for Missing and Exploited Children . . . a report of such facts and circumstances. . .” 18 U.S.C. § 2258A. If the “facts and circumstances” of child pornography include physical materials, such as images, data, or digital files, those materials must be preserved in a “secure location,” and made available to the appropriate authorities upon request. 18 U.S.C. § 2258A(h). For purposes of the statute, the term “electronic communication service” is defined broadly as “any service which provides to users thereof the ability to send or receive wire or electronic communications.” 18 U.S.C. § 2510. On its face, the statute appears to apply its mandatory reporting requirement to any employer that provides e-mail access to its employees. Although some commentators suggest that the scope of 18. U.S.C. § 2258A is limited to Internet Service Providers (such as Comcast or Verizon), this limitation has not been addressed in regulations or case precedent.
Also, under Massachusetts General Law Chapter 119, §51A, certain “mandated reporters,” such as school or hospital employees, are required to report suspected incidents of child abuse and neglect to law enforcement authorities.
In addition to these statutory mandates, employers have been found liable for common law negligence for failing to report child pornography found on a work computer. In the New Jerseycase of Doe v. XYC Corporation, a mother, on behalf of her daughter, brought a negligence action against her husband’s employer, seeking to hold employer liable for the husband’s use of workplace computer to access pornography and send nude photographs of the daughter to a child pornography site. Although the employer was on notice that the husband was using work computers to access pornographic websites, the employer did not investigate the husband’s behavior or report his conduct to authorities. In reversing summary judgment in the employer’s favor, the court held that the employer “had a [common law] duty to report Employee’s activities to the proper authorities and to take effective internal action to stop those activities, whether by termination or some less drastic remedy.” See XYC Corporation, 887 A. 2d at 1168.
In sum, employers must be prepared to promptly report incidents of suspected child pornography to law enforcement authorities.
The Need to be Proactive
Although it is critically important for employers to understand the appropriate actions to take after discovering child pornography, it is equally important to adopt policies and procedures that limit the likelihood of such illegal material entering the work place. A fundamental tool in this regard is an effective media policy that addresses employee use of workplace computer equipment and systems. Such a policy should:
- Restrict employee computer use to authorized work-related activities and limited personal use that does not interfere with work activities or burden the employer’s computer system;
- Notify employees that work computers, e-mail accounts, and internet activity may be monitored by the employer, and that employees have no expectation of privacy in information stored on such equipment or transmitted through such services;
- Notify employees that the employer reserves the right to monitor employee usage of company computer equipment and systems; and
- Inform the employee that illegal use of the company’s computer systems may be reported to law enforcement authorities.
Employers should also be committed to enforcing the policy. When an employer suspects or becomes aware of an employee’s misuse of company computer systems, the employer should engage in a prompt and thorough investigation. If the investigation reveals inappropriate employee conduct, the employer should take remedial action. As discussed above, such action may involve subjecting the employee to internal disciplinary procedures or, if circumstances warrant, reporting the employee’s conduct to the appropriate authorities.
Although the statutory and case precedent on this issue continues to evolve, a clear principle has emerged: employers may not ignore employee conduct that may involve child abuse or child pornography.
Matthew L. Mitchell is a partner at Holland & Knight LLP. Mr. Mitchell represents businesses and educational institutions on a broad range of employment, student, and compliance related matters.