Arbitration and Governing Law Clauses

By George H. Schadler, Esq.

Arbitration can provide many benefits in business disputes, including faster resolution times and lower costs as compared to traditional litigation. However, arbitration provisions must be very clear as to the law that governs and to the scope of the arbitrator’s authority. Where the parties are not clear in the text of their contracts, courts may interpret agreements to include authority that was never intended by either party.

Recent court decisions, both in Massachusetts and in the United States Supreme Court, emphasize the importance of closely reviewing the arbitration and governing law clauses in your contracts, lest they lead to unintended consequences. A Massachusetts court recently found that an arbitrator was allowed to award triple damages under Pennsylvania law, even where the Agreement stated that it was to be governed by the law of Massachusetts, because the arbitration clause did not limit the jurisdiction of the arbitrator. Likewise, the United States Supreme Court recently decided that where a class-action statement in an arbitration provision stated it was dependent on whether class-actions were permissible in the “law of your state”, and Federal law preempted the state’s laws regarding class-actions, the arbitrator must look to Federal law, as opposed to the invalid state law.

Contact us today if you would like for us to review your agreements to ensure they clearly reflect your choice of applicable law and best protect your interests.

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Wage Claims Can Be Subject To Mandatory Arbitration Agreement

Following a recent trend of court decisions upholding broad application and enforceability of arbitration agreements, the Massachusetts Supreme Judicial Court has held that Wage Act claims may be subject to arbitration if agreed to by the employer and employee through a binding mandatory arbitration agreement. In so doing, the SJC noted that Massachusetts courts generally permit arbitration agreements that shorten the statute of limitations period to raise a claim. Specifically, the SJC held that the arbitration agreement’s clause shortening the three year limitations period within which an employee could raise a claim under the Wage to one year or eighteen months was not unreasonable or unconscionable.

As an arbitration agreement can be viewed as a waiver of the rights to raise claims through the courts, in order to be enforceable in the wage and employment context, the arbitration agreement must be very and understandable to the employee. And while not necessarily required for enforcement, the employer should consider including specific reference to Wage Act, and other specific laws and matters intended to be covered by the arbitration agreement.

As arbitration can offer a more efficient and affordable alternative to court proceedings, particularly if coupled with an agreement to shorten the limitations periods for claims, mandatory arbitration agreement may present a beneficial risk management option for employers. However, such agreements do not alter the employer’s responsibility to comply with its Wage Act obligations. It is important to note that an arbitration agreement would not limit the statutory penalties under the Massachusetts Wage Act, namely mandatory treble damages, costs and attorney fees, that an prevailing employee is entitled when a violation of the law is determined.

Please note that the arbitration agreements should be carefully tailored and reviewed for the specific circumstances and practices of your business. Should you require assistance or would like more information, please do not hesitate to contact us.

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Personnel Records

Applicable laws in Massachusetts may require that employers maintain certain documents and information for each employee in separate personnel records. These records must be retained for the term of the employment and at least three (3) years after termination. The definition of “personnel records” under the Massachusetts law is broad, encompassing all information that has been used or could be used to determine the employee’s qualifications for employment, promotion, transfer, additional compensation, and disciplinary action. Records that may generally be required to be retained in each employee’s separate personnel records include:

  • General information: name, address, date of birth;
  • Job title and description;
  • Rate and basis of pay, time when workweek begins and hours worked each day;
  • Starting date of employment;
  • Employment application, inquiry and/or resume, if provided;
  • Performance evaluations, if any;
  • Disciplinary warnings, or other disciplinary documents, and warnings of substandard performance, if any;
  • List of probationary periods, if any;
  • Waivers, acknowledgements (i.e., acknowledging receipt of personnel handbook, sexual harassment policy, etc.) signed by the employee, if any;
  • Copies of dated termination notices, if any.

Under the Massachusetts personnel records law, employers are required to give notice to an employee within 10 days of placing certain negative information into the employee’s personnel record. Specifically, notice to the employee is required “within 10 days of the employer placing in the employee’s personnel record any information to the extent that the information is, has been used or may be used, to negatively affect the employee’s qualification for employment, promotion, transfer, additional compensation or the possibility that the employee will be subject to disciplinary action.”

Further, employers must provide employees with access to their personnel records, including making a copy available to an employee within five (5) business days from an employee’s written request.

For additional information please do not hesitate to contact Finneran & Nicholson, P.C. at (978) 462-1514 or via email at cases@finnic.com.

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Employee Handbooks And Avoiding Contractual Obligations

A January, 2016 decision by the federal district court for the District of Massachusetts reiterates the importance of careful drafting and tailoring of employee handbooks and policies so as to avoid contractually binding obligations on management to their employees. Massachusetts law has long held that employee handbooks and policies may in some circumstances be interpreted as implied contracts and establishing binding obligations on the part of the employer to adhere to the policies and rights set forth therein. Such contractual obligations would impede upon employer’s general flexibility under the law in at-will employment relationships.

Key elements to avoid any such contractual requirements generally include:

  • bold and consistent disclaimers asserting that the policy is not a contract of employment;
  • avoid granting specific rights and remedies to particular scenarios, i.e., avoiding granting “due process” rights and/or mandatory progressive discipline procedures;
  • make clear that the handbook is non-negotiable; and
  • state that the policies are subject to change in the sole and exclusive discretion of management.

Under Massachusetts law, great caution must be used in drafting employment handbooks and policies. Please feel free to contact Finneran & Nicholson, P.C., if you have any questions in reviewing, updating and adopting employment handbooks and policies. Should you have any questions regarding these or other employment matters, please do not hesitate to contact us.

Please note that the written policies required for compliance with these regulations should be tailored and reviewed for the specific circumstances and practices of your business. Should you require assistance in meeting your compliance obligations under these regulations, please do not hesitate to contact us.

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Health Club Contracts

By: Adam D. Page, Esq.

January 1, 2016 is quickly approaching, and with it, new members will be joining health clubs. Both members and health club owners need to be aware that Massachusetts law requires health club contracts to include certain terms and conditions, such as restrictions on the length of the contract, limitations on installment payments and certain cancellation rights. Health club owners, especially, need to be mindful that a failure to include such required terms and conditions may be considered an unfair and deceptive trade practice under Massachusetts law, possibly subjecting the health club owner to triple damages and an award of attorney’s fees to the member.

Adam D. Page is a business and corporate attorney with Finneran & Nicholson, P.C. He can be reached at (978) 462-1514.

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Minimum Wage Changes in Massachusetts

As of January 1, 2015, the minimum wage for Massachusetts employees is $9.00 per hour (an increase from the prior rate of $8.00 per hour rate). The minimum wage law applies to all employees with certain statutory exemptions.

Effective January 1, 2016, the minimum wage increases to $10.00 per hour and the minimum service rate for service staff employees generally compensated by tips increases to $3.35 per hour (an increase from $3.00 per hour in 2015 ). The service rate generally applies to wait staff, service employees and service bartenders, who may be paid the service rate if they regularly receive tips of more than $20 a month, and if their average hourly tips, when added to the service rate, are equal to or exceed the basic minimum wage.

On a going forward basis, these rates increase gradually over the coming years, specifically:

Effective January 1, 2016:

  • Minimum Wage increases to $10.00 per hour
  • Service Rate increases to $3.35 per hour

Effective January 1, 2017:

  • Minimum Wage increases to $11.00 per hour
  • Service Rate increases to $3.75 per hour

Employers should prepare to update their payroll practices and posters in order to be in compliance with these changes.

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Sick Leave Policies

Under Massachusetts law, all employees, including part-time and temporary employees, are be entitled to accrue earned sick leave, which an employee may use to address and tend to their own personal health conditions, or to tend to health concerns of their families (children, spouses, parents and/or in-laws), including attending routine medical care appointments. Earned sick leave may also be used by employees to address matters occasioned by domestic abuse situations.

Employees must be entitled to accrue a minimum of one hour of earned sick time for every 30 hours worked by the employee beginning upon the date of hire, up to at least 40 hours of earned sick time during each calendar year. While earned sick leave must begin accruing upon hiring, the employer may limit the employee’s ability to use the leave until after 90 days of employment. Employees may carry over up to 40 hours of earned sick leave into the next calendar year, but are not entitled to use more than 40 hours of earned sick leave in any given calendar year.

While all employers will need to offer sick leave to employees, employers of 11 or more must provide PAID earned sick leave to their employees. Employers have the option to provide more leave to employees than what is required in the proposed law. Employers offering existing paid time off or vacation time to employees are not required to provide more leave, so long as the policies meet the requirements of the act. Unlike vacation time, unused earned sick leave need not be paid to employees on termination of employment.

All employers must adopt sick leave policies and/or amend or review their existing vacation or paid time off policies to ensure compliance with this new law. In addition to adopting or updating existing policies to grant sick leave to employees, the new law has restrictions on retaliating against employees for the use of sick leave, the exercise of rights under the law, and sets forth standards for employers to require medical certification for use of the sick leave.

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