The Massachusetts Department of Paid Family and Medical Leave—the agency charged with regulating and enforcing the Commonwealth’s nascent paid leave program—just issued its mandatory workplace poster and guidance on the law’s notification requirements. Yesterday’s announcement provides employers with needed guidance on the law’s notice requirement—an obligation you must meet by May 31, 2019. What do Massachusetts employers need to know about this latest development?
Last year, Massachusetts Governor Charlie Baker signed into law what has been referred to as the “grand bargain” legislation. When it was enacted, we covered some of the law’s key provisions that would have a significant impact on Massachusetts employers, including the phase-in of paid family and medical leave under the Massachusetts Paid Family and Medical Leave Act (PFML).
The Massachusetts Supreme Judicial Court (SJC) recently discussed class certification in state court wage and hour cases in Gammella v. P.F. Chang’s China Bistro.1 The SJC held that the same civil procedure rules applicable to other class actions also apply to wage claims. It also found that uncertainty in the exact number of persons who might have a valid claim is not a reason for denying class action treatment. The SJC further held that making an offer of judgment to a class action plaintiff that includes all potential relief she might recover does not extinguish that person’s claims.
UPDATE: The changes to the Massachusetts data breach notification law described below are now in effect. Thus, if you have discovered a data incident involving the personal information of Massachusetts residents you will want to review these changes carefully – they are significant and the Commonwealth is intent on educating the public about them.
On March 29, 2019, the Massachusetts Executive Office of Labor and Workforce Development (EOLWD) released an updated version of the proposed Massachusetts Paid Family and Medical Leave (PFML) regulations, offering further clarification to one of the most generous paid family and medical leave programs in the nation.
The Massachusetts Department of Family and Medical Leave has published updated draft regulations implementing the Massachusetts Paid Family and Medical Leave Law (PFMLA) that, in many respects, substantially change or add to the initial draft regulations published in January 2019.
The Massachusetts Paid Family and Medical Leave law (PFML) will require most private employers to provide covered individuals with paid family and medical leave funded through a payroll tax. Beginning April 29, 2019, the Massachusetts Department of Family and Medical Leave (the “Department”) will offer approved plan applications for employers seeking an exemption from collecting, remitting, and paying contributions under the PFML that would otherwise be due beginning on July 1, 2019.
Rejecting the federal standard for determining whether a party has “prevailed” on his or her claim under the Massachusetts Wage Act, Mass. Gen. Laws ch. 149, §§ 148 & 150, the Massachusetts Supreme Judicial Court has held instead that the less-stringent “catalyst” test applies. As a result, plaintiffs who received $20,500 in a settlement under the Act were entitled to an award of attorney’s fees. Ferman v. Sturgis Cleaners, Inc., 481 Mass. 488, 2019 Mass. LEXIS 96 (Feb. 19, 2019).
On January 23, 2019, the newly-created Massachusetts Department of Family and Medical Leave (Department) released proposed regulations clarifying the rights and responsibilities of employers and employees under the new Massachusetts Family and Medical Leave Law (MFMLL). The MFMLL will require all private employers in Massachusetts to provide covered individuals with paid family and medical leave funded through a payroll tax.1 Under the proposed regulations, it appears that the Department will be responsible for, among other things, making decisions about whether to approve employees for paid leave under the MFMLL once the law goes into effect on January 1, 2021.
The newly-created Massachusetts Department of Family and Medical Leave has stated that it plans to publish draft regulations for the recently enacted Massachusetts Paid Family and Medical Leave Law no later than January 23, 2019. In addition, the Massachusetts Department of Family and Medical Leave has scheduled a number of public listening sessions on the draft regulations throughout the state, beginning with a session in Boston on January 30, 2019. A complete list of these public listening sessions can be found at this link.
The Massachusetts Attorney General’s Office recently published guidance regarding how a new tipped-employee law is to be applied. Employers must now compare the tips earned by an employee, plus the service rate, to the full minimum wage at the end of each shift and pay any shortfall to the employee. This change went into effect January 1, 2019.
As you may remember, it was Christmas in July for employees when Massachusetts passed the “Grand Bargain,” among other things, putting the Commonwealth on a path to a $15.00 minimum wage. When the clock struck midnight on January 1, 2019, however, not only did the minimum wage increase to $12.00 per hour, but there was a significant change to the way employers calculate the tip credit and a decrease to the Sunday/Holiday mandatory premium rate that, though favorable, actually might complicate matters.
On October 13, 2018, the Massachusetts legislature amended the state’s Criminal Offender Record Information (CORI) law. Many other U.S. territories and localities have passed ban-the-box laws over the last decade that limit employer inquiries into an applicant’s criminal history. Massachusetts initially adopted ban-the-box legislation in August 2010.
A summary of the Department of Family and Medical Leave's new website and FAQ, including highlights from the employer FAQ page.
New guidance issued by the Massachusetts Department of Revenue requires Massachusetts employers with six or more employees to file an annual health insurance responsibility disclosure (HIRD) form. The form became available on November 1, and must be submitted by November 30 of this year and each year subsequent.
A summary about the Health Insurance Responsibility Disclosure (“HIRD”) form and what it means for employers in Massachusetts.
A summary about the Brave Act taking effect on November 7, including information about the new changes to the law, what these changes mean for employers, and how to address leave for veterans on Veterans Day.
A summary about the new Criminal Justice Reform Act taking effect on October 13th, including information about existing law, changes to existing law, and what these changes mean for employers.
A new Massachusetts law establishes minimum requirements for employment-related noncompete agreements to be enforceable and bans agreements that do not meet the law's requirements. Massachusetts joins several other states that have recently established new regulations for noncompete agreements. The new law applies only to agreements entered into on or after October 1, 2018.
A Suffolk County jury recently awarded a Haitian–American nurse an unprecedented $28.2 million in total damages on her claim of retaliation against Brigham & Women’s Hospital, her former employer. At the same time, the jury rejected the nurse’s claim of race discrimination.
On the final day of the legislative session, Massachusetts lawmakers passed a significant reform bill addressing non-compete agreements and trade secret protection. Passage was years in the making, as the specifics of reform and the need for reform itself have been hotly debated for almost ten years in prior legislative sessions. This update, written by Hirsch Roberts Weinstein LLP, outlines the significant changes that would occur to current MA law and what it means for employers.
As discussed in our prior Alert, the Massachusetts Legislature has been considering legislation focused on reforming non-compete covenants. The Legislature has now passed a major overhaul of non-compete law, known as the “Massachusetts Noncompetition Act.” Assuming Governor Charlie Baker signs the bill, it will apply to noncompetition agreements entered into on or after October 1, 2018. This Alert summarizes the key provisions of the Act.
It finally happened. After years of debate on Beacon Hill, Massachusetts law makers agreed to reform the Commonwealth’s treatment of noncompetition agreements as part of a number of bills passed in the waning hours of the 2018 legislative session.
After years of negotiation, on July 31, 2018, the Massachusetts legislature finally was able to pass legislation that, if signed by Governor Charlie Baker, would significantly limit the enforceability of noncompetition agreements in the Commonwealth. The Massachusetts Noncompetition Agreement Act ("the Act") would apply to all noncompetition agreements entered into on or after October 1, 2018. If signed into law, the Act generally would limit all post-employment noncompetes to a maximum duration of 12 months, and, absent agreement to the contrary, require employers to pay 50% of the former employee’s base salary – termed “garden leave” pay – during the restricted period, among other constraints. This significant change to employment relationships in Massachusetts was included in a broader economic development bill, and is now on Governor Baker’s desk for signature.
The new “grand bargain” legislation Governor Charlie Baker signed into law last week gradually phases out the requirement that Massachusetts retailers pay time-and-a-half for work on Sundays or certain holidays. However, this phase-out has a hidden complication: payment of less than time-and-a-half for work on Sunday or holidays is not credited towards overtime for work over 40 hours in a week, and therefore must be included in the regular rate. This means retailers may be required to account for extra premium pay for employees who work on Sundays or holidays.
Massachusetts Governor Charlie Baker has signed a sweeping bill that, over a period of five years, will: (1) raise the minimum wage to $15 per hour; (2) mandate paid family and medical leave for Massachusetts employees; and (3) phase out Sunday and holiday premium pay for retail employees. The law, signed on June 28, 2018, also will institute an annual sales tax holiday weekend. The first minimum wage increase, to $12.00 an hour, and first decrease in Sunday and holiday premium pay will go into effect on January 1, 2019.
Like New Jersey’s Diane B. Allen Equal Pay Act, the Massachusetts Equal Pay Act (MEPA) amendments went into effect on July 1, 2018. Regarded as one of the first comprehensive fair pay laws to be passed at the state level, MEPA has served as not only as a catalyst, but a model, for the patchwork of fair pay laws being enacted across the nation.
On June 28, 2018, Massachusetts Governor Charlie Baker executed legislation that makes sweeping changes to Massachusetts law. As part of this so-called “Grand Bargain” legislation (the “Act”), Massachusetts will incrementally raise the minimum wage from $11 to $15 an hour and eliminate the need for most retail employees to receive premium pay for work performed on Sundays and holidays. The new law also creates one of the most generous paid family and medical leave programs in the country. Massachusetts now joins California, New York and Washington, D.C. as the only states to have both a $15 minimum wage and mandatory paid family and medical leave.
In one fell swoop, Massachusetts has set in motion a plan to increase its minimum wage to $15.00 per hour and create a comprehensive paid family and medical leave program as the result of a “grand bargain” between employee advocates and representatives of the state’s business community. Governor Charlie Baker signed the bill in a ceremony today at the State House, which will also eliminate premium pay for Sundays and holidays, and make the annual sales tax holiday permanent. What do Massachusetts employers need to know about this new law?
The Massachusetts legislature is once again seeking to enact comprehensive noncompetition legislation to rein in the use, and some may argue the abuse, of restrictive covenants in employment agreements. Currently, noncompete agreements are examined by courts on a case-by-case basis under well-developed Massachusetts case law. This approach, however, has sometimes led to inconsistencies in the courts and unpredictable results.
Ever since Massachusetts Governor Charlie Baker signed the state Equal Pay Act (MEPA) on August 1, 2016, employers have been seeking direction on how employee pay should be analyzed to withstand scrutiny under the new law. MEPA goes into effect on July 1, 2018.
A provision in the Massachusetts criminal justice reform law signed by Governor Charlie Baker amends the state’s restrictions on the questions employers may ask a job applicant regarding the applicant’s criminal history during the hiring process. The new restrictions include an adjusted limitation on asking about misdemeanor convictions and a bar on asking about sealed or expunged criminal records.
Health insurance carriers often provide explanation of benefits (EOB) summaries to the policyholder specifying the type and cost of health care services received by dependents covered by the policy. EOBs often disclose sensitive information regarding the mental or physical health condition of adult dependents. Massachusetts has now enacted a law, an act to protect access to confidential health care (the PATCH Act), that permits patients to require their insurance carriers to send their medical information only to them as opposed to the policyholder.
On March 1, 2018, the Massachusetts Attorney General (AG) issued detailed guidance on the amendments to the Massachusetts Equal Pay Act (MEPA), which are set to go into effect on July 1, 2018. The amendments, which were enacted in 2016, will overhaul MEPA, a law that has been in effect for over 70 years, and make it one of the strictest pay equity laws in the nation. Structured primarily in a question-and-answer format, the new guidance answers many of the important questions employers have been asking since the enactment of the amendments. This article will highlight some of the most significant issues addressed in the new guidance.
The Massachusetts Commission Against Discrimination (MCAD) on February 28, 2018, issued questions and answers (Q&A) to provide additional interpretive information about the Massachusetts Pregnant Workers Fairness Act (PWFA). This updates the MCAD’s January guidance. The PWFA becomes effective on April 1, 2018.
Massachusetts Legislature Close to Deal on Non-Compete Law?
The Massachusetts Legislature, after a decade of attempts, may pass restrictions on the use of non-compete covenants in the Commonwealth.
The Massachusetts Pregnant Workers Fairness Act goes into effect on April 1, 2018. This new law requires employers with six or more employees to provide reasonable accommodations to pregnant employees. As the effective date of the Act draws near, employers should take steps to ensure compliance with its requirements.
The Massachusetts Pregnant Workers Fairness Act, enacted in July of 2017, will take effect on April 1, 2018. The Act prohibits Massachusetts employers from denying pregnant women and new mothers reasonable accommodation for their pregnancies and any conditions related to their pregnancies, regardless of whether the pregnancies or related conditions constitute disabilities under existing federal or state discrimination law. The Act also provides increased legal protection against pregnancy-related discrimination in the workplace.
The Massachusetts Supreme Judicial Court recently held that individuals acting as board members and investors cannot be held personally liable under the Massachusetts Payment of Wages Law, M.G.L. c. 149, § 148, for a company’s failure to pay wages. Only board members or investors who also served as an officer or agent “having the management” of the company can be subjected to personal liability. This is a significant decision, given that the Payment of Wages Law carries substantial penalties for noncompliance.
As we get closer to the July 1, 2018 implementation date for the Massachusetts Equal Pay Act (MEPA), it is time to focus in earnest on practical workplace considerations for affected employers. Although the MEPA does not dictate what specific language employment policies must include, employers should align their internal policies and practices with the law’s detailed requirements. Employment policies that may require revision or amendment in order to comply with the provisions of MEPA cover not only compensation, but also hiring practices, interview procedures, commissions, merit-based bonuses, and confidentiality. Employers also should reviewing and updating their written employment applications, offer letters, onboarding materials, and job descriptions to ensure compliance with MEPA. These documents may include questions about salary history, explain company practices with regard to making compensation decisions, or otherwise touch on areas covered by MEPA.
The July 1, 2018, implementation date for the amendments to the Massachusetts Equal Pay Act (MEPA) is less than a year away. The amendments approved in 2016 will bring about substantial changes to the definition of “comparable work,” employer defenses, statutes of limitations, and prohibited employer practices, such as salary history inquiries.
Next spring, Massachusetts employers will have additional compliance requirements under the state Pregnant Workers Fairness Act, which prohibits employers from denying pregnant employees reasonable accommodations for pregnancy- and childbirth-related conditions, absent due hardship.
An amendment to the Massachusetts Fair Employment Practices Act, G.L. c. 151B, expressly includes pregnancy as a protected characteristic and expands accommodation requirements for pregnant employees. The amended law goes into effect April 1, 2018.
On July 27, 2017, Governor Baker signed the Massachusetts Pregnant Workers Fairness Act (the “Act”). Once the Act takes effect on April 1, 2018, most employers with employees in Massachusetts will be required to provide reasonable accommodations to employees for pregnancy and related conditions.
Massachusetts just joined 21 other states and the District of Columbia by enacting a comprehensive pregnancy workplace law with unanimous support from the legislature, employee advocates, and the Massachusetts business community. Today, Governor Charlie Baker signed the Pregnant Workers Fairness Act (PWFA), which will take effect (appropriately enough) in about nine months – on April 1, 2018.
The Massachusetts Supreme Judicial Court has ruled that a newly-hired employee who was terminated because she tested positive for marijuana use can sue her former employer for handicap discrimination. Christina Barbuto suffers from Crohn's disease and her physician had provided her with a written certification allowing her to use marijuana for medicinal purposes. Medical and recreational marijuana use is legal in Massachusetts in limited amounts.
On May 10, 2017, the Massachusetts House, by unanimous vote (150-to-0), passed the Massachusetts Pregnant Workers Fairness Act. If enacted, the Act will expand existing protections for pregnant employees in Massachusetts and require employers to provide pregnant women and new mothers with “reasonable accommodations” for their pregnancies and any conditions related to their pregnancies. The bill (House, No. 3680) is expected to pass the Massachusetts Senate and be signed into law by Governor Charlie Baker.
Employers operating in Massachusetts are already aware of the Commonwealth’s Criminal Offender Record Information (CORI) law.1 CORI refers to the database of criminal information maintained by the Department of Criminal Justice Information Services (DCJIS).
In a decision that could spell trouble for Massachusetts employers, a judge in the Superior Court’s Business Litigation Session recently held that meal breaks count as “compensable working time,” for which employees must be paid, unless the employee is relieved of all work-related duties during the break. In reaching that decision, the court rejected the employer’s argument that the court should apply the more lenient federal standard, under which the compensability of meal breaks depends on whether the break time is spent “predominantly” for the benefit of the employer.
Recently, the Governor of Massachusetts signed a new pay equity law that will prohibit employers from inquiring into applicants’ prior salaries. The law goes into effect in July 2018 and it makes Massachusetts the first state in the country to have this type of law.
Massachusetts’s highest court recently issued a decision that impacts the ability of delivery companies operating in the commonwealth to use independent contractors in providing delivery services. In Chambers v. RDI Logistics, Inc., the Massachusetts Supreme Judicial Court (SJC) ruled that the second prong of the state’s three-pronged independent contractor test is preempted by federal law when applied to motor carriers. Significantly, however, the SJC also ruled that the three prongs of the test are severable and that, even when the second prong is preempted, an employer must satisfy the other two prongs to avoid misclassification liability. The SJC ruling aligns with the First Circuit’s decision in Schwann v. FedEx Ground Package Sys., Inc.
On November 8, 2016 voters answered “yes” to Question 4, approving the Regulation and Taxation of Marijuana Act (the “Marijuana Act”). The Marijuana Act goes into effect on December 15, 2016. Massachusetts previously passed a law permitting use of marijuana for medicinal purposes. For more information on the impact of both of these laws on the workplace, including their impact on employer drug testing policies, read our full alert.
On July 14, 2016, Massachusetts Governor Charlie Baker signed into law An Act Relative to Housing, Operations, Military Service, and Enrichment (the “HOME Act”).By amending several existing laws, the HOME Act provides additional support and protections for veterans, members of the Armed Services, and their families. Employers should be aware of two major changes in employment law brought about by the HOME Act, both of which went into effect when the law was signed by Governor Baker and may require changes to your policies, practices, or employee handbook.
Warehouses and delivery centers in Massachusetts can be opened on Sundays and holidays under a provision in the new economic development law amending the state’s “blue laws.” The Massachusetts blue laws, with a list of 55 exceptions, restrict certain commercial activities on Sundays and holidays. Governor Charlie Baker signed “An Act Relative to Job Creation and Workforce Development” (H. 4569) on August 10, 2016.
On August 5, 2016, Massachusetts Governor Charlie Baker signed into law a bill governing gig economy rideshare companies such as Uber and Lyft – dubbed “transportation network companies” – which implements a novel new background check system, among other things. With this law, Massachusetts will join 34 other states that have passed comprehensive oversight for this new industry. The details of this compromise bill were hammered out between the House and the Senate at the eleventh hour, moments before Massachusetts’s legislative session came to a close on July 31.
On August 1, 2016, Massachusetts Governor Charlie Baker signed into law a comprehensive pay equity bill entitled The Act to Establish Pay Equity (the Act). The law establishes significant new employer obligations with respect to pay equity, employer policies, and hiring practices, and also creates serious consequences for violations.
Continuing a trend, Massachusetts is poised to implement major changes to its equal pay laws. Following the lead of California, New York, and Maryland, which each enacted expansive equal pay laws in the last few months, Massachusetts is now nearing issuance of similarly broad legislation that will make litigating such cases significantly less challenging for plaintiffs. As such, Massachusetts employers need to be even more mindful of these new litigation risks and may want to take proactive steps to avoid claims of pay inequity.
Massachusetts finally may enact non-compete reform legislation. The current session of the General Court, the state’s legislature, ends on July 31, and the House and Senate have passed versions of non-compete reform legislation limiting non-compete agreements that differ on important points. If non-compete reform is to become a reality in Massachusetts, significant compromise will be necessary before July 31.
Employers know all too well that employees sometimes help themselves to documents the employer would like to keep confidential. This is precisely why many employers require employees to sign confidentiality agreements and often impose discipline, including termination, for taking confidential documents. But what if an employee who has filed a discrimination suit against his or her employer takes confidential documents to assist in the case? That is, can an employer subject an employee who engages in “self-help discovery” to discipline for taking confidential information?
An important new Supreme Judicial Court decision has paved the way for Massachusetts employees pursuing certain discrimination claims to engage in what the court has dubbed “self-help discovery.” This new variant of “discovery” would permit employees, in certain circumstances, to lawfully take and disclose confidential employer documents before a lawsuit has even begun. This ruling emphasizes the importance of maintaining appropriate security for sensitive documents, including firewalls and other technological barriers.
On May 11, 2016, the First Circuit Court of Appeals issued the latest of several decisions supporting and furthering federal preemption of the Massachusetts independent contractor statute for businesses that qualify as motor carriers under the Federal Aviation Administration Authorization Act of 1994 (FAAAA). The practical impact of the First Circuit’s decision in Massachusetts Delivery Association v. Healey and the cases that preceded it is that motor carriers, including many delivery businesses, may be able to classify their drivers as independent contractors with a reduced risk of violating the Massachusetts independent contractor statute.
On February 22, 2016, the First Circuit issued its decision in Schwann v. Fedex Ground Package System, Inc. This decision clarified the extent to which the Massachusetts Independent Contractor statute, G.L. c. 149 § 148B (“§ 148B”), as applied to motor carriers, is preempted by the Federal Aviation Administration Authorization Act of 1994, 49 U.S.C. § 14501(c)(1) (“FAAAA”). Schwann v. FedEx Ground Package Sys., 2016 U.S. App. LEXIS 3050 (1st Cir. Mass. Feb. 22, 2016).
Readers are probably aware that last year, Massachusetts voters approved a new sick leave law that went into effect on July 1, 2015. Many employers with preexisting leave policies, however, took advantage of the so-called “safe harbor” provision in the law and its implementing regulations that allowed those employers to delay full implementation until January 1, 2016, as long as they complied with certain general provisions of the law. This safe harbor expires on January 1, 2016—so employers that relied on the safe harbor rules must now put in place new policies to comply with the sick leave law.
Employers operating under the Massachusetts Earned Sick Leave Law “safe harbor” should prepare to fully comply with the Law beginning January 1, 2016.
Effective July 1, 2015, all private-sector employers in Massachusetts must provide their employees with up to 40 hours of sick leave per calendar year.1 Earlier this year, the Massachusetts Attorney General published proposed regulations concerning the implementation of the new law.2 After receiving comments to those proposed regulations, the Attorney General recently issued final regulations that differ from the proposed regulations in a number of important respects.
As many of you are aware, the July 1, 2015 effective date of the Massachusetts earned sick leave law is looming. In summary, the new law provides that employers of 11 or more employees must provide their Massachusetts employees with job-protected paid sick leave accrued at a rate of 1 hour for every 30 hours worked, while smaller employers must provide the same amount of unpaid sick leave.
The Massachusetts Attorney General has issued final regulations (“regulations”) regarding the new earned sick time (EST) law. Our recent HRW Alert provides a summary of key provisions of the regulations. Please click the link below to view the full HRW Alert.
On June 10, 2015, the Attorney General’s Office issued an amended safe harbor notice and poster regarding the new Massachusetts Earned Sick Time law, which goes into effect on July 1, 2015. Check out the link below for a copy of our newest HRW Alert on these updates.
On June 10, 2015, the Massachusetts Attorney General’s Office (AGO) issued two important new documents for employers concerning implementation of the new earned sick time law that goes into effect on July 1, 2015. The AGO has held public hearings and listening sessions concerning the proposed regulations it issued in April, and has stated that the final regulations will be issued in mid-June of 2015. (AGO representatives targeted June 19, 2015 as the date for issuance of final regulations.) On June 10, the AGO issued two documents that will assist employers in preparing to implement the law.
On June 10, 2015, the Massachusetts Attorney General issued a Notice of Employee Rights (the "Notice") under the Commonwealth's new earned sick leave law, as well as a document clarifying the scope of the "safe harbor" exemption to that law.
In April 2015, the Supreme Judicial Court of Massachusetts issued two important decisions providing guidance for employers on the scope of Massachusetts’s wage and hour laws. In one decision, the Court held that employers may institute no-tipping policies in the Commonwealth without violating the Tips Act; however, employers must provide notice to customers of their no-tipping policies in order to avoid potential liability for the failure to treat change left by customers as tips. In the other decision, the Court found that taxi drivers are not properly considered independent contractors under the Massachusetts Independent Contractor Law.
The Massachusetts Attorney General recently issued a supplemental regulation to the state's new sick leave law that aims to provide a "safe harbor" to Massachusetts employers that had qualifying paid time off ("PTO") policies (including sick, personal, vacation, and/or combined PTO policies) in place as of May 1, 2015. The new regulation is welcome news to employers who are struggling to adopt policies that comply with the new law.
On May 18, 2015, the Massachusetts Attorney General’s Office (AGO) held the first of several public hearings on proposed regulations concerning implementation of the new earned sick time law passed by Massachusetts voters in November 2014. At that hearing, Attorney General Maura Healey stated that the AGO intends to proceed with implementing the law as of its July 1, 2015 effective date and that the AGO is on track to finalize implementing regulations ahead of that date (AGO representatives targeted June 19, 2015 as the date for issuance of final regulations).
The Massachusetts Attorney General has issued proposed regulations (“regulations”) regarding the new Sick Leave Law. The regulations do not yet have the force of law. There will be a notice and comment period that lasts until June 10, 2015, and public hearings will be held throughout the Commonwealth. For a summary of key provisions of these regulations check out the full copy of our alert by clicking on this link.
In November, Massachusetts voters approved a paid sick leave ballot measure that will require an employer to provide paid sick leave if it has more than 10 employees, or unpaid sick leave if it has10 or fewer employees. The law is set to go into effect on July 1. However, numerous questions have come up regarding how the new law should be implemented.
As we detailed in November 2014, Massachusetts voters last fall approved a new law mandating that employers provide earned sick time to their employees. Under the new law, employers with 11 or more employees must provide paid sick leave for workers and smaller employers must provide unpaid sick time. The law is set to take effect on July 1, 2015, and employers have raised many questions about how the law will be implemented. The Massachusetts Attorney General’s Office (AGO) recently issued proposed regulations that provide detailed guidance concerning implementation of the new law. The AGO has scheduled six public hearings to gather public feedback on the regulations and has invited any interested parties to submit written comments on the regulations.
Massachusetts has revised the state’s maternity leave law, giving men and women the same rights to take 8 weeks of parental leave after the birth or adoption of a child. The amended law, An Act Relative to Parental Leave, expands the scope of the Massachusetts maternity leave law, M.G.L. c. 149, Sec. 105D, and changes language in the state’s anti-discrimination law, M.G.L. c. 151B sec. 4(11A), making both laws gender neutral. Governor Deval Patrick signed the new law the day before he left office. The law will take effect on April 7, 2015, 90 days after its enactment.
In one of his last acts as governor, former-Governor Deval Patrick signed into law on January 7, 2015 an amendment to the previous Massachusetts Maternity Leave Law that extends eight weeks of unpaid leave to both male and female employees to care for a newborn, newly placed, or newly adopted child.
On November 4, 2014, Massachusetts voters passed a ballot measure to provide earned paid sick leave to employees. Starting on July 1, 2015, employers with more than 10 employees will be required to allow all employees who work in Massachusetts to accrue and use up to 40 hours of paid sick leave per calendar year. Employers with 10 or fewer employees will be required to allow their employees to earn and use up to 40 hours of unpaid sick leave.
In addition to the restrictions on opening in certain New England states, retailers with stores in Massachusetts and Rhode Island should also be aware of their obligation to pay their employees holiday pay (i.e., one-and-one-half of their regular rate) for working on state holidays (as well as on Sundays). These premium pay requirements are some of the last vestiges of the New England “blue laws” that regulate commercial activity on “days of rest.” Although these laws have roots stemming back hundreds of years, they are still vigorously enforced today.
In August of 2014, Massachusetts enacted broad reforms of the Commonwealth’s domestic violence laws. As Ogletree Deakins detailed in an August 18, 2014 Massachusetts eAuthority, “Domestic Leave Now Mandated in Massachusetts,” the reforms included a new law that requires employers with 50 or more employees to provide up to 15 days of leave from work during a 12-month period to employees who are victims of domestic abuse or are related to a qualifying family member who is a victim. The Office of the Massachusetts Attorney General, which is responsible for enforcing this law, recently issued advisory materials about the domestic abuse leave requirement. These guidance documents primarily track the detailed language of the law itself and provide useful summaries of the law. The guidance also provides the Attorney General’s views on certain undefined portions of the law.
Executive Summary: On election day, Massachusetts voters approved a ballot initiative requiring employers to provide sick time to their employees. Absent legislative repeal, the mandatory sick time law will become effective on July 1, 2015.
Over the past several years, many retailers have moved up the start times of their “Black Friday” sales so that they start on Thursday—which is Thanksgiving—instead of Friday. Despite some public disapproval, this move towards an earlier start to the holiday shopping season appears to be here to stay. Retailers with operations in New England should be aware that Massachusetts, Rhode Island, and Maine have laws that prohibit most retailers from opening on Thanksgiving and Christmas day. Although these so-called “blue laws” have been relaxed in many respects to allow retailers to open for business on Sundays and certain other holidays (often requiring retailers to pay employees premium pay if they do), the long-standing prohibitions on Thanksgiving and Christmas openings remain in effect for most retailers.
On November 4, 2014, Massachusetts voters passed a ballot measure to provide earned paid sick leave to employees. Effective July 1, 2015, employers with more than 10 employees will be required to allow all employees who work in Massachusetts to accrue and use up to 40 hours of paid sick leave per calendar year. Employers with 10 or fewer employees will be required to allow their employees to earn and use up to 40 hours of unpaid sick leave.
On November 4, 2014, Massachusetts voters approved by a decisive margin (approximately 60 percent in favor) a new measure requiring employers to provide sick leave to all employees (with certain limited exceptions regarding federal or municipal employers). The new law further provides for paid sick leave for workers employed by employers of 11 or more employees. The new law takes effect on July 1, 2015. While many employers provide sick leave (paid or unpaid) to their workers, approximately one-third of Massachusetts employees are not covered by such voluntary programs. As such, this new law will have a significant impact on these employers, and the new statutory scheme impacts employers that currently provide sick leave as well.
On October 23, 2014, the Boston office hosted Commissioner Sunila Thomas-George, Commissioner Charlotte Golar Richie, and General Counsel Constance McGrane of the Massachusetts Commission Against Discrimination (MCAD) at its semi-annual Breakfast Briefing. The MCAD commissioners and general counsel provided helpful information and advice for employers appearing at the MCAD. Here is a summary of the valuable tidbits the MCAD commissioners and general counsel shared with us.
Massachusetts Governor Deval Patrick signed into law An Act Relative to Domestic Violence on August 8, 2014.This far-reaching law, which institutes reforms throughout the criminal justice system, mandates that all public and private employers with more than 50 employees must permit employees impacted by domestic violence to take up to 15 days of leave in any 12 month period. This leave may be paid or unpaid at the employer’s discretion. Employers are not required to grant leave if the employee is the perpetrator of abusive behavior against a family member. Employers are specifically required to notify employees of their rights and responsibilities under the law.
On August 8, 2014, Massachusetts Governor Deval Patrick signed sweeping new legislation in the area of domestic violence—M.G.L. c. 260 entitled “An Act relative to domestic violence.” The new law is effective immediately and impacts not only the criminal justice system, but public and private employers in the Commonwealth as well. Under the new law, employers with 50 or more employees must provide employees up to 15 days of unpaid leave in any 12-month period if the employee or a covered family member of the employee is a victim of abusive behavior. Covered employers must notify employees of their rights and responsibilities under the law.
Governor Deval Patrick recently approved the Commonwealth’s 2014 fiscal year budget, which includes provisions repealing both the Fair Share Contribution (FSC) and the Health Insurance Responsibility Disclosure (HIRD) form requirements. These requirements were part of the landmark Massachusetts health care reform law in 2006. Their repeal resulted from the upcoming implementation of the federal health care reform, the Affordable Care Act (ACA).
In August 2012, Massachusetts Governor Deval Patrick signed into law a bill that established a series of new legal requirements for temporary staffing agencies and the companies that use their services. The law, called the “Temporary Workers Right to Know Act,” amends existing Massachusetts laws governing the temporary staffing industry in three specific ways by: (1) requiring that staffing agencies provide certain notices and information to all temporary employees; (2) prohibiting staffing agencies and worksite employers from charging certain fees to temporary employees; and (3) regulating the manner in which staffing agencies conduct their business. The new law will take effect on January 31, 2013.
The Massachusetts Department of Criminal Justice Information Services (DCJIS) recently issued final regulations to accompany the Massachusetts Criminal Offender Record Information (CORI) law. The law, which was passed in August 2010, significantly changed the way in which employers screen the criminal histories of applicants and employees. The new regulations, which went into effect immediately, clarify how employers obtain and use criminal history information.
Articles in this issue include: Criminal Record Law Requirements Become Effective May 4; Change in Compensation Voids Massachusetts Non-Compete Agreement; Meal Break Violations Cost A Massachusetts Retailer Almost $500,000.
Recent Amendment To Massachusetts Law Regarding Personnel Records Places New Affirmative Obligation On Employers.
On August 5, 2010, Governor Deval Patrick signed into law "An Act Relative to Economic Development Reorganization" (M.G.L. c. 240, §1, et. seq.), with a stated purpose of providing a business-friendly environment, stimulating job growth, and coordinating economic development activities funded by the Commonwealth. Buried within the Act is a significant amendment to the Massachusetts Personnel Records Statute (M.G.L. c. 149, § 52C). The amended statute, which became effective immediately, now requires that employers provide notice to employees every time certain negative information is placed in their personnel files. This affirmative notice obligation is in stark contrast to prior law, which only required that employers allow employees to review their personnel records at the employee's request.
Massachusetts CORI Amendments Require Employers to Take Close Look at Job Application Process.
On August 6, Governor Deval Patrick signed into law a bill making significant changes to the Massachusetts Criminal Offender Record Information (CORI) law. The new law is extensive and contains changes to all aspects of CORI and the state’s mandatory sentencing laws. One of the underlying purposes of the new law is to help rehabilitate people with criminal records by making it easier for them to return to the workplace, while at the same time, encouraging employers to hire them. In order to fulfill that goal, the new law offers protection for employers that rely on criminal record information, limits the information employers can access, and gives specific rights to job applicants with criminal records.
New Law Restricts Ability Of Massachusetts Employers To Ask About Criminal Convictions.
On August 6, 2010, Governor Deval Patrick signed into law legislation which overhauls the Commonwealth's Criminal Offender Record Information (CORI) law. Currently, the Massachusetts Fair Employment Practices Law prohibits employers from asking questions of job applicants about arrests that do not result in convictions and convictions for certain misdemeanors, but allows questions about felony convictions and about misdemeanor convictions not protected from disclosure.
Massachusetts Data Privacy Law – Compliance Deadlines Nearing.
In the wake of the highly publicized theft of massive amounts of confidential customer information, Massachusetts enacted comprehensive data security legislation intended to prevent unauthorized access to such information. The Office of Consumer Affairs and Business Regulation (OCABR) has since issued detailed regulations implementing the legislation. Compliance with these regulations is now required by March 1, 2010.
Employer Not Liable for Injuries Caused by Intoxicated Employee.
A state appellate court recently ruled that an employer is not liable for the injuries caused by a drunk driving accident involving one of its workers. According to the Massachusetts Appeals Court, although the worker became intoxicated while meeting with his supervisor at a restaurant, his employer did not have a duty of care under a theory of employer host liability.


text:
Booker Hobbs, Jr., pro se, appeals the determination that he is not entitled to recover damages under the Internal Revenue Code ("I.R.C."), 26 U.S.C. 7431, or the Privacy Act, 5 U.S.C. 552a, for the disclosure of his federal income tax returns. Concluding that the disclosures were authorized under I.R.C. 6103, we affirm.
Hobbs was employed by the Internal Revenue Service ("I.R.S.") as an engineer, examining corporate and individual tax returns. His position required an advanced understanding of the tax laws. Thus, when it came to his supervisor's attention that Hobbs might have improperly filed past tax returns, the supervisor directed an audit. That investigation revealed evidence of improper filings and of unsubstantiated deductions, whereupon Hobbs was discharged.
Hobbs appealed his dismissal to the Merit Systems Protection Board ("MSPB"). In response, the IRS submitted the information it had found in its investigation, including information from Hobbs's past federal tax returns. The MSPB upheld the termination and dismissed Hobbs's claim that the IRS had discriminated against him on the basis of race.
Hobbs also filed a complaint against the IRS in the United States District Court for the Eastern District of Pennsylvania, alleging that he had been terminated for discriminatory reasons in violation of title VII of the Civil Rights Act of 1964, Pub. L. No. 88-352, 78 Stat. 241. The jury rejected Hobbs's claim, and he unsuccessfully appealed to the Third Circuit Court of Appeals.1 The merits of that case are not at issue in the current appeal.
Next, Hobbs filed this action against the IRS seeking damages under I.R.C. 7431 for unauthorized disclosure of tax return information and damages for violation of the Privacy Act, 5 U.S.C. 552a. The court dismissed all of Hobbs's claims, and specifically, the claims he had brought pursuant to 7431, because it held that the disclosures were authorized under I.R.C. 6103(h) (4), which permits the disclosure of "return information in a Federal or State judicial or administrative proceeding pertaining to tax administration." The court also dismissed Hobbs's Privacy Act claims, holding that I.R.C. 7431 provides the exclusive remedy for unlawful disclosure of tax information.
Hobbs argues that the dismissal of his 7431 claims was improper because his appeal to the MSPB and his title VII civil trial were not "pertaining to tax administration" as required by the limited exception of 6103(h) (4), but were, instead, personnel matters. Hobbs also asserts that the IRS made these disclosures in bad faith. Next, he avers that the court erred in dismissing his Privacy Act claims, and he challenges the conclusion that 7431 is the exclusive remedy for unlawful disclosure of tax information.
(h) Disclosure to certain Federal officers and employees for purposes of tax administration, etc.-- . . .
(A) if the taxpayer is a party to the proceeding, or the proceeding arose out of, or in connection with, determining the taxpayer's civil or criminal liability, or the collection of such civil liability, in respect of any tax imposed under this title.
Hobbs challenges the dismissal of his 7431 claims and the determination that the IRS properly disclosed his tax return information in accordance with the "tax administration" exception in 6103(h) (4). He asserts that this exception is not applicable, because neither the MSPB nor the title VII civil action was "pertaining to tax administration."
(ii) the development and formulation of Federal tax policy relating to existing or proposed internal revenue laws, related statutes, and tax conventions.
26 U.S.C. 6103(b) (4) (A). The courts that have considered whether certain activities qualify as "tax administration" uniformly have defined the term broadly.2 Andthese interpretations seem correct in light of the expansive terms employed by Congress: Tax administration includes "administration, management, conduct, direction, and supervision." I.R.C. 6103(b) (4) (A) (i).
In response, the IRS argues that the disclosures of Hobbs's tax return documents in the MSPB and title VII proceedings were "in a Federal or State judicial or administrative proceeding pertaining to tax administration." See 6103(h) (4) (emphasis added). The IRS is correct.
There can be little doubt that, like the situation in both Rueckert and Mangan, Hobbs's own compliance with the federal tax laws was something of key concern to the IRS; his position required him to examine the accuracy of corporate and individual tax returns and, in turn, to have a sophisticated understanding of the tax laws. The IRS's decision to terminate him for failure accurately to file his own returns was motivated in large part by the fact that this failure undermined the IRS's confidence in his ability to perform his essential job functions, which unquestionably encompassed tax administration.
When Hobbs then challenged the employment action in subsequent administrative and judicial proceedings, the IRS was required to defend its termination by disclosing the ground for his dismissal. Naturally, this required the IRS to prove that it was Hobbs's improper filing of past tax returns, and not his race or some other factor, that motivated its decision. These disclosures, then, were "pertaining to tax administration."
Although the majority of the courts that have considered the interaction of 6103 with the Privacy Act, 5 U.S.C. 552a, have concluded that 6103 and 7431 provide the exclusive remedy for disclosures of tax return information,4 Hobbs challenges the district court's conclusion that 7431 is the exclusive remedy and relies on the minority position adopted in Sinicki v. United States Dep't of Treasury, No. 97 Civ. 0901 (JSM), 1998 WL 80188 (S.D.N.Y. Feb. 24, 1998) (unpublished). In Sinicki, the court was unwilling to go as far as other courts and hold that 6103 amounts to a repeal of the Privacy Act inall cases involving unauthorized disclosures of tax return information. Instead, the court held that "Section 6103 should only implicitly repeal the Privacy Act to the extent it presents an irreconcilable conflict." Id. at *5.
Repeals by implication are not favored. See Jackson v. Stinnett, 102 F.3d 132, 135 (5th Cir. 1996) (citing cases). "However, courts long ago established an exception to the repeal-by-implication rule: 'Where provisions in the two acts are in irreconcilable conflict, the later act to the extent of the conflict constitutes an implied repeal of the earlier one.'" Id. at 136 (quoting Posadas v. National City Bank, 296 U.S. 497, 503 (1936)).5 This exception apparently was not implicated in Sinicki, in which the court concluded that " [t]hus far, Section 6103 has not been shown to be in irreconcilable conflict with the Privacy Act," but the court went on to recognize the possibility of such conflict in future cases. See Sinicki, 1998 WL 80188, at *4.
Here, on the other hand, there is a present conflict. Although the Privacy Act and 7431 create damages actions for unauthorized disclosures, only 6103 provides for a variety of tax-return-specific exceptions to the general confidentiality rule. Thus, if Hobbs were able to maintain a suit under the Privacy Act even where his 7431 damages action was unsuccessful, this would punish the IRS for disclosing tax return information it was authorized to disclose under the express terms of 6103. Of course, this conflict becomes apparent only where the disclosures fall under one of the 6103 exceptions, but here the IRS's disclosure qualified for the "tax administration" exception.
Congress could not have intended the oddity that the IRS properly could make a disclosure of tax return information in a judicial or administrative proceeding "pertaining to tax administration" in accordance with 6103(h) (4), but would be exposed to liability under the more general provisions of the Privacy Act. Consequently, we refuse to subject the IRS to such an absurd result. To the extent that the Privacy Act would recognize a cause of action for unauthorized disclosure of tax return information even where 6103 would provide an exception for the particular disclosure, 6103 trumps the Privacy Act.
See Hobbs v. Rubin, No. 96-4117 (E.D. Pa.), aff'd, 156 F.3d 1224 (3d Cir. 1998) (unpublished).
See, e.g., Rueckert v. IRS, 775 F.2d 208, 210-12 (7th Cir. 1985) (holding that ensuring that a state's internal revenue service employees are free from conflicts of interest that could undermine the integrity of the state's tax collection system are "management" and "supervision" under 6103(b) (4) (A) (1)); United States v. Mangan, 575 F.2d 32, 40 (2d Cir. 1978) (approving the admission of federal tax returns under the tax administration exception in criminal proceedings against an IRS agent, even though such proceedings did not involve the determination of tax liability). Inexplicably, Hobbs cites National Treasury Employees Union v. F.L.R.A., 791 F.2d 183 (D.C. Cir. 1986), for the proposition that "it is an established settled principle of law that the term 'tax administration' does not include personnel matters." National Treasury does not support this proposition. Instead, that case was solely about whether the disclosures made pursuant to 6103(1) (4) (A) were properly authorized by IRS personnel. The court never discusses "tax administration."
Because we do not reach the alternate ground that the IRS argues justifies affirming the summary judgment--i.e, that the disclosures also were authorized under 6103(l) (4) for use in "personnel or claimant representative matters"--we also need not reach Hobbs's assertion that the disclosures violated provisions of the Internal Revenue Manual ("IRM"). Those IRM provisions relate only to disclosures made pursuant to 6103(l) (4), and not to disclosures under 6103(h) (4); consequently, we have no occasion to consider whether they are consistent with, or are trumped by, the I.R.C.
See, e.g., Lake v. Rubin, 162 F.3d 113, 115-16 (D.C. Cir. 1998) (holding that 6103, although not framed as an express exception to the Privacy Act, provides the exclusive statutory route for taxpayers to access their tax records), cert. denied, 119 S. Ct. 1465 (1999); Cheek v. IRS, 703 F.2d 271, 272 (7th Cir. 1983) (per curiam) (holding that 6103 is exclusive to both the Privacy Act and the Freedom of Information Act); Gardner v. United States, Civ. Ac. No. 96-1467 (EGS), 1999 WL 164412, *3 (D.D.C. Jan. 29, 1999) (opining that " 6103 is the exclusive remedy for alleged wrongful disclosures of returns and return information").
See also United States v. Ardoin, 19 F.3d 177, 180 (5th Cir. 1994) (noting that "the only permissible justification for repeal by implication is when the earlier and later statutes are irreconcilable").
We have no occasion, however, to consider whether 6103 operates as an implied repeal of the Privacy Act to the extent that the two provisions are not in conflict.

matches: v. v. v. v. v. v. v. v. v. v. v.


The plaintiff in this case, Mr. Knight, stopped working as a production assistant for Nissan due to lower back pain and took disability leave on December 15, 1999. Knight v. Provident Life and Acc. Ins. Co., 2014 WL 1280278 (M.D. Tenn. 2014) at *1, Id. at *1, n.1. On June 16, 2000, Mr. Knight submitted a claim for long-term disability benefits under a group policy administered by Unum. Id. at *1. On July 23, 2000, Unum approved Knight’s claim and paid him long-term disability benefits until 2012. Id. at *1. In an April 11, 2012 letter, Unum notified Knight that it was terminating his long-term disability benefits and gave him 90 days to appeal the denial of benefits. Knight v. Provident Life and Acc. Ins. Co., 2014 WL 1280278 (M.D. Tenn. 2014) at *1.
As explained in the summary of this case, Unum denied Mr. Knights claim, because they said it was late when not appealed within the 90 days they gave him to appeal in their denial letter. Unum’s position was that Mr. Knight’s original policy allowed him only 90 days to appeal, and back when he first applied, the ERISA regulations at 29 C.F.R. § 2560.503-1 allowed an appeal deadline as short as only 60 days. The ERISA regulations were revised January 1, 2002 to include a 180-day deadline to appeal the denial of disability benefits, but that only applied to new claims filed after January 1, 2002. Id. at *3. Unum claimed they could require Mr. Knight to appeal under a short deadline because his claim was controlled by an old version of his policy and older pre-2002 ERISA regulations. Id. at *2-*3.
Because Mr. Knight’s policy and plan had been changed while he was getting paid benefits, to allow up to 180 days to appeal, we argued that 180 days applied to this appeal. We agreed that Unum was technically correct that the older version of the ERISA regulations applied, and they could have required a deadline as short as 60 days. But, when they amended the plan, the rule is that the deadline cannot be shorter than whatever is in the plan, even if the older regulations allowed a shorter deadline. Thus, by amending the plan while Mr. Knight was being paid, the new 180 day deadline applied to him.
Unum refused to consider our appeal, and we were forced to sue Unum in court on behalf of Mr. Knight. We sued under ERISA, contending that Mr. Knight’s administrative appeal was timely and that he was entitled to his long-term disability benefits under 29 U.S.C. §§ 1132(a)(1)(B). Id. at *1.
The court ultimately agreed with us that Unum could not use the shorter deadline because the policy under which Mr. Knight was covered had been amended while he was being paid benefits. Id. at *3-*4. The new version of the plan allowed for a full 180 days to appeal, as was required by the more recent ERISA regulations. Id. at *3-*4. The court ruled in Mr. Knight’s favor that his appeal was filed on time and that Unum was arbitrary and capricious to require him to appeal in the shorter time. Id. at *8-*9.
Rather than addressing whether Mr. Knight was disabled or not, the court remanded the case back to Unum to require them to finish their decision-making process. Id. at *9 (citing Shelby Cnty. Health Care Corp. v. The Majestic Star Casino, LLC, 581 F.3d 355, 373-74 (6th Cir. 2009)(“[Where the plan administrator fails to comply with ERISA appeal-notice requirements in adjudicating a participant’s claim, the proper remedy is to remand the case to the plan administrator so that a full and fair review can be accomplished”); Elliott v. Metro. Life Ins. Co., 473 F. 3d 613, 621-622(6th Cir. 2006); Walsh v. Metro. Ins. Co., 2009 WL 603003 at *6-*7 (M.D. Tenn. Mar. 9, 2009)).


Bankruptcy Code is the informal name given for title 11 of the United States Code (11 U.S.C. §§ 101-1330), which is the federal bankruptcy law.
Under the Bankruptcy Code 'Bankruptcy' is a legal procedure for dealing with debt problems of individuals and businesses. It is specifically, a case filed under one of the chapters of title 11 of the United States Code informally called the Bankruptcy Code.
Bankruptcy helps individuals who are unable to pay their debts get a fresh start by liquidating assets to pay off their debts or by proposing a repayment plan. Bankruptcy law also gives protection to financially troubled businesses.
Chapter 7 of the Bankruptcy Code provides for 'Liquidation'. Liquidation involves the sale of an insolvent debtor's nonexempt property and the distribution of the proceeds to the creditors/lenders.
Individuals and Businesses may file bankruptcy under Chapter 7 to liquidate.
A chapter 7 claim commences when the debtor files a 'Petition' with the bankruptcy court that serves the jurisdiction where the individual debtor lives or where the business debtor is organized or has its principal place of business or principal assets. In addition to the petition, the debtor has to also file with the courts amongst other documents their record of assets and liabilities; table of current income and expenditures; a statement of financial affairs; a list of all creditors and the amount and nature of their claims; list of all of the debtor's property; and a schedule of executory contracts and unexpired leases. Individual debtors have to additionally file a certificate of credit counseling and a copy of any debt repayment plan developed during credit counseling and a detailed list of their monthly living expenses.
Filing a petition under chapter 7 stops (i.e. automatic stay) almost all collection actions against the debtor or the debtor's property. The automatic stay arises by operation of law and requires no additional judicial action. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor. The filing the petition does not stay certain types of actions listed under 11 U.S.C. § 362(b), and the stay may be effective only for a short time in some situations. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even make collection telephone calls demanding payment.
When Chapter 7 petition gets filed, the U.S. trustee or the bankruptcy court appoints an impartial 'Case Trustee' to administer the case and liquidate the debtor's nonexempt assets. Between 21 and 40 days after the chapter 7 petition is filed by the debtor, the Case Trustee that is handling the case will hold a meeting of creditors. It is mandatory for the debtor to attend the meeting of creditors and answer any questions related to the debtor's financial affairs and property. The debtor must cooperate with the trustee and to provide any financial records or documents that the trustee wants. Bankruptcy judges do not attend the meeting of creditors.
Initiation of Chapter 7 bankruptcy case creates an "estate". The estate technically becomes the temporary legal owner of all the debtor's property and the debtor's creditors are paid from nonexempt property of this estate.
If the debtors has assets then the case is deemed to be an 'asset case' otherwise the case is declared 'no asset' case. In asset cases, the unsecured creditors must file their claims with the court within 90 days after the first date is set for the meeting of creditors.
In an asset case the role of a chapter 7 trustee is to liquidate/sell-off the debtor's free and clear of liens nonexempt assets and to maximize returns to the debtor's unsecured creditors. The trustee also has additional powers to: set aside preferential payments made to creditors within 90 days before the filing of the petition; the trustee can also undo security interests and other prepetition transfers of property that were not properly perfected at the time of the petition. The trustee can also take action against fraudulent conveyance and bulk transfer. In some cases, for a business that has filed for chapter 7, the bankruptcy court may authorize the trustee to run a business if such activity helps in maximizing returns for its creditors.
Claims are paid in order of priority. Under 726, there are six classes of claims and each class must be paid in full before the next class is paid. The debtor is only paid if all other classes of claims have been fully paid and the case is closed after all assets of the debtor have been fully rendered by the case trustee.
In a chapter 7 case that involves an individual debtor, the primary goals of the individual debtor is to retain exempt property and receive a discharge that covers as many debts as possible. A discharge releases individual debtors from personal liability for most debts and prevents the unsecured creditors from taking action to collect from the discharged debtor. Secured creditors may retain some rights to seize property even after such a discharge is granted.
There are certain debts that are not discharged. Some of them are as follows: alimony and child support; certain taxes; certain educational loans etc.
Unsecured debts are loosely defined as debts for which the extension of credit to the debtor was made purely upon an credit assessment by the creditor of the debtor's ability to pay whereas secured debts are debts for which the loan or credit was extended based upon the debtor's ability to pay and additionally the creditor securing and registering the rights to seize the collateral assigned by the debtor if the debtor defaults.
There are also provisions for converting a case from chapter 7 to a chapter 11 case. It can be done upon a request received from the debtor.
Chapter 11 of the Bankruptcy Code provides for 'Reorganization' for businesses i.e. generally for a corporation or partnership. The purpose is to keep the business going by proposing a plan of reorganization and paying off its creditors over a given period of time. People in business or individuals can also seek relief to reorganize their debts under chapter 11.
A chapter 11 case begins with the filing of a petition with the bankruptcy court within the jurisdiction where the debtor has a domicile or residence.
The petition can be voluntary or in voluntary. The petition when filed by the debtor is called voluntary petition. The petition when filed by the creditors against a debtor when given conditions are met is called an involuntary petition. Individual debtors have to additionally file a certificate of credit counseling and a copy of any debt repayment plan developed during credit counseling and a detailed list of their monthly living expenses.
A stay of creditor actions against the chapter 11 debtor automatically goes into effect when the bankruptcy petition is filed. 11 U.S.C. § 362(a). This automatic stay provides a relief period for the debtor, a period of time during which all collection activities, judgments, foreclosures and repossessions of property are suspended and may not be pursued by the creditors on any debt or claim that arose before the filing of the bankruptcy petition.
Debtor in Possession: Upon filing a voluntary petition under chapter 11, the debtor automatically assumes the status as the "debtor in possession." 11 U.S.C. § 1101. So termed since the debtor keeps possession and control of its assets while undergoing a reorganization under chapter 11, without the appointment of a case trustee like in the case when a petition gets filed under chapter 7 (liquidation).
The debtor remains a Debtor in Possession until either the debtor's plan of reorganization is confirmed or the debtor's case is dismissed or the case gets converted to chapter 7 (liquidation). In few cases election of a trustee occurs and a chapter 11 trustee may get appointed. Mostly, the debtor under chapter 11 with assumes the identity of a Debtor in Possession and then as 'debtor in possession', runs the business and performs the many functions of a chapter 11 trustee U.S.C. § 1107(a).
The debtor (unless a "small business debtor") has a 120-day period during which the debtor has an exclusive right to file a plan. 11 U.S.C. § 1121(b). This exclusivity period may be extended or reduced by the court. But in no event may the exclusivity period, including all extensions, be longer than 18 months. 11 U.S.C. § 1121(d). After the exclusivity period has expired, a creditor or the case trustee may file a competing plan.
A chapter 11 case may continue for many years unless the court, the U.S. trustee, the committee, or another party in interest acts to ensure the case's timely resolution. The creditors' right to file a competing plan provides incentive for the debtor to file a plan within the exclusivity period and acts as a check on excessive delay in the case. Also, delays in formulating, filing, and obtaining confirmation of a plan often can prompt creditors to file motions for relief from stay, to convert the case to chapter 7 (liquidation), or to dismiss the case altogether.
The U.S. trustee plays a key role in monitoring; supervising operation of the business the administration and progress of a chapter 11 case. The U.S. trustee is responsible for the submission of operating reports of the business and fees. Should a debtor in possession fail to comply with the reporting requirements, or fail to take the appropriate steps to bring the case to confirmation, the U.S. trustee may file a motion with the bankruptcy court to have the debtor's chapter 11 case converted to another chapter of the Bankruptcy Code or have the case dismissed.
Creditors' Committees: A creditor's committee is appointed by the U.S. trustee and consists of unsecured creditors who hold the seven largest unsecured claims against the debtor. This committees can play a major role and can act as an important security to the proper management of the business by the debtor in possession. Among other things, the committee can consult with the debtor in possession on administration of the case; it can investigate the debtor's conduct; it can monitor the day-to-day operation of the business that is run by the debtor in possession; and can participates in formulation of the reorganization plan. 11 U.S.C. § 1103. With the court's approval, the committee can hire an legal counsel or other professionals that may help in the performance of the duties of the creditor's committee.
Claims: The Bankruptcy Code defines a claim as: (1) a right to payment; (2) or a right to an equitable remedy for a failure of performance if the breach gives rise to a right to payment. 11 U.S.C. § 101(5).
Claims are listed by the debtor on the debtor's schedules. If any creditor whose claim is not scheduled or is scheduled as disputed, contingent, or unliquidated must file a Proof of Claim by attaching evidence that provides proof for the claim. All creditors with a valid claims are treated as a creditors for purposes of voting on the plan and distribution under it. Filing a proof of claim is not necessary if the creditor's claim is scheduled (but is not listed as disputed, contingent, or unliquidated by the debtor) because the debtor's schedules are deemed to constitute evidence of the validity and amount of those claims. 11 U.S.C. § 1111. If a scheduled creditor chooses to file a claim, a properly filed proof of claim supersedes any scheduling of that claim by the debtor. It is the responsibility of the creditor to determine whether the claim is accurately listed on the debtor's schedules. The debtor must provide notification to those creditors whose names are added and whose claims are listed as a result of an amendment to the schedules. The notification also should advise such creditors of their right to file proofs of claim and that their failure to do so may prevent them from voting upon the debtor's plan of reorganization or participating in any distribution under that plan. When a debtor amends the schedule of liabilities to add a creditor or change the status of any claims to disputed, contingent, or unliquidated, the debtor must provide notice of the amendment to any entity affected.
In a chapter 11 plan the debtor must designate classes of claims and interests for treatment under the reorganization. Generally, a plan will classify claim holders as secured creditors, unsecured creditors entitled to priority, general unsecured creditors, and equity security holders.
Under section 1126(c) of the Bankruptcy Code, an entire class of claims is deemed to accept a plan if the plan is accepted by creditors that hold at least two-thirds in amount and more than one-half in number of the allowed claims in the class. Under section 1129(a)(10), if there are impaired classes of claims (i.e., claims that are not going to be paid completely or in which some legal, equitable, or contractual right is altered), the court cannot confirm a plan unless it has been accepted by at least one class of non-insiders who hold impaired claims. Moreover, under section 1126(f), holders of unimpaired claims are deemed to have accepted the plan.
In order to confirm the plan, the court must find, among other things, that: (1) the plan is feasible; (2) it is proposed in good faith; and (3) the plan and the proponent of the plan are in compliance with the Bankruptcy Code. In order to satisfy the feasibility requirement, the court must find that confirmation of the plan is not likely to be followed by liquidation. Confirmation of a plan discharges a debtor from any debt that arose before the date of confirmation. After the plan is confirmed, the debtor is required to make plan payments and is bound by the provisions of the plan of reorganization. The confirmed plan creates new contractual rights, replacing or superseding pre-bankruptcy contracts.
Also called a wage earner's plan, Chapter 13 of the Bankruptcy Code provides for adjustment of debts of an individual that has a regular income. It allows a debtor to keep property and pay debts over time period of generally three to five years. During this period the law forbids creditors from starting or continuing collection efforts against the individual debtor.
Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual's unsecured debts are less than $394,725 and secured debts are less than $1,184,200. 11 U.S.C. § 109(e). A chapter 13 case begins with the filing of a petition with the bankruptcy court within the jurisdiction where the debtor has a domicile or residence.
Individual debtors have to additionally file a certificate of credit counseling and a copy of any debt repayment plan developed during credit counseling and a detailed list of their monthly living expenses.
When an individual files a chapter 13 petition, an impartial trustee is appointed to administer the case. 11 U.S.C. § 1302. The chapter 13 trustee evaluates the case and also serves as a disbursing agent that collects payments from the debtor and makes distributions to the creditors. 11 U.S.C. § 1302(b). The debtor must file a repayment plan with the petition or within 14 days after the petition is filed. A plan must be submitted for court approval and must provide for payments of fixed amounts to the trustee on a regular basis, typically biweekly or monthly. The trustee then distributes the funds to creditors according to the terms of the plan, which may offer creditors less than full payment on their claims.
Filing the petition under chapter 13 "automatically stays" (stops) most collection actions against the debtor or the debtor's property. 11 U.S.C. § 362. Between 21 and 50 days after the debtor files the chapter 13 petition, the chapter 13 trustee will hold a meeting of creditors. During this meeting, the trustee places the debtor under oath, and both the trustee and creditors may ask questions. The debtor must attend the meeting and answer questions regarding his or her financial affairs and the proposed terms of the plan.11 U.S.C. § 343. In a chapter 13 case, to participate in distributions from the bankruptcy estate, unsecured creditors must file their claims with the court within 90 days after the first date set for the meeting of creditors.
There are three types of claims: Priority, Secured, and Unsecured. Priority claims are those granted special status by the bankruptcy law, such as most taxes and the costs of bankruptcy proceeding. Secured claims are those for which the creditor has the right take back certain property/collateral if the debtor defaults on payment. Unsecured claims are generally those for which the creditor has no special rights to collect against particular property owned by the debtor.
In the reorganization plan priority claims must be paid in full. If the debtor wants to keep the collateral securing a particular claim, the plan must provide that the holder of the secured creditor(s) receive at least the value of the collateral or pay the full debt (in case there is depreciation involved).
The plan need not pay unsecured claims in full as long it provides that the debtor will pay all projected "disposable income" over an "applicable commitment period," and as long as unsecured creditors receive at least as much under the plan as they would receive if the debtor's assets were liquidated under chapter 7. 11 U.S.C. § 1325. Within 30 days after filing the bankruptcy case, even if the plan has not yet been approved by the court, the debtor must start making plan payments to the trustee. 11 U.S.C. § 1326(a)(1). No later than 45 days after the meeting of creditors, the bankruptcy judge must hold a confirmation hearing and decide whether the plan is feasible and meets the standards for confirmation set forth in the Bankruptcy Code. 11 U.S.C. §§ 1324, 1325. Creditors will receive 28 days' notice of the hearing and may object to confirmation. If the court confirms the plan, the chapter 13 trustee will distribute funds received under the plan "as soon as is practicable." 11 U.S.C. § 1326(a)(2). If the court declines to confirm the plan, the debtor may file a modified plan. 11 U.S.C. § 1323. The debtor may also convert the case to a liquidation case under chapter 7. (4) 11 U.S.C. § 1307(a). If the court declines to confirm the plan or the modified plan and instead dismisses the case, the court may authorize the trustee to keep some funds for costs, but the trustee must return all remaining funds to the debtor (other than funds already disbursed or due to creditors). 11 U.S.C. § 1326(a)(2).
Chapter 13 offers individuals significant advantages over liquidation under chapter 7. Individual debtors will have no direct contact with creditors while under chapter 13 protection since chapter 13 helps consolidate the debtor's loan under which the individual debtor makes the scheduled payments under the plan to a chapter 13 trustee who then distributes the payments to creditors. Chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may fix delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties (like co-signers to the debtor's loan) who are liable with the debtor on consumer debts.
The discharge in a chapter 13 case is somewhat broader than in a chapter 7 case. Debts dischargeable in a chapter 13, but not in chapter 7, include debts for willful and malicious injury to property (as opposed to a person), debts incurred to pay nondischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings. 11 U.S.C. § 1328(a). The bankruptcy law regarding the scope of the chapter 13 discharge is complex and has recently undergone major changes. Therefore, debtors should consult competent legal counsel prior to filing regarding the scope of the chapter 13 discharge.
Update Dec 01, 2017: Individuals filing for bankruptcy under Chapter 13 must use a new form that presents their payment plan in a more uniform and transparent manner, and creditors will have less time to submit a proof of claim, under new bankruptcy rules and form amendments that took effect Dec. 1, 2017.
Disclaimer: This information is mainly obtained from the website of US Courts and should not be cited or relied upon as legal authority. It should not be used as a substitute for reference to the United States Bankruptcy Code (title 11, United States Code) and the Federal Rules of Bankruptcy Procedure. This article on the basics of bankruptcy should not substitute for the advice of competent legal counsel. Credit Guru Inc cannot provide legal or financial advice. Such advice may be obtained from a competent attorney, accountant, or financial adviser.
Altman Z-Score is a mathematical formula that was developed by NYU Professor Edward I. Altman. It is used for predicting financial stress and the probability of a publicly traded firm going bankrupt in the next two years. The formula uses a combination of five financial ratios, with weighted coefficients that require various values from the firm's financial statements namely, income statement and balance sheet.