The Need For Precision In High-Low Agreements

October 26, 2021

Source: Melick & Porter, LLP

High-low agreements are intended to manage the risks of civil trials. The defendant agrees to pay a minimum amount, and the plaintiff agrees to accept a maximum recovery, no matter the outcome of a trial. Thus, the plaintiff eliminates the risk of recovering nothing, and the defendant eliminates the risk of a run-away jury. While a high-low agreement can be a sensible means of resolving a lawsuit, it is important that it be properly drafted so as to conclusively terminate any further litigation. The case of David v. Kelly, 2021 WL 4944478 (Mass. App. Ct. 2021) demonstrates the need to include specific language waiving appellate rights in a high-low agreement.

David is a textbook dog bites mailman case. Liability was admitted, but damages were vigorously contested. The parties entered into a high-low agreement on the last day of trial, and memorialized it in a handwritten document drafted in the courtroom. The hastily-written terms set a floor of $150,000 and a ceiling of the available $1 million liability policy limit, but made no mention of appellate rights. After the jury awarded $375,000, the defendants unsuccessfully moved for a new trial, and then appealed. Plaintiff argued that the high-low agreement constituted a waiver of the defendants’ appellate rights, but the Massachusetts Appeals Court disagreed. It held that a high-low agreement is a contract like any other, and ordinary rules of contract construction apply. As such, the Court observed that waiver must be shown “clearly” and “unequivocably.” The handwritten high-low agreement made no reference to post-verdict or appellate rights. In the absence of explicit language, the Court ruled that the agreement was not susceptible of a reading that included a waiver of appellate rights.

A courtroom in the middle of a trial is a busy place. Trial counsel are often juggling several things at once. The burdens on trial counsel are immense. A lesson that might be learned from the David case is that these burdens can be lessened by anticipating potential settlement discussions and keeping draft settlement agreements handy in the trial bag.

SJC Reaffirming Ruling for Personal Auto Insurer to Provide Coverage

November 16, 2021

Source: Melick & Porter, LLP

In Berry v. Commerce Insurance Co., which was decided on October 25, 2021, the Massachusetts Supreme Judicial Court found determined that the insurance company had to provide coverage for a police officer’s damages after a fellow police officer struck him with his personal motor vehicle. Commerce’s insured, Officer Sheehan, was a 14-year veteran of the Raynham Police Department and was a certified firearms instructor. On the day of the accident, he was being paid to conduct a firearms training session for fellow officers at a gun range owned by the town of Raynham. Officer Berry was one of the attendees at this training session, which was mandatory and for which he was being paid by the town.

During a paid break, Officer Sheehan left the range to purchase lunch at a nearby store. Other officers remained at the range, including Officer Berry who was seated outside at a picnic table. Upon returning to the range, Officer Sheehan drove his personal motor vehicle “too fast”, stopped, but then proceeded toward Officer Berry. When Officer Sheehan applied his brakes, his tires spun, his vehicle slid, and it ultimately struck Officer Berry. The claimant’s leg was pinned between the picnic table and Officer Sheehan’s vehicle, and he sustained serious injuries.

Officer Berry sought recovery for his damages from Commerce as Sheehan’s insurer. In response, Commerce denied coverage on the grounds that, as a public employee, Officer Sheehan was acting within the scope of employment, and therefore personally immune from tort liability under the Massachusetts Tort Claims Act (G. L. c. 258, § 2). Officer Berry sought a declaratory judgment that Officer Sheehan was not immune. The Superior Court concluded that Commerce was liable because Officer Sheehan was not acting within the scope of his employment. On appeal, the SJC agreed.

In its decision, the Court considered and applied a three-factor test for determining whether a person is acting within the scope of employment, which has been used several times before. See Clickner v. Lowell, 422 Mass. 539, 542 (1996); Pinshaw v. Metropolitan Dist. Comm., 402 Mass. 687, 694-695 (1988); Wang Labs, Inc. v. Business Incentives, Inc., 398 Mass. 854, 859-860 (1986). The three factors are: 1) whether the conduct is of the kind the employee is hired to perform; 2) whether it occurs within authorized time and space limits; and 3) whether it is at least in part motivated to serve the employer. The SJC determined that the incident occurred within authorized time and space limits. Although the first prong—whether the Officer’s conduct was the kind he was hired to perform – was mixed, the SJC held that the unsafe manner in which Officer Sheehan drove his vehicle was not within the duties that he was hired to perform as a firearms instructor. Even though the incident occurred during a “working lunch,” Officer Sheehan’s egregious driving took it out of the scope of his employment.

In so holding, the SJC rejected Commerce’s argument that it should apply the standards for police officer compensation for work-related injuries established by G. L. c. 41, § 111F (“in the performance of his [or her] duty”), or the workers’ compensation act, G. L. c. 152, § 26 (“arising out of and in the course of his [or her] employment”). The decision highlights the differences in the scope-of-employment test for purposes of vicarious liability in tort and worker’s compensation. Although Officer Berry was entitled to receive benefits under c. 41, Officer Sheehan’s dangerous driving was not motivated, even in part, by an intent to serve the police department. As such, the immunity provision of c. 258 provided no defense to Commerce as Officer Sheehan’s auto insurer.

Massachusetts SJC Sets Standard For Joint Employer Liability Under Wage Laws

December 21, 2021

Source: Melick & Porter, LLP

The Massachusetts Supreme Judicial Court has established the legal standard for determining whether an entity is an employee’s “joint employer” for purposes of determining liability under Massachusetts wage and hour laws. In Jinks v. Credico (SJC 13106), DFW Consultants, Inc. entered into an agreement with Credico to provide sales services for Credico’s clients. As part of its services, DFW hired sales workers to assist with Credico’s marketing efforts, and retained control over their wages, hours, and working conditions. A group of DFW sales workers filed suit claiming they were jointly employed by both Credico and DFW, and that both entities had misclassified them as independent contractors rather than employees, and that they should be jointly liable for payment of regular and overtime wages. The lower court ruled that Credico was not a joint employer, applying the test employed under the Federal Fair Labor Standards Act (“FLSA”), rather than the standard used under the Massachusetts independent contractor statute, M.G.L. c. 149, § 148B.

On appeal, the SJC acknowledged that a joint employer could be deemed liable for misclassification of workers and failure to comply with wage laws, but those laws do not provide a standard for determining when such joint employment status exists. Thus, the Court considered whether to borrow the standard set by the independent contractor statute (which applies to workers’ compensation obligations) or the FLSA standard.

The plaintiffs urged the Court to adopt the broader standard applied under the independent contractor statute, which provides that an individual performing services for a company is considered an employee unless (1) the individual is free from control and direction in connection with the performance of the service in fact and under the contract; (2) the service is performed outside the usual course of the business of the employer; and (3) the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed. Since the plaintiffs did not control their own work, they argued that any entity which derived an economic benefit from their work should be treated as a joint employer and held responsible for compliance with the wage laws.

The SJC disagreed, concluding that this standard was too broad to be applied in the context of the wage laws, and failed to address the question of whether the individual’s work was subject to control by more than one entity. Instead, the Court agreed with the lower court that the standard applied under the FLSA – which is the statute the state wage laws were modeled after – was more appropriately applied. That standard calls for a “totality of the circumstances” analysis, focusing on four factors to determine whether joint employment exists. Those factors are whether the alleged employer (1) had the power to hire and fire the employees; (2) supervised and controlled employee work schedules or conditions of employment; (3) determined the rate and method of payment; and (4) maintained employment records. The SJC explained that these factors provide a framework which “capture[s] both the nature and structure of the working relationship as well as the putative employer’s control over the economic aspects of the working relationship.” Applying the standard to the case at hand, the SJC agreed that Credico was not the plaintiffs’ joint employer because DFW alone controlled the workers’ hiring, termination, and working conditions, and there was no evidence that Credico determined the rate and method of payments to the plaintiffs, or maintained their personnel files and other records.

The SJC’s holding is significant because it clarifies the nature of employment relationships which may give rise to liability under the Commonwealth’s wage and hour laws, and adopts a narrower view of the circumstances under which an entity may be deemed a joint employer. While the four factors taken from the FLSA by the SJC are not rigid in their application, they nonetheless provide a helpful framework to permit companies relying on outside staffing providers to structure their agreements to avoid liability for alleged wage and hour violations.

MA SJC overturning Wrongful Termination Decision

December 30, 2021

Source: Melick & Porter, LLP

On December 17, 2021, the Massachusetts Supreme Judicial Court ruled that an employee could sustain a claim for wrongful termination in violation of public policy after his employer discharged him for submitting a written rebuttal to a performance improvement plan kept in his personnel file. In Meehan v. Medical Information Technology, Inc., SJC 13117, the SJC overturned the Appeals Court’s determination that because there is no statutory provision prohibiting retaliation against or termination of an employee who submits a rebuttal to information in their personnel file, the employee could not sustain a claim for wrongful termination. The SJC’s decision is a welcomed sight for employees who should not feel restrained against responding to negative information maintained in their personnel files and explaining their position.

The plaintiff in Meehan was placed on a performance improvement plan to which he submitted a written rebuttal. Members of the defendant’s management team met to discuss the plaintiff’s rebuttal and agreed to terminate his employment immediately. The plaintiff filed a one-count complaint alleging wrongful termination in violation of public policy. The trial court allowed the defendant’s motion to dismiss, finding that the plaintiff’s right to submit a rebuttal was “not a sufficiently important public policy” to support the plaintiff’s claim, and noting that such a right merely involved “matters internal to an employer’s operation.” The Appeals Court affirmed the decision dismissing the complaint.

While Massachusetts is an at-will employment state by which employment can be terminated for any reason or for no reason, its courts have recognized statutory and common law exceptions to the general rule, such as when employment is terminated based on a discriminatory animus or contrary to a well-defined public policy. As a threshold matter, the SJC concluded that a public policy employment right existed pursuant to the personnel records statute, which protects the ability of employees to seek other employment and enables employers to make informed hiring decisions. In deciding whether to create a common-law public policy exception to employment at will, the SJC considered whether a statutory remedy for the public policy violation at issue already existed.

In this case, the personnel records statute relied on by the plaintiff did not provide at-will employees with a statutory remedy, but instead authorized only the Attorney General to enforce its provisions. Therefore, the SJC was limited to determining whether terminating an employee for submitting a rebuttal to negative information in their personnel file constituted wrongful termination in violation of public policy. Noting the absence of any statutory remedy for at-will employees under the personnel records statute, the SJC concluded that "the Legislature would not have permitted such a flouting of its authority, had it contemplated the possibility" of an employee being terminated for submitting a rebuttal to information contained in their personnel file. It held that the plaintiff's termination simply for filing a rebuttal expressly permitted by the personnel records statute constituted wrongful termination in violation of public policy.

The SJC also qualified its holding, stating that the employee's rebuttal does not provide them with additional rights, and that the at-will employment tenant of "termination for any reason or for no reason" still rings true. Additionally, the SJC cautioned that while the rebuttal permits the employee to share their version of events or position of disagreement with the information contained in their personnel file, the rebuttal may not include threats of personal violence, abuse, or other egregious responses.

The Meehan decision provides employers and employees with valuable guidance underlying the important employment decisions that often ignite contentious employment litigation. By making employment decisions consistent with the SJC’s opinion, employers can avoid costly and protracted litigation.