What you need to know

In a case that increases Massachusetts employers’ potential exposure to liability, the Massachusetts Supreme Judicial Court has recently determined that an employer may be liable to a former employee under certain sections of Chapter 151B, the Massachusetts anti-discrimination statute, for retaliatory or other “interfering conduct” that occurs after the employment relationship has ended.

What you need to do

Massachusetts employers must carefully consider actions taken against former employees who are pursuing or supporting a discrimination claim against them to ensure that they will not be considered retaliatory.

 

The Decision

Psy-Ed Corp. v. Klein concerns a lawsuit brought by Psy-Ed Corporation against two of its former employees, Dr. Stanley Klein and Kimberly Schive, in 1999.  Schive’s employment with Psy-Ed ended in 1996.  Shortly thereafter, she filed a charge of discrimination against the company at the Massachusetts Commission Against Discrimination.

Klein’s employment with Psy-Ed was terminated in August 1997.  Almost six months later, Klein—who also owned a share of the company—entered into an agreement with the company that he was to receive quarterly payments under a promissory note until the company had reacquired all of Klein’s shares.  In October 1997, in the interim period between Klein’s employment ending and the execution of the promissory note, Klein submitted an affidavit in connection with Schive’s MCAD charge that was unfavorable to the company.  The company did not become aware of this affidavit until it attended a mediation almost two years later, in September 1999.

In December 1999, the MCAD issued a probable cause determination in favor of Schive.  Two weeks after the MCAD’s ruling (and almost three months after learning of Klein’s affidavit), Psy-Ed and its president/CEO filed a court complaint against both Klein and Schive alleging various claims, including defamation.  The company’s board also voted to discontinue making payments to Klein under the promissory note.

In response, Klein and Schive, in separate actions, asserted claims of retaliation under Chapter 151B against Psy-Ed and its president/CEO based on the company’s lawsuit against them.  In Klein’s case, the lower court ruled against him, reasoning that he could not bring a retaliation claim because the alleged retaliatory conduct occurred when he was no longer employed by the company.  In Schive’s case, even though she, too, was a former employee at the time the lawsuit was brought, the court found in her favor on the retaliation claim after trial.

On appeal, the Supreme Judicial Court, looking at the plain language of Chapter 151B’s anti-retaliation provisions, concluded that the lower court had wrongly dismissed Klein’s retaliation claim based on the fact that he was not an employee at the time of the alleged retaliatory conduct (the lawsuit brought by Psy-Ed).  The SJC explained that under Chapter 151B, it is unlawful for “any person” to:

  • “discharge, expel or otherwise discriminate against any person because he has . . . filed a complaint, testified or assisted in any proceeding under [Chapter 151B],” or
  • “coerce, intimidate, threaten or interfere with another person in the exercise or enjoyment of any right granted or protected by [Chapter 151B], or to coerce, intimidate, threaten or interfere with such other person for having aided or encouraged any other person in the exercise or enjoyment of any such right [under Chapter 151B].”

Because the statute prohibits retaliatory conduct by “any person” against another “person”—rather than retaliatory conduct by an “employer” against an “employee”—the SJC determined that Chapter 151B does not require that an employment relationship exist at the time of the alleged wrongful conduct.  Accordingly, Klein’s retaliation claim was reinstated and remanded to the lower court for further consideration.

The SJC also noted an additional consideration that needs to be made when the alleged retaliatory conduct involves a lawsuit brought by an employer, given all citizens’ constitutional right to petition courts.  It first explained that, in a previous decision involving an alleged retaliatory lawsuit brought by an employer, the Court had found that the company’s lawsuit was constitutionally protected and not retaliatory because it had “a legitimate basis in law and fact,” and there was no evidence that the company was not acting with the purpose of stopping conduct it reasonably believed to be wrongful.  Then, in what may arguably be construed as an expanded limitation on an employer’s ability to sue a current or former employee, the SJC went on to cryptically state that “[a] suit that is not entirely baseless may nonetheless be retaliatory if it is not subjectively genuine.”

Looking to these standards, the SJC upheld the lower court’s finding in Schive’s favor on her retaliation claim because:

  • the trial judge had properly concluded Psy-Ed’s lawsuit was baseless given that the defendants admitted they had no evidence of money damages, and allegations in support of their claims were without factual support; and
  • the defendants’ asserted reason for bringing the lawsuit and the timing of the lawsuit, which was brought just two weeks after Schive received a favorable ruling from the MCAD, indicated that the lawsuit was not “subjectively genuine.”

What the Decision Means for Employers

Given the SJC’s determination that an individual can properly bring a retaliation claim under Chapter 151B against his former employer, and do so even years after his employment has ended, the Psy-Ed decision broadens the potential risk of liability faced by a Massachusetts employer.  By way of example:

  • An employer may face retaliation claims for allegedly interfering with a former employee’s new job prospects by providing a negative job reference.  Accordingly, employers may want to consider implementing a policy in which they will provide a potential new employer with only the title and dates of service of a former employee. 
  • An employer may face a retaliation claim if it stops making payment under a severance agreement.  Although it is unclear from the Psy-Ed opinion whether Dr. Klein’s retaliation claim included allegations involving Psy-Ed’s decision to stop payment on his promissory note, and the SJC does not address the issue, the opinion teaches that an employer should make sure that it has a legitimate basis to stop payment.  To that end, severance agreements should explicitly state that an employer may stop payment (and recover previous payments) if the employee breaches the agreement in any way. 
  • Employers must give careful consideration as to whether they may be susceptible to a retaliation claim when deciding whether to bring a lawsuit (or counterclaim) against a current or former employee.  They should be confident that they have sufficient evidence to support any claim.  Moreover, if a lawsuit is contemplated, it is particularly important that an employer assert its rights and address conduct it perceives to be wrongful promptly by giving the employee notice of the allegations and then following through to the degree necessary under the circumstances.  An employer’s delay in asserting its rights, particularly if its eventual assertion closely follows an individual’s protected activity under Chapter 151B, may lead a court to conclude that the employer’s action was not “subjectively genuine” and could give rise to a successful retaliation claim.

Thus, as a result of this determination, the consideration that an employer must make with respect to its post-employment actions, where the actions concern an employee involved with a complaint or proceeding under Chapter 151B, has expanded.