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FALL 2010

Estate Tax Update

Congress has not changed the estate tax law for 2010. As it stands today, there are no federal estate taxes due on the estates of persons who die in 2010. It is rather doubtful that it will change before the fall elections.

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Health Care Reform Act

As you know, the Health Care Reform Act provides for changes in the health care system over eight years beginning in 2010.

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Post-Nuptial Agreements are Valid in Massachusetts

In a recent Supreme Judicial Court decision, Ansin v. Craven – Ansin, 457 Mass. 283 (2010), the high court upheld a post marital agreement executed by a husband and wife 19 years after their marriage. A post marital agreement, like a premarital agreement, provides for the distribution of assets without judicial or equitable intervention in the event of a future divorce. These agreements have been rare in the past, but given the increase in divorces among empty nesters; they are more often considered and used.

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New Massachusetts Law Requires Notice to Employees When Negative Information is Added to Their Personnel Records

Buried in the newly-enacted Massachusetts Economic Development Reorganization law is a significant change to the state law regarding employee personnel records. The new law requires employers to notify an employee within ten days of adding any information that has been used or may be used in the future to negatively affect “the employee’s qualification for employment, promotion, transfer, additional compensation or the possibility that the employee will by subject to disciplinary action.”

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The SJC Clarifies the Massachusetts Law Regulating Maternity Leave

Massachusetts’ highest court reviewed the 1972 Maternity Leave Act (the “Act”) last month. The Act applies to all companies in Massachusetts comprised of less than fifty employees. The Court clarified that, under the Act, an employer has an obligation to provide at least eight weeks of maternity leave. During these eight weeks, an employer must guarantee each woman the right to reclaim her position. During this period, however, employers are not required to pay their employees.

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A New Private Right of Action to Enforce Workers’ Compensation Law

On August 9, 2010, Massachusetts Governor Patrick signed into law an amendment to the state’s workers’ compensation statute which allows individuals to sue employers for violations of the statute. More specifically, the new law provides an incentive for individuals to seek recovery of any unpaid insurance premiums that are due from employers for workers who are or who should be covered by the employer’s workers’ compensation insurance plan, including individuals misclassified as independent contractors. The law also permits a private attorney general’s action if an employer fails to maintain any workers’ compensation insurance. Bottom line: your employees or former employees are now private attorneys general for the purpose of making sure you pay workers comp insurance premiums for them.

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Liability for an Intoxicated Employee’s Misconduct Depends on Who is Supplying

In a recent SJC decision the Court held that an employer could not be held responsible for the actions of its employee who injured a pedestrian while driving under the influence. Just prior to the auto accident the employee had consumed alcoholic beverages during a work related meeting at a local restaurant. The Court in Lev v. Beverly Enterprises- Massachusetts, Inc., 457 Mass. 234 (2010), supported its ruling based on the long standing bright-line rule that an employer who does not provide alcohol to its employees owes no duty of care. In addition the court relied heavily on the “going and comings” rule which states an employee is not acting within the scope of his employment when she is traveling to or from work.

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The Mandatory Treble Damages Provision of the Wage Act is Not Retroactive

Decisions by the Business Litigation Session (Judge Margaret Hinkle) and the U.S. District Court for Massachusetts (Judge William Young) concluded that pending cases under chapter 149 of the Massachusetts General Laws (including the Wage Act) are not subject to the mandatory trebling statute. In 2008, the Massachusetts legislature passed an amendment requiring the imposition of treble damages when an employer is found to have violated the Wage Act. The trebling requirement is imposed – regardless of whether the employer’s violation was intentional or merely an inadvertent oversight.

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Leased Employees: A Workers’ Compensation Nightmare

If an employee is injured at work, generally his or her only recourse under Massachusetts law is a claim to workers’ compensation benefits. And usually employers are protected by the workers’ compensation statute from civil actions brought by their employees or their estates for injuries sustained in workplace accidents, unless the employee reserves the right to sue before he begins to work. However, the situation is different where the company leases its workforce. In a situation where a company leases its employees from a labor leasing company, generally the “employer” under the workers’ compensation statutes is technically the leasing agency, not the company which is utilizing the labor. In many cases this leaves a company vulnerable to uninsured liability if an employee is hurt on the job.

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Defense to Failure to Remove Snow is Removed

The Massachusetts Supreme Judicial Court in Papadopoulos v. Target, 930 N.E. 2d. 142 (2010) removed the distinction between “natural” and “unnatural” accumulations of snow. Personal injury lawyers are ecstatic, as landowners now no longer have this defense in slip and fall-snow cases.

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Duty of Buyer or Licensee to Use Reasonable Efforts to Maximize Profits for Seller or Licensor Implied in Contract

In this important intellectual property case, Plaintiffs, a corporation and its founder, had developed a new printing technology for newspapers, but, because the plaintiff corporation was small and had limited capital, it contracted to sell the technology to the defendant. The business ultimately failed and the plaintiffs sued the defendant. Plaintiffs alleged that the defendant’s bad business decisions and bad-faith caused the business failure. While the trial and appellate courts found that the defendant did not breach any express provision of the contract or of the covenant of good-faith and fair dealing, the Federal Court of Appeals ruled that the defendant did have a duty to use reasonable efforts in its execution of the contract. The court found that the contract, read as a whole, implied a duty to the defendant to use reasonable efforts to maximize the benefit to plaintiffs.

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Legal Fees Denied for Victorious Corporate Defendant, Even Where Suit Appeared Frivolous

The United States First Circuit Court of Appeals (for New England) ruled recently in Bukuras v Mueller Group 592 F.3d 255 (1st Cir. 2010) that a party prevailing in a lawsuit is not entitled to reimbursement by the losing party for its attorney’s fees and expenses, unless a contract, statute or rule provides for reimbursement. A severance agreement with the former general counsel for the corporate defendant was the subject of the controversy. The plaintiff general counsel argued that he should have received more money under a disputed formula. He had signed a general release of all claims when he signed the severance agreement.

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Recession Tips continued

This year has been challenging for all of us. Although there are signs of a thaw, nothing is certain when so many are unemployed and the housing market is so depressed. We hope that our newsletter with Recession Tips last January was of some help and that you find the tips in this current newsletter helpful as well.

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Use of networking technology

Do you or your employees use Facebook, Twitter or LinkedIn to communicate with friends, family and/or business associates on a daily basis? The three networks are growing at an exponential rate and can be valuable marketing tools. But are you also taking care that you and your employees are not posting your company’s confidential and proprietary information on the web? Or worse, are your employees using your confidential and proprietary information to compete with you? Perhaps your concern is that you have disgruntled employees who are badmouthing your company or your product undermining the benefits of using Facebook, Twitter and LinkedIn and the web in general. Even their personal information, in no way relating to their business dealings, may reflect poorly on your company.

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An Employment Agreement May Legally Require the Arbitration of Wage Act Claims to Avoid the Risks, Delay and Expense of Superior Court Trials

The Massachusetts Court of Appeals has ruled in Dixon v. Perry & Slesnick, P.C., (October 2009) that employees may be required to arbitrate Wage Act claims. In Dixon, the employee-dentist signed an employment agreement when she started to work for the defendant corporation. The employment agreement required the arbitration of all claims arising out of the agreement. Upon the termination of her employment, the employee-dentist initiated suit in the Superior Court. Though the employee agreed that she was required to litigate her breach of contract claim, she argued that the language of the Wage Act precluded her employer from requiring her to waive her right to a judicial forum on her statutory claim. As a result of this decision, a very substantial business risk can be avoided by drafting and executing appropriate employment agreements. The Court of Appeals reviewed the statutory language and held that the statute did not preclude arbitration of claims.

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Confidentiality Agreement Struck Down

A recent court decision, Northeastern Land v. N.L.R.B., 560 F.3d 36 (1st Cir. 2009), should have employers reviewing their confidentiality agreements to ensure that they do not inadvertently violate state and federal law. The federal appeals court in Massachusetts upheld the National Labor Relations Board’s ruling that an employer’s confidentiality agreement would not be upheld because it violated the federal law giving employees the right to organize. The employee was reinstated, and the company was fined heavily for discharging the employee for discussing his pay dispute with third parties. Don’t allow a poorly worded confidentiality provision defeat your objective and deny you of your intended benefits. Ensure that your confidentiality agreements pass federal and state law muster and that your company is adequately protected.

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Carefully Consider Which Entity is Right For Your Venture: LLC Cannot Obtain Charitable Tax Exemption

The Massachusetts Supreme Judicial Court (SJC) has definitively ruled in CMF Buckley/North v. Bd. of Assessors Greenfield, 453 Mass.404 (2009) that LLCs are ineligible for charitable tax exemptions under state law. The SJC upheld the denial of the exemption based upon the language in the statute which provides the exemption only includes incorporated charitable organizations. The SJC ruled that an LLC, as opposed to a corporation, is not an incorporated entity. While LLCs may be the chosen form for many Massachusetts-based businesses for a variety of reasons, such as its flexibility of governance, it is important for business owners to carefully review the advantages and disadvantages of choosing one business form over the other. It is important to review thoroughly with your accountant and attorney the pros and cons of choosing a particular corporate entity for your business.

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Publishing Employee Discipline May Be Libel, Even If True!

The legal adage “Truth is always a defense,” has been dealt a serious blow. A Massachusetts federal appeals court has ruled in Noonan v. Staples, 07-2159 (1st Cir. Feb. 13, 2009) that publishing the truth about employee discipline may subject employers to civil liability, even where the content of the publication is absolutely true.

Following an internal investigation into violations of the company’s travel expense report policy, Staples fired one of its employees and shortly thereafter sent out an email to its employees relating the incident. The former employee sued for libel.

Despite the fact that the contents of the email were true, the federal appeals court ruled that the former employee had stated a claim sufficient to allow his case to proceed to trial. The federal appeals court reversed the lower court’s judgment in favor of Staples because there was a dispute as to whether Staples acted with “actual malice” in making the statement. Though the case was tried and the jury found that Staples did not commit libel because it did not take action with “actual malice”, the appellate court’s decision should give an employer pause before it decides to create a behavior-modifying precedent by publishing the details of its employee discipline.

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Pleading Standard Heightened for Suits Filed in Massachusetts Courts

Massachusetts state and federal courts now require plaintiffs to flesh out their complaints with detailed factual allegations to survive motions to dismiss. Previously, a plaintiff merely needed to provide the barest outline of a case with almost no factual allegations to force a defendant to engage in costly and time-consuming litigation. While it is unclear to what extent this new interpretation of the rules of civil procedure will bar some plaintiffs completely from the courthouse, the Court’s ruling has put another defensive tool in the arsenal of defendants who may be targeted in litigation. And it will definitely assist defense counsel get to the plaintiff’s vulnerabilities more efficiently.

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Significant Changes in Federal Estate Tax Law in 2010

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Selling Your House to Your Child May Not Disqualify You From Receiving Medicaid Assistance for Nursing Home Expense

In a Superior Court decision, Clark v. Dehner, a court held that MassHealth, the agency responsible for administering Medicaid in the state, abused its discretion in denying the Medicaid application of a woman simply because she had sold an interest in her property to her daughter and taken, in exchange, a note and mortgage as payment and security.

MassHealth had taken the position that, because it was a private note and mortgage, and therefore, it could not be readily sold on the free market, that the transfer of the interest to the daughter was a disqualifying transfer under the Medicaid regulations, making the mother ineligible for Medicaid coverage.

The Superior Court found that the note was actuarially sound, did not provide for cancellation in the event of the mother’s death and provided for equal repayment amounts throughout the loan period, and therefore was not invalid.

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Recession Tips

We are going to depart from our regular Newsletter format for this edition to provide some tips based on our past experiences with economic downturns. Although there are some indications that this downturn might be somewhat different than those we have experienced, some lessons we have learned should be applicable, nevertheless. Some of these tips may be reminders to you, but we think they are worth elaborating in case they aren’t and as a refresher, if they are.

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