September 2024
Massachusetts court holds retention bonus is not a “wage”
In Nunez v. Syncsort Incorporated, a Massachusetts court held that a retention bonus did not constitute not “wages” under the Massachusetts Wage Act (the “Wage Act”). The plaintiff-employee alleged that his former employer violated the Wage Act by not paying him the second installment of a retention bonus. The employee’s agreement stated that the installment was contingent on him remaining employed in good standing through the payment date. The plaintiff was terminated due to a reduction in force on the date that he was due to receive the second installment.
The court observed that while the Wage Act explicitly defined wages to include holiday pay, vacation pay and other payments “definitely determined and due and payable to the employee,” it did not include all types of contingent compensation. Ultimately, the court held that the retention bonus at issue was not wages because it was contingent on certain conditions.
S&K Take: This is a win for employers. Whether employee compensation is considered “wages” under applicable wage laws—including the Wage Act—is important because violations often carry liquidated damages (sometimes three times the unpaid amount) and attorney’s fees and costs. If those claims are not available, employee’s seeking recourse for unpaid amounts would be limited to contract-based claims.
Florida court compels arbitration despite harassment claim because plaintiff failed to plausibly allege sexual harassment
The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (“EFAA” or the “Act”) amended the Federal Arbitration Act to prohibit mandatory arbitration of sexual harassment and sexual assault claims. In Mitchell v. Raymond James and Associates Inc., a federal judge in the Florida adopted the report and recommendation of a magistrate judge and compelled a former employee’s sexual harassment suit to arbitration because she failed to plead a plausible claim for sexual harassment under Title VII.
The plaintiff argued the EFAA did not require her harassment claims to be plausible to avoid arbitration. The court disagreed, holding that the alleged incidences were not objectively severe and pervasive to state a plausible claim for hostile work environment harassment under Title VII. The court also found that the employee’s retaliation claim, alleging that she was retaliated against for complaining about sex discrimination and filing a charge with the United States Equal Employment Opportunity Commission, “fail[ed] to trigger [the] EFAA[’s]” protection where the plaintiff did not allege facts supporting a plausible claim for sexual harassment under federal law.
S&K Take: We previously reported on cases interpreting the scope of the EFAA, including in circumstances where a plaintiff’s supplemental harassment claims impact arbitrability. Employers seeking to compel arbitration in this scenario should consider whether they can assert that sexual harassment claims are not plausible as pled.
First Circuit enforces noncompete by affirming injunction against California-based executive
A panel for the First Circuit Court of Appeals upheld a lower court decision granting DraftKings, Inc. a preliminary injunction enjoining a former executive—presently located in California—from competing against DraftKings in the United States. As we previously covered, the former executive moved to California to join a competitor and then sued in California state court to nullify his noncompete. He asserted that the noncompete, which contained a Massachusetts choice of law provision, was unenforceable under California law, which protected him as a California resident. DraftKings responded by bringing its own suit in Massachusetts federal court asserting, among other claims, that the executive breached his noncompete.
The First Circuit rejected the executive’s arguments that California law applied to the dispute. In finding that the former employee had not established that California had a materially greater interest in the dispute, the court noted that (i) although the executive primarily worked for DraftKings from New Jersey and New York, he traveled to Massachusetts approximately once every six weeks in the two and half years prior to his departure, (ii) there was no evidence the executive performed any work for DraftKings from California, and (iii) any harm flowing from the employee’s breach of his noncompete would likely be felt by DraftKings in Massachusetts. The court also highlighted that the Massachusetts Noncompetition Agreement Act, enacted in 2018, reflected a legislative balance struck between the interests of employees and businesses.
The court also rejected the executive’s alternative argument that, even if Massachusetts law applied, the preliminary injunction should exclude California from its scope, finding that California’s public policy concerns could not override Massachusetts’s.
S&K Take: Effective January 1, 2024, Section 16600.5 of the California Business and Professions Code voids any agreement that is unenforceable under Section 16600 of the California Business and Professions Code “regardless of where and when the contract was signed.” As we have covered previously, these California statutes may encourage employees to relocate to California to avoid being subject to noncompetes entered in other states. The parallel California and Massachusetts proceedings in the DraftKings matter present an important question about California’s authority to regulate and invalidate noncompetes made under the laws of another state. In this case, the court found the noncompete enforceable despite California’s broad prohibitions. Notably, the California state court presiding over the companion case had previously found that the executive was likely to prevail on the merits of his case but declined to enjoin the noncompete because of the pending Massachusetts lawsuit.
