Don’t Jump Into an Imprecise Contract…It Will Co$t You

 

Cliff-Jumping-into-the-Ocean-at-Sunset-Outdoor-Adventure-Lifestyle-Stock-Photo Take the case of “The Jumping Toy” a/k/a the “SkyDriver”.  The inventor, Will Isaksson, entered into an oral royalty sharing agreement with marketer, Craig Nadel and his company, Design O Matic, to market a toy known as “the Modified Kenner Car”.  The parties to the oral contract agreed to evenly split any royalties.   However, because they failed to commit their agreement to writing, the parties soon crashed into a costly and protracted lawsuit concerning several important contract terms.

As luck would have it, Isaksson altered the design of the Modified Kenner Car by adding a fin.  This fin made the toy jump.  Isaksson naturally called the toy “the Jumping Toy”, and he presented it to Nadel for possible marketing.  Isaksson wanted the toy marketed to Hasbro, but Nadel suggested a smaller company.  This disagreement drove Isaksson to go direct to Hasbro with the toy.  Hasbro agreed to sell the toy under the name “SkyDriver”, and the toy generated approximately $535,000.00 in royalties.

As you might expect, Nadel demanded 50% of the royalties from the SkyDriver and Isaksson refused.  For his part, Isaksson alleged that the oral agreement with Nadel was limited to the Modified Kenner Car and any royalties generated by it.  Nadel meanwhile alleged that the oral agreement covered any toy that arose out of the design underlying the Modified Kenner Car.

In April 1998, the parties wheeled their dispute into the United States District Court for resolution.  In December 1999, nearly 20 months later, the case was tried to a jury and Nadel won.  The jury decided that the SkyDriver was not a new toy but merely a modification of the Modified Kenner Car, and therefore covered by the oral royalty sharing contract. The jury awarded Nadel his share of the royalties. But this toy story did not end there…

The case was appealed by Isaksson.  And, in February 2003 nearly five years after the lawsuit was filed, the Appellate Court decided the appeal.  The Appeals Court accepted the jury’s determination that the SkyDriver was not a new toy.  However, the Appeals Court also ruled that there was another critical question that the jury needed to answer before deciding the case. The Appeals Court sent the case back to the trial court and the jury to decide whether or not Nadel earned his share of the royalties under the oral contract.  The specific questions that the Appeals Court required the jury to answer – (1) what performance the Modified Kenner Car agreement required of Nadel for him to earn a share of the royalties, and (2) whether Nadel fulfilled those performance obligations?

The parties ended up resolving this dispute in a confidential settlement before returning to the jury for answers to these additional questions.  However, neither party could take a victory lap in this case, having spent too many years fighting and thousands upon thousands of dollars on lawyers.  This dispute could have been avoided with a well-crafted contract.

Do you want to lower your risk of a contract dispute and avoid Court?  We can help!

You can reach us at 508.548.4888 or info@foleylawpractice.com

© Foley & Foley, PC 2017

MA Wage Act is mightier than your commission plan

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Last month, a Massachusetts US District Court judge held that a former employee who quit was still eligible for $32,000 in sales commissions despite a commission plan that provided otherwise.  (Israel v. Voya Institutional Plan Services, LLCI)  Voya’s commission plan specifically stated that an employee who resigns is not eligible for further commission payments.  The plan was clear and on point.  How did the judge get to yes on the commission?

Voya’s plan could not override the Wage Act requirement that sales commissions be paid promptly once the amount is “definitely determined”–at that point the commission becomes “due and payable.” The judge distinguished a sales commission, as a share of sales revenue generated by an employee, from other types of variable compensation– like a bonus.  Because the amount of commission was known and earned based on sales, it fell under the Wage Act’s strict payment requirements.

Massachusetts employers who provide commissions as part of their pay structure are advised to review their commission plans in light of this decision.  As we all know, the MA Wage Act, with its costly provisions for damages and attorney’s fees, is not to be taken lightly.

DOL OT Rule Going Away? Don’t count your chickens… .

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In a new development, 21 states and many business groups are requesting that the Texas court enjoin implementation of the new DOL overtime exemption rules.  As far as their chance of success, at least in the near term, it is not good.

Reports are that both cases have been assigned to Judge Amos Mazzant, who was nominated by President Barack Obama in 2014. It has been suggested that this assignment may not bode well for the plaintiffs.  Theoretically, prospects may improve if the lower court decision is taken up on appeal to the Fifth Circuit.

The states are claiming that the DOL overstepped by raising the salary level for what should be exempt duties–regardless of salary. Moreover, the plaintiffs allege that the automatic indexing that raises the threshold salary over three years is an overreach of authority and should include provisions for economic conditions or the effect on resources.

Our view is that we all stay the course, and continue compliance efforts. With the compliance date of December 1 so close, it would be risky to leave the fate your workplace with the courts. In the meantime we will closely monitor this case and if the courts stop implementation, that will be a wonderful surprise.

EMPLOYMENT LAW ALERT: Less than 3 months to comply with overtime rules

Why all the hype

  • The long-awaited and much-debated “White Collar” regulations issued on May 18, 2016, become effective December 1, 2016 – your compliance deadline.
  • The DOL has already set up field offices in every state and is conducting random audits. The fines associated with these audits are high. In addition to unpaid overtime, misclassification of employees can result in liquidated damages, equitable relief, and reimbursement of attorneys’ fees.
  • The risk is not limited to the FLSA. Each state has its own unique employment laws. Some of these laws are consistent with the FLSA, others are not. State agencies and Attorney Generals’ Offices also conduct audits and initiate lawsuits, compounding the risk to employers.
  • The new overtime regulations have given every employer the perfect opportunity to not only reclassify positions impacted by the new salary levels, but to correct positions that were improperly classified as exempt from the start. This is a unique and limited opportunity.

Do I need a lawyer?

  • In the event of a lawsuit, internal audits of exempt/non-exempt classifications can be used as evidence of a willful violation of the FLSA, which lengthens the statute of limitations from two to three years. The strongest protection is the careful use of the attorney-client privilege to protect the audit itself. Engaging human resources staff or consultants or even in-house counsel to conduct the audit will not allow the company to avail itself of the attorney-client privilege. By retaining outside counsel to perform this service, all findings are protected by Attorney-Client privilege.
  • This is an exceptional chance to obtain an indemnified legal opinion that all the jobs in your workplace are accurately classified as exempt or non-exempt, under both state and federal law.

We Get It!

  • That is why we developed our 2016 Positions Classification Service and charge a fixed/flat fee for that service.
  • Getting started is very easy.
  • We provide your team the forms, checklists and worksheets that will carefully guide you through the classification process.
  • We will review the forms, checklists and documents that you provide us to insure exempt positions comply with state and federal law.
  • You can relax knowing that you have well-written job descriptions and that each employee is correctly classified and being compensated under the pertinent state and federal laws.

Introducing Our Service:

Introducing Our New Lawyer

Speaking of help, we are very proud and excited to introduce Attorney Julie Fletcher to our practice. Prior to joining Foley & Foley, Julie worked in the areas of immigration and employment law for several years at national law firms in Boston. Check out her bio.

Closing Thoughts

The United States Department of Labor has been on a roll, impacting wages, job classifications, the FMLA and Affirmative Action Compliance for Federal Contractors, just to name a few of their recent initiatives.

Please let us know how we can help your team better manage employment law compliance and HR-related risk.

CONTACT US 508-548-4888 or mike@foleylawpractice.com

We can help.


© 2016 FOLEY & FOLEY, PC, ALL RIGHTS RESERVED

Let Freedom Ring–Happy July 4th

May the sun in his course visit no land more free, more happy, more lovely, than this our own country! ~Daniel Webster

We have exciting news at Foley & Foley, PC –Attorney Mikaela McDermott will join our team July 12, 2016. She brings years of experience in public and private sector employment and labor law. She will make our strong team even stronger.

The Massachusetts legislature has been busy. Two bills that will impact employers are still in the works and may land on the Governor’s desk soon:

Noncompete reform

The Massachusetts House passed a comprehensive noncompete reform bill on June 29, 2016. Because the Senate passed a fairly similar measure last year, the bill is expected to be approved by the Senate before the session closes on July 31, 2016. Whether Governor Baker will sign the bill is unknown at this time. The major changes:

    • By far the most significant change would introduce what is referred to as a “Garden Leave” clause requirement. Under the current version of the law, employers would have a choice of paying either 50% of the employee’s salary for the length of the non-compete or “other mutually-agreed upon consideration… .”
    • Noncompete period is limited to 12 months in duration unless the employee has breached a fiduciary duty or taken property, in which case 24 months is allowed;
    • Noncompetes are not allowed for several categories of workers:
      • Employees terminated for cause or laid off;
      • Non-exempt (OT eligible) employees;
      • Ages 18 or younger; and
      • Undergraduate or graduate interns.
    • Noncompete must include a right to consult with counsel before signing, and must be provided to the employee by a formal offer or 10 business days before the start date, whichever is earlier.
    • Any noncompete entered during employment must be supported by additional consideration beyond continued employment.
    • A court may not strike out unlawful provisions of a noncompete in violation of this law–the entire agreement will be invalid, which is not the practice now.

Should this bill become law many current noncompetes in Massachusetts will need to be rewritten.

Pay Equity

The Senate Bill Proposal – 2119 “An Act to Establish Pay Equity” is gaining momentum. Attorney Mike Foley recently presented on this topic at a Government Affairs Committee of the New Bedford Chamber of Commerce – more about his presentation

Here is the bottom line: For decades, it has been illegal in the United States for an employer to discriminate against women, including discrimination against women in terms of compensation.

In Massachusetts, employees who believe that they are underpaid on the basis of their gender currently have recourse to four statutes when seeking relief:

  • The Federal Equal Pay Act (FEPA);
  • Title VII of the Civil Rights Act of 1964 (Title VII);
  • The Massachusetts Equal Pay Act (MEPA); and
  • Chapter 151B of the General Laws of Massachusetts (151B).

Depending upon your perspective, here are the highlights or low lights regarding the pending pay equity law:

    • Significantly changes the definition of “comparable work” under MEPA. That critical phrase under the proposed law “shall solely mean work that is substantially similar that it requires substantially similar skill, effort and responsibility and is performed under similar working conditions.. .” The key question is how will this impact merit pay, commission pay and any pay system that is not seniority driven.
    • It would become unlawful for an employer to seek the salary history of any prospective employee.
    • Employers could not prevent employees from disclosing their wages, benefits or other compensation or inquiring about or discussing the wages of any other employee.

There is more to this far ranging bill and we will, of course, keep you informed.

As always, please contact us with any concerns or questions. We can help.


© 2016 FOLEY & FOLEY, PC, ALL RIGHTS RESERVED

The Defense Against Trade Secrets Act: what does it means for you?

This month, President Obama signed into law the most significant trade secret reform in nearly twenty years: the Defend Trade Secrets Act of 2016 (DTSA).  The Act received enormous bipartisan support, illustrating how significant this issue is to business. How does the Act impact your workplace?

Historically, trade secret protection has been the exclusive domain of the states. In fact, the DTSA does not pre-empt state law but adds an additional level of federal protection for trade secret holders. Specifically, the Act allows a federal cause of action to obtain a civil seizure order and remedies for trade secret theft. If a showing of “extraordinary circumstances” is met, a federal court can issue an ex parte property seizure—a powerful tool to stop misappropriation. The Act specifies how a trade secret threshold is met, and refers to “reasonable measures” to keep the information secret.  Moreover, the Act requires the information sought to be protected derives “independent economic value” for the owner(s).  The federal remedies are welcome but the burden of establishing information as a trade secret is high.

The best way to protect business secrets to avoid a breach and to seek federal and state protection after a breach is:

  1. Identify and continually protect trade secrets;
  2. Establish steps to maintain secrecy;
  3. Develop a comprehensive Protection Plan;
  4. Periodically audit your security measures.

Most importantly, the DTSA requires that employers must now provide a notice of whistle blower immunity protection in any contract or agreement with an employee (or an independent contractor or consultant).

We can help. Our lawyers have vast experience assisting businesses with trade secret matters.  Contact us at info@foleylawpractice.com or call 508.548.4888

Thanks DOL. Now what?

At last, the final version of the Department of Labor’s (DOL) overtime rule has been issued. The final rule will:

-Raise the salary threshold for overtime eligibility for “white collar” workers from $455/week to $913 per week or $47,476 per year, effecting a projected 4.2 million workers.
-Automatically update the salary threshold every three years, based on wage growth over time.
-Amend the highly compensated employees subject to a minimal dutes test salary from $100,000 to $134,004 per year.
-Go into effect December 1, 2016.
We won’t quote Joe Biden here, but this is a big….deal. With six months to prepare, do not wait until the last minute. Be sure your employees are properly classified with an employment audit. Running afoul of the Fair Labor Standards Act (FLSA) is expensive with big penalties, plus the possibility of class action lawsuits.

In other less shattering but important news:

The EEOC just released their final rules regarding employer wellness plans. The ten second version: the EEOC’s final rules describe how Title I of the Americans with Disabilities Act (ADA) and Title II of the Genetic Information Nondiscrimination Act (GINA) apply to wellness programs offered by employers that request health information from employees and their spouses. The guidance applies to both employers and employees about how workplace wellness programs can comply with the ADA and GINA consistent with provisions governing wellness programs in the Health Insurance Portability and Accountability Act, as amended by the Affordable Care Act (Affordable Care Act).

Time to take a closer look at your Wellness Plan. No good deed goes unpunished.

We can help. 508-548-4888

Understanding the Zone in the Workplace

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-Attorney Timothy G. Kenneally

Retaliation protection in the workplace is defined by the “zone of interests” standard. If an employee falls within the interests sought to be protected under the law (Title VII) that employee is shielded against retaliatory adverse employment action.

A recent decision by the Massachusetts Commission Against Discrimination (the “Commission”) in Schillace v. Enos Home Energy Therapy illustrates how the zone works. Schillace charge Enos with terminating her employment because her fiancé, who had also worked for Enos, had previously charged the company with retaliation.  The Commission concluded that the fiancé relationship was “a close personal association” for Schillace, and therefore she was protected against any adverse employment action motived by or related to her fiancé’s claim.  The Commission concluded that Schillace was entitled to back pay and damages for emotional distress due to the wrongful termination of her employment. In other words, she was in the zone of protection.

How should employers properly define the zone and react to it?  For starters, employers must acknowledge that the focus on a zone of interests, in practice, creates a unique type of protection for each employee.  This personalized zone is defined by any and all of the employee’s known close personal associations with members of protected classes. Close personal associations have been defined to include blood relatives, relatives by marriage, adoptive relations, and of course, a fiancé.  However, we hesitate to suggest that a Court or the Commission will not define the group more broadly to include other persons closely tied to the employee.

Before taking adverse employment action, employers must consider all of the employee’s known close personal associations.  Do any of those persons fall within protected classes?  Can the adverse action be viewed as retaliation related to a person associated with the employee?  Only through a measured and careful analysis, can an employer minimize its risk of running afoul of the ZONE.

If you have any questions about the zone of interests, feel free to contact me at tim@foleylawpractice.com.