New Bill to Modernize Noncompete Agreements Filed

Today Representative Lori Ehrlich (D-Marblehead) and Representative William Brownsberger (D-Belmont) filed a bill to codify, clarify, and modernize Massachusetts law relative to employee noncompetition agreements. In-depth analysis of the bill can be found here.

Noncompete agreements are frequently used by employers to prevent employees from working for competitors for a period of time following the employee’s departure from the company.  In Massachusetts, there is a long line of court decisions interpreting and enforcing such agreements, but there is not a state statute that codifies their use and limitations.

The noncompete bill — originally drafted by Russell Beck — would codify current law, which permits noncompete agreements to be enforced if, among other things, they are reasonable in duration, geographic reach, and scope of proscribed activities and necessary to protect the employer’s trade secrets, other confidential information, or goodwill.  In doing so, the noncompete bill filed today would provide more certainty to employers and employees by setting limits to the scope of permissible noncompete agreements.  The bill also details the types of restrictions that are presumptively reasonable.

Key provisions of the noncompete bill include the following:

  • The noncompete bill restricts noncompete agreements to one year.
  • There would be a two-year restriction on garden leave agreements (under which the employer compensates the employee while the employee is restricted from competitive activities).
  • The bill requires that noncompetes be in writing, signed by both parties, and, in most circumstances (i.e., if reasonably feasible), provided to the employee seven business days in advance of employment.
  • In the event of a claimed breach of a noncompete agreement, the noncompete bill requires payment of the employee’s legal fees under certain circumstances, primarily where the agreement is not enforced in most respects by the court or where the employer acted in bad faith.

The noncompete bill would not apply retroactively – it would only affect noncompete agreements that are entered into after the law becomes effective

The noncompete bill filed today contains many of the same provisions that appeared in a version that was filed in the prior legislative session.  A notable change includes the elimination of a salary threshold for the use of noncompete agreements.  While the version introduced in the prior session limited the use of noncompete agreements to employees earning at least $75,000, the new bill directs courts to factor in the economic circumstances of, and economic impact on, the employee.

For a complete analysis of the new bill, along with a discussion of the differences between the new and prior versions, please visit Fair Competition Law.

About Us

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience at large law firms, working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and labor and employment. We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

What Are Reasonable Attorneys’ Fees?

Today’s story in the Boston Globe provides a glimpse into the kinds of disputes that that can arise when a law firm’s client believes its legal fees are too high. The story covers an arbitrator’s finding that one of Boston’s premier law firms overcharged a client by more than $540,000. The arbitrator reportedly faulted the firm for submitting “vague” invoices and for assigning multiple employees to work on pleadings (e.g., six employees who billed more than 200 hours in total to prepare a complaint and injunction papers).

In these kinds of disputes, clients and lawyers are often forced to deal with the question of what constitutes “reasonable” attorneys’ fees. If the dispute is presented to a court in Massachusetts, a judge will use the “lodestar method” to calculate reasonable attorneys’ fees. According to a Massachusetts Appeals Court decision, this method involves “the multiplication of a fair market hourly rate by the amount of reasonably spent time.”

Read the full article here.

Video Games and the High Court: Summary of EMA’s Arguments in Supreme Court Case Schwarzenegger v. EMA

On November 2, 2010, the Supreme Court will hear arguments in the matter of Schwarzenegger v. EMA. This case is about a California law that bans the sale of certain violent video games to minors. This is an historic moment for video games – as this is the first time the Supreme Court has ruled on a statute directed to the video game industry.

In today’s installment, the positions of the Entertainment Merchant Association (EMA) and Entertainment Software Association (ESA) position are summarized.  Both EMA and ESA are referred to here as ESA.  As the Governor of California, Arnold Schwarzenegger’s name appears as the Appellant.

For a summary of the State of California’s positions in this action, click here.

California’s Statute

This dispute arises over the enforcement of California Civil Code sections 1746-1746.5, which prohibits the sale of violent video games to minors under 18.

The statute defines a “violent video game” as one that depicts “killing, maiming, dismembering, or sexually assaulting an image of a human being” in a manner that meets all of the following requirements:

(1) A reasonable person, considering the game as a whole, would find that it appeals to a deviant or morbid interest of minors;

(2) it is patently offensive to prevailing standards in the community as to what is suitable for minors, and;

(3) it causes the game, as a whole, to lack serious literary, artistic, political, or scientific value for minors.

The statute does not prohibit a minor’s parent or guardian from purchasing or renting such games for the minor. There is a penalty of up to $1,000 per violation, which may be lowered in the discretion of the court.

First Amendment Challenge to the Statute

California’s statute was challenged by ESA in 2005. A U.S. District Court barred enforcement of the statute on First Amendment grounds. Thereafter, the Ninth Circuit Court of Appeals ruled that the statute is unconstitutional.

Summary of ESA’s Arguments

In sum, ESA argues that video games deserve the full protection of the First Amendment.  It contends that the violence portrayed in video games should not be subject to any different treatment under the Constitution than violence depicted in literature, movies, art, or comic books.  ESA’s own summary of its position is that “with or without elements of violence, video games are as fully protected by the First Amendment as every other mode of expression.”

ESA’s argument begins by placing video games in context.  ESA describes various types of video games – ranging from Red Dead Redemption to The Sims and FarmVille.  ESA’s approach is educational – an apparent attempt to show the Court that there are more types of video games available than the violent examples (like Postal II) described by the State of California in its brief.  ESA paints a picture of broad cultural acceptance of video games as a form of entertainment.

ESA describes the industry’s rating system administered by the Entertainment Software Ratings Board and highlights the high rate of voluntary compliance with the ESRB’s ratings system among developers and retailers.  In support of its argument that the ratings deter children’s access to mature-rated products, ESA cites a 2009 FTC study that found that the video game industry does a better job than the movie and music industries in policing access by minors to age-inappropriate content.

In support of its assertion that video games are entitled to “full-throttled First Amendment Protection,” ESA posits that:

California fundamentally distorts bedrock First Amendment principles when it suggests that video games are entitled to lesser protection because their interactivity increases the impact of their expression on the viewer. Plainly, the Government is not entitled to regulate speech on the ground that it is particularly effective at conveying its message.

 

Focusing on the target of California’s statute – violence in video games – ESA argues that “depictions of violence have never been considered a category of unprotected expression.” In this regard, ESA discusses the central role of violence in literature:

[W]hether it be the “Odyssey, with its graphic descriptions of Odysseus’s grinding out the eye of Polyphemus with a heated, sharpened stake, killing the suitors, and hanging the treacherous maidservants;” or “The Divine Comedy with its graphic descriptions of the tortures of the damned; or War and Peace with its graphic descriptions of execution by firing squad, death in childbirth, and death from war wounds.

Pushing back against California’s efforts to conflate violent material with obscenity, ESA distinguishes the two by citing Supreme Court precedent that “obscenity is limited to ‘works which depict or describe sexual conduct.’”

In response to California’s citation to several statutes barring violent expression, ESA claims that California is engaged “in an effort to manufacture a tradition of regulation of depictions of violence” and explains that the statutes cited by California are constitutionally unenforceable.

In response to California’s citation to studies linking violent video games with antisocial behavior, ESA argues that

the evidence that video games cause any real harm to minors is paltry at best. The research cited by California has been resoundingly rejected by every court to have looked at it, and it both underproves and overproves the State’s claims: it does not show that video games cause actual harm to minors, and it purports to find the same measured effects for a wide array of stimuli, including games designed for small children, television cartoons, or even a picture of a gun. If evidence of this sort were sufficient to justify treating expression as unprotected, the First Amendment would mean very little.

 

Addressing California’s position with a broad brushstroke, ESA explains that

history teaches that every new form of media is met with concern that it will undo the youth of the nation. Pulp novels, movies, and the Internet have all been subject to similar attempts at censorship, complete with purported social science support. In each case, this Court has refused to take the “starch” out of strict scrutiny review, and has treated the regulations as presumptively unconstitutional.

ESA concludes that, if the Supreme Court determines that California’s statute is Constitutional, a “nearly impossible” burden would be placed on retailers to determine whether any particular video game violates the law and that the “only rational response might well be to stop selling video games to minors altogether.”

Oral arguments on Tuesday, November 2, 2010, may shed light on the Court’s views on these issues.

About Us

Stephen Riden is a partner at Beck Reed Riden LLP, Boston’s innovative litigation boutique. Our lawyers have years of experience at large law firms, working with clients ranging from Fortune 500 companies to start-ups and individuals.  We focus on business litigation – including contract, copyright, trademark, unfair competition, and healthcare litigation – as well as labor and employment, trade secrets, noncompetes, and alternative dispute resolution.

Starting Up A Video Game Company

On Thursday, October 14, 2010, Stephen Riden joined a panel of speakers at PoweredUp Boston’s 2010 Video Game Conference.  The “Life As A Startup — Legal Do’s & Don’ts” panel addressed a variety of issues affecting new and established video game companies, including formation issues, noncompete agreements, and protection of trade secrets.

The other speakers on the panel were Bill Reed, CEO of Demiurge Studios, and Marco Mereu, Esq., General Counsel to Regan Mercantile, LLC.  The moderator was Michael Cavaretta, Esq., of Morse Barnes-Brown Pendleton.  Attorney Cavaretta is also the founder and chair of New England Games SIG of the MIT Enterprise Forum.

A video of the presentation can be viewed here.

The Boston Redevelopment Authority’s PoweredUp conference was held at the Renaissance Boston Waterfront Hotel in the city’s emerging Innovation District. The BRA’s CreateBoston program, in partnership with its game steering committee, academic institutions, game companies and the Massachusetts Cultural Council (MCC), hosted the two-day international conference.  The conference brought together independent game developers to share best practices and address the challenges and opportunities facing the local video game industry.

Comprehensive Survey of Tax Incentives for Video Game Developers

State governments across the country are competing to attract video game developers to stimulate local economies.  As part of this effort, at least 20 states have enacted legislation to provide tax incentives to interactive media companies.  Most of these incentive packages have been implemented in the past five years.  Typically, the tax incentives take the form of credits, grants, and exemptions.  The incentives are often administered by a state’s film office.

Beck Reed Riden LLP is pleased to provide Stephen Riden’s comprehensive list of the states that are currently offering tax incentives to video game companies, along with a short description of each state’s incentive plan.

The chart is available for download here. (June 2011 update.)

We are following tax incentive legislation for game developers pending in several other states.  Check back for periodic updates or email us at info@beckreed.com, and we will automatically send the latest updates as they become available.  We welcome your feedback:  Please drop us a line if you have more up-to-date information.

Please note that this summary is not legal advice or tax advice of any nature, nor is it a substitute for proper legal research and advice. It is provided for informational purposes only.

About Us

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience at large law firms, working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and labor and employment. We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

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Massachusetts Legislature Amends Personnel Records Statute

Buried deep within the recently-enacted “Act Relative to Economic Development Reorganization” is language placing new burdens on Massachusetts employers. Under the amendment, which became effective August 1, 2010, any time a document is created that could negatively impact an employee’s employment, and the employer retains the document, the employer must notify the employee of it within ten days of the document’s placement in the employee’s personnel record.  The rest of this article is available here.

SJC Clarifies Leave Limit Under Massachusetts Maternity Leave Act

In an August 9, 2010 decision, the Massachusetts Supreme Judicial Court clarified that job-restoration rights under the Massachusetts Maternity Leave Act (“MMLA”) do not extend beyond eight weeks. In Global NAPS, Inc. v. Awiszus (No. SJC-10586), the Court, by a 4–3 margin, held that “[o]nce a female employee is absent from employment for more than eight weeks, she is no longer within the purview of the MMLA, and, consequently, is not afforded the protections conferred by the statute.” The decision represents a victory for employers that are faced with an ever-increasing barrage of state and federal statutes and regulations designed to protect the rights of employees in the workplace.

The MMLA, which has been in existence since 1972, provides that a female employee – the statute does not cover male employees – who has completed her employer’s probationary period, or who has worked full time for the same employer for three consecutive months, is entitled to take up to eight weeks of leave for the birth or adoption of a child. As long as the employee gives her employer at least two-weeks’ notice of her anticipated date of departure and her intention to return to work, she must be restored to her previous or similar position with the same status, pay, length of service credit, and seniority. The maternity leave may be paid or unpaid at the employer’s discretion. Employers are free to provide maternity leave benefits greater than those required under the statute. An employee who believes her MMLA rights have been violated may file a charge with the Massachusetts Commission Against Discrimination (“MCAD”), the agency charged with enforcing the statute.

In late June 2000, Sandy Stephens informed her employer, Global NAPS, Inc., that she would begin her maternity leave on July 14. She was told that she could remain out of work until October 2. When Stephens telephoned Global on September 27 to confirm that she would be returning within the week, she was told her employment had been terminated. Stephens subsequently sued Global under the MMLA, alleging that Global failed to comply with the MCAD’s Maternity Leave Guidelines, which state in relevant part that “if the employer does not intend for full MMLA rights to apply to the period [of leave] beyond eight weeks, it must clearly so inform the employee in writing prior to the commencement of the leave.” After trial, the jury awarded Stephens more than $2 million in damages (this amount was later reduced to $1.3 million).

Following a series of complicated post-trial legal maneuvers, the case made its way to the SJC. A majority of the Court concluded that neither the MMLA, nor its regulations, require an employer to notify an employee taking more than eight weeks of leave whether MMLA rights will apply to the period of leave extending beyond eight weeks. The Court also concluded that to the extent the MCAD’s Maternity Leave Guidelines suggest that MMLA rights extend beyond the eight-week statutory limit, they are inconsistent with the statute and do not provide a basis for legal relief. The Court pointed out that an employee may have other rights that protect her from termination while on maternity leave, including breach of contract and detrimental reliance, but unless those claims are plead, the employee has no right to her job back after eight weeks under the MMLA.

An important caveat. The MMLA covers eligible female employees who work for a Massachusetts employer with at least six employees. Employees – both female and male – who work for employers with at least 50 employees within a 75-mile radius may be eligible for parental leave of up to twelve weeks under the federal Family and Medical Leave Act. Parental leave under the FMLA runs concurrently with MMLA leave, not in addition to it.

For more information, contact Stephen Reed: sreed@beckreed.com or (617) 500-8662. To learn more about Beck Reed Riden LLP, click here.

Parental Leave Expanded Under FMLA

The July 2010 edition of New England In-House features Stephen Reed’s article on the FMLA’s expansion of parental leave rights to same-sex parents.

By Stephen Reed

On June 22, 2010, the U.S. Department of Labor clarified the definition of “son and daughter” under the Family and Medical Leave Act, effectively extending parental leave rights to individuals who provide day-to-day care or financial support to a child, regardless of the legal or biological relationship between the individual and the child.

The FMLA entitles eligible employees to take up to 12 weeks of unpaid leave during a 12-month period because of — among other things — the birth of an employee’s son or daughter, the placement with an employee of a son or daughter through adoption or foster care, and the need to care for a son or daughter with a serious health condition.

The FMLA defines “son or daughter” as a “biological, adopted, or foster child, a stepchild, a legal ward, or a child of a person standing in loco parentis.”

The FMLA regulations define in loco parentis to include those individuals with day-to-day responsibilities to care for and financially support a child. Thus, an employee who has no biological or legal relationship with a child may nonetheless stand in loco parentis to the child and be entitled to FMLA leave.

Determining whether an individual stands in loco parentis is dependent upon the particular facts of each case. Factors to be considered include the child’s age; the degree to which the child depends on the person claiming to stand in loco parentis; the amount of support, if any, the individual provides; and the extent to which duties commonly associated with parenthood are exercised.

Click here to read the rest of Steve’s article in this month’s issue of New England In-House.

Nursing Breaks Required Under FLSA

The Wage and Hour Division of the U.S. Department of Labor has issued a new Fact Sheet setting out requirements for employers to provide reasonable breaks during the work day to nursing mothers who need to express their breast milk.

The break time requirement for nursing mothers went into effect on March 23, 2010, with enactment of the Patient Protection and Affordable Care Act. That Act (part of the Obama Administration’s healthcare reform efforts) amended the overtime pay provisions of Section 7 of the Fair Labor Standards Act (“FLSA”), which requires, in part, that nonexempt employees be paid at the rate of one and one-half times their regular hourly rate for all hours worked beyond 40 in a work week.

Employers are now required to provide “reasonable break time for an employee to express breast milk for her nursing child for one year after the child’s birth each time such employee has need to express the milk.” The duration and frequency of the breaks will depend upon the particular needs of the employee. As long as the duration and frequency are reasonable, breaks cannot be denied.

The amendment also requires that employers provide “a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which may be used by an employee to express breast milk.” If an employer does not have a dedicated location for nursing mothers, it can create a temporary space as long as it provides privacy from coworkers and the public and is shielded from view.

The break time requirement has a number of caveats. First, it only applies to nonexempt employees; i.e., those who are subject to FLSA’s overtime pay requirements. Employers are not required under FLSA to provide nursing breaks to exempt employees. Second, employers are not required to pay employees who take breaks to express their milk. But, if an employer compensates employees for other types of breaks, and an employee uses such a break to express her milk, she must be paid the same as other employees on break. Third, employers with fewer than 50 employees do not have to provide breaks to nursing mothers if doing so would impose an undue hardship. Whether an undue hardship exists “is determined by looking at the difficulty or expense of compliance for a specific employer in comparison to the size, financial resources, nature, and structure of the employer’s business.” The 50-employee threshold is determined by counting all of an employer’s employees, regardless of their physical location.

Finally, the new FLSA break time requirement does not preempt state laws that provide greater protection to employees. According to a March 2010 report by the National Conference of State Legislatures, 24 states, plus the District of Columbia, and Puerto Rico currently have statutes related to breastfeeding in the workplace (Arkansas, California, Colorado, Connecticut, Georgia, Hawaii, Illinois, Indiana, Maine, Minnesota, Mississippi, Montana, New Mexico, New York, North Dakota, Oklahoma, Oregon, Rhode Island, Tennessee, Texas, Vermont, Virginia, Washington, and Wyoming). Many of these states extend break time to all employees, regardless of an employer’s size, require that the break time be paid, or extend the period for taking breaks beyond the one-year limit under FLSA.

Employers in states with existing laws governing breastfeeding in the workplace should have little trouble complying with the new federal law. Employers in states without such laws must adjust their policies and procedures to insure that they are in compliance with the new federal requirement.

For more information, contact Stephen Reed: sreed@beckreed.com or (617) 500-8662. To learn more about Beck Reed Riden LLP, click here. To view the DOL Breastfeeding Fact Sheet, click here.

Employers Cautioned On Unpaid Interns

Summer is upon us and high school and college students across the country are attempting to polish their resumes by taking unpaid internships with employers of all types. But “for-profit,” private-sector employers looking to provide students with a glimpse into the working world may find themselves at odds with the Fair Labor Standards Act (“FLSA”), the federal statute governing minimum wage and overtime payments. Using somewhat arcane language, the FLSA requires that non-exempt individuals who are “suffered or permitted to work” be compensated for the services they perform. The Department of Labor’s Wage & Hour Division has taken the position that interns working in the for-profit, private sector must be paid as employees unless each of the following six factors is satisfied:

1. The internship, even though it includes actual operation of the employer’s facilities, is similar to training that would be given in an educational environment;
2. The internship experience is for the benefit of the intern;
3. The intern does not displace regular employees, but works under close supervision of existing staff;
4. The employer derives no immediate advantage from the activities performed by the intern;
5. The intern is not necessarily entitled to a job at the end of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

With the DOL cracking down on FLSA violations, employers utilizing interns –regardless of the season – are cautioned to examine the nature and purpose of the internship to determine whether each of these six criteria is satisfied. If even one of the criteria is not met, the intern must be compensated as an employee. Click here to view the DOL’s Internship Fact Sheet.

For more information, contact Stephen Reed: sreed@beckreed.com or (617) 500-8662.  To learn more about Beck Reed Riden LLP, click here.

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