Massachusetts’ Supreme Judicial Court has expanded premises liability to include a broader definition “mode of operation” which relieves plaintiffs from having to prove actual or constructive notice of conditions. In BOWERS vs. P. WILE’S, INC the court found that “where the manner of operation of a business creates a reasonably foreseeable risk of a hazardous condition, the approach permits a plaintiff to recover for injuries resulting from such conditions if the plaintiff establishes that the business did not take all ‘adequate steps’ reasonably necessary under the circumstances to protect patrons against that risk’.

Amicus briefs were submitted by the Massachusetts Academy of Trial Attorneys, the Property Casualty Insurers Association of America, and the Massachusetts Defense Lawyers’ Association. 

Despite the broader applicability of mode of operation, the court observed that “even where a plaintiff is able to prove notice through a defendant’s mode of operation that a dangerous condition was reasonably foreseeable, that alone does not establish liability. A plaintiff still must establish that the steps the defendant took to protect customers from the condition that resulted in the injury were unreasonable in the circumstances.”

In the aftermath of the Bowers decision, Massachusetts retail businesses should re-examine their operations in view of this expanded risk of liability. Summary Judgments will be harder to obtain in cases where mode of operation applies. 

Earlier this week, we posted an update on House Bill H4434, which had passed unanimously in the House and was being reviewed by the Senate Rules Committee. The bill, now S.2418, which would adopt the Uniform Trade Secrets Act (UTSA) and enact the Massachusetts Noncompetition Agreement Act, has been placed on the Senate’s calendar for Thursday, July 14, 2016. The Rules Committee recommended that the bill ought to pass in the Senate after adding an emergency preamble as required by the state constitution.

            We are covering the bill as part of a two-part series, starting with Noncompetition Act. Now, an overview of the Uniform Trade Secrets Act, the other half of the bill.

 

Why have a uniform act?

            For context, some history: the Uniform Trade Secrets Act is a model act first developed in the 1970s by the National Conference of Commissioners on Uniform State Laws. Uniform laws are designed to create consistency and predictability at the state level around areas of law that are constitutionally within the control of the states but have wider-reaching effects. The UTSA seeks to create consistent state law, so that businesses operating in multiple states may take full advantage of state trade secret protections with some confidence that their innovations will be protected to the same extent in one state in which they do business as in another. The Conference recognized that businesses may protect their innovations in two ways: through the patent system, which is national, or through trade secret protections, which are mainly controlled by the states — though a limited federal trade secret law was ratified in May 2016, creating a federal cause of action for misappropriation of trade secrets. Regardless, these two types of protections are very different, and as such, certain innovations may be better protected by one system than another. The patent process, for example, makes information public, then applies certain protections to it, while the trade secret protections, as the name implies, allow innovations to be kept secret instead.

            The Uniform Law Commission advocates adoption of the UTSA to support business growth and innovation in a variety of ways:

–    Better protections and modernization of the law to protect businesses making fast-paced technological advances

–    Precise definition of a “trade secret” will make clear what innovations are eligible for protection

–    Obtaining legal representation will be easier and less expensive, because the law will be easier for general practitioners to interpret accurately and efficiently

–    Reduction or elimination of the problem of “forum shopping” between litigants from various states who are seeking state law most favorable to their litigation interests

            The UTSA has been adopted in some form by a vast majority of states: as of this publishing, the UTSA has been enacted in 47 states, as well as the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. However, that does not mean that trade secret protections are exactly uniform between all of these states. Although a main goal of the UTSA is consistency, because states are free to modify the model act before ratifying it, there is still some variation in the statutory trade secret protections adopted in each state.

 

The UTSA in Massachusetts

            Currently, Massachusetts state law on trade secrets is governed by two brief statutory sections, one which creates a cause of action in tort for misappropriation, and the other which allows for injunctive relief. The rest of trade secret law in Massachusetts is contained in the state common law, decided by the courts and not governed by a statutory scheme. The new bill would repeal both statutory sections — Chapter 93, Section 42 and 42a — and replace them with the UTSA’s comprehensive statutory scheme.

            Massachusetts’ last attempt to adopt the UTSA failed, but ratification is looking more likely this time around. If this bill does pass, the new law will take effect on October 1, 2016. Once in place, the new law would only apply to misappropriation beginning after October 1, not to conduct that occurred (or continuing conduct that began) prior to the effective date of the statute.

 

Changes may soon be coming to Massachusetts noncompetition laws. Bill H4434, which passed unanimously in the House and was referred to the Senate Rules Committee last week, would adopt the Uniform Trade Secrets Act and enact the Massachusetts Noncompetition Agreement Act. The bill has yet to be approved by the Senate or the Governor, so its enactment is not guaranteed. Given its strong support in the House, however, a preview of the bill is in order.

            We will be covering the bill as part of a two-part series, starting with Noncompetition Act. Next week, we will cover the Uniform Trade Secrets Act, which has already been adopted in 47 other states.

 

Massachusetts Noncompetition Agreement Act

            The Massachusetts Noncompetition Agreement Act prescribes rules for noncompetition agreements arising out of employment relationships and applies to competition with the employer after employment has ended. The bill lists more than a half-dozen types of covenants that would be exempted from the new law although otherwise fitting within the statutory definition of a noncompetition agreement.

 

            These exemptions include:

  • Covenants involving the solicitation or hiring of employees of the employer; 
  • Covenants not to solicit business with customers of the employer; 
  • Covenants made with someone who is a significant owner of a business entity when the agreement is made in connection with disposing the ownership interest of a business; 
  • nondisclosure or confidentiality agreements; 
  • Invention assignment agreements.

 

            Nondisclosure agreements not exempted by the proposed statute and entered into on or after October 1, 2016 would have to meet certain requirements in order to be valid and enforceable. The requirements include both technical and substantive requirements.

            The technical requirements are relatively straightforward. The agreement must be in writing, signed by both parties, and explicitly state that the employee has a right to consult with counsel prior to signing the agreement. Under the language of the bill, the agreement will have to be provided to the employee at a specific time to be enforceable: at the time of the formal offer of employment, or ten business days before the start of the employment, whichever is earlier. For contracts enacted after that deadline, an agreement will only be valid if it is supported by additional consideration — not just continuation of employment.

            The substantive requirements of the bill are far less clearly defined and therefore may be subject to some interpretation. Overall, the bill requires that the content of noncompetition provisions be no broader than necessary to protect a legitimate business interest of the employer, and limits the amount of time such an agreement could be effective to 12 months from the cessation of employment. (This timeframe would be extended to 2 years under certain circumstances involving misbehavior on the part of the employee.) The bill would also limit the geographical scope of any such agreement, to limit the restrictions on the employee only to the extent necessary to protect the employer’s interests.

            In addition, noncompetition provisions would not be enforceable against certain types of workers:

  • Nonexempt employees;
  • Students partaking in internships or other short-term employment while enrolled in undergraduate or graduate education programs;
  • employees that have been laid off;
  • employees age 18 and under.

            However, if such a provision were included in a comprehensive employment contract, the inclusion of a noncompetition provision would not render the rest of the contract unenforceable. In addition, the bill gives courts discretion to reform agreements to render them valid and enforceable, or impose noncompetition conditions as a remedy for other legal wrongs, such as breach of contract or tort.

            If this bill does pass, it will be important to review any standard employment contracts used by your business to ensure that they comply with the new law. If questions or issues arise, an attorney can help you ensure that your business’ interests are protected.

In Massachusetts, wearable technologies, such as smartwatches, smart glasses, and location-tracking badges, are raising concerns from security experts as they become increasingly ubiquitous in business settings. While these devices may bring about gains in productivity, efficiency, and information-gathering, they also carry cybersecurity risks that may make sensitive data more susceptible to attack. There are other worries, too. UPS, for example, has substantially increased its profitability through the use of wearable tech that tracks its employees and collects data, helping to increase efficiency while reducing costs. While this use of technology has been a game changer in some contexts, businesses looking to adopt similar measures should carefully consider potential privacy issues as they track the whereabouts and behavior of their employees.

            In Massachusetts, data breaches reported to the Office of the Attorney General have been climbing steadily since 2008. One explanation is that technology developers, in their rush to get new products to market, may overlook safety or security flaws in their products. (Think of the security features recently uncovered in Mitsubishi’s new Wi-Fi outfitted hybrid, where hackers found they could disable the vehicle’s security system remotely.) Early adopters of new technologies are well-advised not to make the same types of mistakes, hastily seeking the benefits of new tech without considering the risks.

            How will your business avoid these pitfalls?

  1. An experienced attorney can help you reap the benefits of new technology without creating avoidable vulnerabilities within your business.
  2. By working with lawyers with expertise in addressing privacy in the workplace, clients will likely avoid being blind-sided by privacy issues.
  3.  Another benefit of working with privacy-savvy counsel is better understanding and buy-in  to the  company’s data security and privacy programs from the Board of Directors to the entry- level employee.
  4.  Frequent bench-marking of performance; training; and improvement processes are all necessary elements to blending in new technology with appropriate attention to employee and customer privacy. 

 

Thumbnail image for FullSizeRender.jpg A recent unpublished decision by the Massachusetts Appeals Court found that an employee could not establish a case for age discrimination under Massachusetts law when his entire job class was eliminated as part of a reduction in force. See Richard A. Porio v. Department of Revenue, 13-P-1621, (memorandum and order pursuant to Rule 1:28, August 27, 2015). Plaintiff is an employee who was laid off when his job class was eliminated, while other, younger members of his same job classification were “provisionally promoted” to a higher job class prior to the cuts. The court held that plaintiff could not establish a prima facie case of age discrimination — that is, his termination did not result in a reasonable presumption of age discrimination sufficient for the court to allow him to proceed with his claim against his employer. In order to raise that presumption, plaintiff would have had to show evidence that the employer failed to treat age neutrally in deciding which positions to eliminate, which the plaintiff failed to do.

The court also found that plaintiff could not proceed on a “disparate impact” theory. Disparate impact does not require a discriminatory motive, but instead focuses on business practices that have the effect of excluding a protected class of people from hiring or promotions. Generally, a plaintiff must show statistical evidence that a particular business practice, usually a testing or measuring procedure, has the same effect as intentional discrimination, and is not a practice that is related to job performance. The court did not specifically apply the facts of plaintiff’s case to this analysis, but instead found that the “fundamental premise” of disparate impact theory does not apply to this scenario, where an entire group of employees is affected by a reduction plan.

Age discrimination suits in Massachusetts can have costly impacts on businesses. Even in the case discussed above, which was ultimately a win for the plaintiff’s employer, the parties were involved in proceedings from 2002 to 2015. Massachusetts businesses are subject to both federal and state age discrimination statutes, and may be liable if age was a contributing factor to a decision at any stage in the employment process, including hiring, promotion, and termination. In addition tothe time and cost of litigation, if found liable, a business may need to pay extensive damages, including emotional distress and treble damages. Furthermore, employers may be hit with fines and other administrative penalties through the Massachusetts Commission Against Discrimination (MCAD).

America’s workforce is growing older, and will continue to do so for the foreseeable future. Now more than ever, employers should begin to think about mitigating the risk of an age discrimination lawsuit through planning and development of employment practices. Whether you are facing a lawsuit or trying to avoid one, an experienced business attorney can help mitigate potential losses in a way that is right for your business.

A Massachusetts superior court has recently ruled that an insurance company choosing to appeal a jury’s decision to a higher court rather than extend a formal settlement offer after a verdict has been entered against them is NOT a commission of unfair settlement practices.

The decision, Graf v. Hospitality Mutual Ins. Co., held that the “functional equivalent” of a settlement offer from the insurer was not a failure to “effectuate a prompt, fair and equitable settlement,” which would violate G.L.c. 176D, §3(9)(f).  The insurer stopped short of a formal offer due to a dispute over the policy limits in question.  The court found this dispute to be in good faith, and Hospitality Mutual’s open offer of the $500,000 settlement, based on the limits they believed existed, was a valid “functional equivalent” during the appeals process.

Plaintiff’s argument relied on Rhodes v. AIG Domestic Claims, Inc., which was decided three years prior.  The family of a woman who was hit by a truck, rendering her a paraplegic, was awarded $11.3 million by a jury, and an additional $22 million in damages after AIG made willful and intentional attempts to thwart settlement.  AIG unsuccessfully argued that their conduct did not affect the actual jury verdict, and that plaintiffs would not have accepted their offer anyway, so the plaintiff was not damaged and AIG was not liable.

The Right to an Appeal

One key difference between Rhodes and Graf, however, was the blatant, undisputed liability in the case.  Rhodes was so straight forward, in fact, that the primary insurer of the truck company, Zurich, tendered their entire policy to AIG as the excess insurer, knowing that they would be paying the plaintiff in full.  This tendering of policy limits freed Zurich from liability in the eventual lawsuit against AIG.  Policy limits were of no dispute in Rhodes either, whereas a genuine dispute existed in Graf

Had Graf been ruled in the same manner as Rhodes, it would functionally deny any insurer from filing an appeal – a bad faith claim would automatically exist if an insurer chose to appeal.  The Graf decision, however, pulls back the reins on that, allowing 176D to be read as a breach only when there is a clear determination of liability.

Functional Equivalent versus Formal Extension

But what Graf clears up in its right to an appeal for insurers, it muddies in determining what type of settlement offer is sufficient to avoid a 176D claim.  A claim is typically not prevalent unless a plaintiff has no opportunity to accept an offer.  In Rhodes there was no way for the plaintiff to settle on $3 million, given the extent of injuries and liability of the truck driver.  AIG’s offers were so incredibly low that it was impossible for the plaintiff to be remedied by the settlement.

The insurer in Graf, however, had their $500,000 policy limit available to the plaintiff at all times – the dispute was over whether this was the proper policy.  The judge in the case saw this as the “functional equivalent” of an offer, and just like in Rhodes, whether or not the plaintiff would turn down the offer anyways is irrelevant.  This ruling seemingly broadens the definition of a settlement offer.

What to do as an Insurer

The Graf decision seems to give back some flexibility to insurers that the Rhodes decision took away, in making sure that the right to an appeal is still available to insurers and also by broadening the scope of a settlement offer.  Still, money must be available to the plaintiff in order for a settlement to be valid.  It is important for an insurer to put some value of money on the table that can be bargained over in order to protect them from falling in to a 176D claim.  Honest efforts of settlement can protect an insurer from liability.

Not only should insurers make sure that the plaintiff always has access to a settlement that is more respectable than in Rhodes (at one point, plaintiffs demanded $16.5 million, to which AIG offered $3 million), but it is also essential to make sure that an appeal is not frivolous.  The right to an appeal is an important piece of American law, however, if an insurer were to extend a judgment by appealing for some minute detail in an attempt to prolong settlement and avoid paying, they could still be found liable of 176D.  Failing to settle after a jury verdict can be allowed in some cases, but an insurer must make sure that they are not unreasonable in doing so.

Law Clerk Shaun Loughlin contributed substantially to this post.

On November 7, 2014, the Australian Department of Immigration and Border Proteciton gave notice of a data breach that morning affecting the leaders of the G20.  As described:

The personal information which has been breached is the name, date of birth, title, position nationality, passport number, visa grant number and visa subclass held relating to 31 international leaders (ie prime ministers, presidents and their equivalents) attending the G20 leaders summit.

Affected by this data breach were, among others, President Barack Obama, Russian President Vladimir Putin, German Chancellor Angela Merkel, and UK Prime Minister David Cameron.  The cause of the data breach was the autocomplete feature of the “To:” field in Microsoft Outlook.

The autocomplete feature is a useful way to send an e-mail without having to look up an email address.  Unfortunately, without careful attention, it is easy for any person within a government agency, nonprofit organization, or commercial enterprise to accidentally send a message to the wrong person.  

As with the unfortunate Australian government employee, it is all too common for emails to contain personally identifying information and for such emails to be unencrypted.  It is easy to imagine the same occurring with trade secrets, protected health information, or attorney-client privileged material.

Massachusetts businesses are required to protect personal information pursuant to G.L. c. 93H and the implementing regulations at 201 CMR 17.00.  Business owners and managers should take care to review their e-mail policies regarding the transmission of unencrypted personal information and the use of the autocomplete feature as part of their written information security program.  Employers should take care, further, to ensure that such a program does not conflict with the NLRB’s December 2014 decision in Purple Communications.  In developing such a program, it is best to consult with experienced privacy attorneys.