2017 is in the books and 2018 is now upon us. A dramatic close to 2017 on Capitol Hill ushered in sweeping changes to the tax code that will begin to impact both employers and employees in a number of ways – some more immediately – from employers losing deductions for sexual harassment settlement payouts, to penalties for high nonprofit executive compensation, to tax deferral on exercise of stock options for public company executives, to employee benefit plans. Wage and leave-related issues are also likely to dominate in 2018, as more states (and employers on their own initiative) increase wage thresholds and broaden employee paid and unpaid leave entitlements (even for some smaller employers). Salary history bans, such as those already enacted in New York City, Massachusetts, and California, will continue to get traction in 2018 as more states and municipalities jump on that bandwagon. We also expect to continue to witness a significant shift in the NLRB’s enforcement policy and decision-making; the NLRB’s new General Counsel has already announced a number of changes that are sure to make employers sigh with relief. Also in 2018, employers could continue to face rising uncertainty with respect to health plans in the wake of the tax bill’s repeal of the individual mandate that was central to keeping health plans affordable under the Affordable Care Act. Finally, so that we can help keep you accountable to the five New Year’s resolutions we made for you over the holidays (that we know you were eager to adopt as your own), we have collected them for you here: (1) review and refresh your non-harassment policies and training; (2) update your leave policies; (3) make sure your job applications comply with new state ban-the-box laws and salary history inquiry bans; (4) assess the strength and enforceability of your post-employment covenants under changing state law; and (5) make sure your employee benefit plans are compliant.
Many state legislatures spent 2017 tinkering with post-employment covenants. Given the growing trend to legislate locally and the employee mobility issues that seem to nag every employer, we thought the New Year would be a perfect time to review and revisit your post-employment covenants. So for our multi-jurisdictional employers (which seems to be everyone these days), how do your post-employment covenants legally measure up?
Today we continue with our Year in Review segment, which looks at the key labor & employment law developments from 2016 in New York, the DC Metro Area, Massachusetts, and California, while offering our thoughts on 2017. Last week we covered New York and the DC Metro Area. Now we turn to Massachusetts. In addition, please join us in NYC on April 6, 2017 for Mintz Levin’s Third Annual Employment Law Summit as we address some of the key labor & employment issues impacting employers in 2017. Register here.
2016 Massachusetts Employment Law Year in Review
From case law interpreting one of, if not, the most employee-friendly independent contractor statute in the country to Beacon Hill’s efforts to pass non-competition agreement reform, Massachusetts is certainly no stranger to key developments in the labor and employment arena. This blog post highlights the 2016 case law and legislative efforts about which every Massachusetts employer should be aware, and provides insight over what to watch for as we move our way along through 2017 and beyond.
If your company operates in a territory covered by the 4th circuit (Maryland, Virginia, West Virginia, North Carolina, and South Carolina) and requires employees to sign a noncompete agreement with language similar to the following, it may be time to consider revising the agreement:
We have co-authored an alert with our affiliate government relations consulting group, ML Strategies entitled, “Massachusetts State Legislature Takes Action on Major Employment Reform as Legislative Session Ends”, which addresses key legislation concerning pay equity, transgender anti-discrimination, non-compete agreement reform, credit checks reform and wage theft. The alert provides a review of the new laws and their implications for employers.
On Wednesday, June 29th, the House passed H. 4434: An Act relative to the judicial enforcement of noncompetition agreements, which includes a number of provisions that have long been discussed as the necessary components of non-compete reform.
Does this sound familiar: employee disregards a non-compete and joins a competitor; former company calls foul and initiates a lawsuit; parties fight it out, but by the time litigation has run its course, the non-compete period in the underlying contract has expired. The dispute is moot, right? Not necessarily according to the Ninth Circuit in Ocean Beauty Seafoods v. Pacific Seafood Acquisition Company. There, the Court applied the doctrine of equitable extension to tack on a non-compete period to an agreement after the original period had run.
It turns out the answer to this question depends on the reason for the move and whether California law applies to the contract.
As ubiquitous as limited liability company interests may be these days, litigants are still arguing over whether the sale of LLC membership units is like the sale of stock. When a stock sale takes place, the new owners of the stock simply fill the shoes of the old stockholders. In a stock sale, there is no “FICA” restart – the employer identification remains the same, as does nearly everything else associated with the transaction. An asset sale, on the other hand, involves the actual transmission of tangible or intangible things to an entirely new entity. The asset transaction invariably results in a FICA restart (a new employer, a new employer identification, and everything that comes with the “newness”) because a different entity (but not always a brand new one) now owns the assets.
Why is this relevant to non-compete agreements?
On June 23rd, the Massachusetts Joint Committee on Labor and Workforce Development met to consider legislation relating to the legality and enforcement of non-compete agreements. The committee considered five bills on this topic, with the two most prominent being House Bill 1701 and Senate Bill 957, two proposals that prohibit the enforcement of non-compete clauses while permitting nondisclosure and non-solicitation agreements. Senate Bill 169 was also under consideration, which adopts a version of the Uniform Trade Secrets Act, which standardizes a company’s legal right to protect their intellectual property.
The potential policy directions discussed at these hearings ranged from moderate reform to a complete ban on non-compete agreements in Massachusetts, the latter largely supported by start-up and venture capital groups. In the reform category, one popular idea involved requiring the employers to disclose if accepting employment would require signing a non-compete at the time of the job offer, rather than on the first day of work. Supporters argue that this would avoid situations where workers may have already terminated their current employment or turned down other offers only to discover that they were ultimately required to sign a non-compete.