The In-House Advisor

  • Ironically, a General Release Needs to Be Specific to Apply to Wage Act ClaimsFebruary 06, 2018

    Often, when settling a dispute, I include a general release that goes something like this:

    Releasors hereby forever release and discharge Releasees from, and/or based on, any and all suits, etc. which Releasors ever had, now have or may in the future claim to have against Releasees, arising out of any acts or conduct that occurred from the beginning of time to the date of this Agreement.

    Plainly, such a release is intended to “wipe the slate clean” and give the parties the comfort of knowing that neither can be sued by the other for any conduct that occurred up to that point in time – whether the other party knows about the conduct/claim or not.  As a recent case from the Superior Court, Fratea v. Unitrends, Inc., reminds us, however, a general release of this sort will not bar a former employee from pursuing a claim under the Massachusetts Wage Act.

    When Michael Fratea left the employment of Unitrends, he executed a release in exchange for the payment of $1,875. Thereafter, Fratea filed suit against the company and two individuals, alleging a violation of the Wage Act because he was not paid overtime compensation. The defendants … Keep reading

  • No Individual Liability for Board Members and Investors Under MA Wage ActJanuary 08, 2018

    As I have written before, the Massachusetts Weekly Payment of Wages Act obligates employers to pay all earned wages to employees in a timely fashion. The Wage Act also specifies that the “president and treasurer of a corporation and any officers or agents having the management of such corporation” are personally liable for violations. In Segal v. Genitrix, LLC, et al., the Massachusetts Supreme Judicial Court, interpreting the phrase “agent having the management of the corporation” for the first time since it was added to the Wage Act in 1935, ruled that, as long as board members and investors acted in their ordinary capacities, they were not such agents and could not personally be liable for violations.

    In Segal, the former president and chief executive officer of Genitrix, asserted that two former board members of the company, H. Fisk Johnson III and Stephen Rose, should be individually liable for wages that Segal claimed he was owed for services he performed for the company. Neither Johnson nor Rose was the president, treasurer, or any other officer of Genitrix. The Appeals Court, relying on Cook v. Patient Edu, ruled that Segal might have viable claims against Johnson and … Keep reading

  • Fiduciary Duties of “Ordinary” PeopleJanuary 02, 2018

    In a recent blog post, I discussed how all-encompassing a fiduciary duty can be and how in-house counsel in closely held businesses might want to advise insiders about measures that could curb or even eliminate some of those duties. A new case from the Massachusetts Superior Court, Christensen v. Cox, highlights some other need-to-know aspects of fiduciary duties.

    Clayton Christensen is a leader in the field of “disruptive innovation,” and he and his brother, Mathew, are involved in at least two companies working in that area, Disruptive Innovation GP, LLC and Rose Park Advisors, LLC. In 2010, Shawn Cox was hired as an employee at will of Rose Park, although he ended up providing various services to both companies. In April of 2013, Cox notified the Christensens that he would be taking a new job, and his last day of employment with Rose Park was at the end of May.

    Shortly after Cox left, he asserted that he had been given equity in Disruptive Innovation and demanded a distribution based on that equity. While the Christensens disputed that Cox had been given any equity in Disruptive Innovation, Cox pointed to an April 2013 memo (signed by … Keep reading

  • Eliminating Fiduciary Duties in a Closely Held BusinessDecember 05, 2017

    Longstanding Massachusetts law holds that officers, directors, partners, and even equity holders in closely held corporations owe their respective entities and related equity holders a fiduciary duty to act with the utmost good faith and loyalty and “the punctilio of an honor ….” While that might sound eminently reasonable, if one has a fiduciary duty, she can risk personal liability by engaging in a variety of conduct that might seem to make sound business sense and/or appear to be completely benign.

    For instance, if an officer of one company causes it to enter into a contract with another, and the officer has an equity interest in the second entity, he is exposed to a claim for self-dealing – even if it appears that the transaction will benefit both businesses. Likewise, a partner who invests in a business similar to her partnership could be sued for a “diverting a business opportunity” if she did not offer her partners an opportunity to participate equally in the investment.

    Plainly, therefore, imposing fiduciary duties can have a chilling effect on conduct and transactions that might be good for business or, at least, would not be unfair. Fortunately, however, cases like the recently decided … Keep reading

  • Be Careful When Using Liquidated Damages with Your Non-Compete ClauseNovember 21, 2017

    As I have counseled many clients, a non-compete provision is different than most other contractual terms, because simply having mutual consent and consideration will not automatically render it enforceable for reasons of public policy. Thus, even in states like Massachusetts that are known to enforce non-competes, such restrictions will be deemed invalid unless they are reasonable in time and scope and also are necessary to protect against unfair competition – which occurs when the employee uses the company’s confidential information, trade secrets or goodwill to compete against it. As oxymoronic as it may sound, a non-compete that merely prevents “ordinary competition” will be deemed unreasonable and unenforceable.

    While some businesses try to make an end-run around this law by requiring an employee to forfeit some benefit or pay liquidated damages if he/she competes against his/her company, any such requirement will be viewed through the same public policy lens used to scrutinize a formal non-compete provision. Indeed, as the Supreme Judicial Court of Massachusetts noted long ago in Cheney v. Automatic Sprinkler Corp.:

    If forfeiture for competition provisions were enforced without regard to the reasonableness of their terms while covenants not to compete were subjected to such a

    Keep reading

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