Reference no: EM133190986 , Length: word count:1200

Question: M LLC, headquartered in Boulder, Colorado, has been seeking for some time now to lure to its employ Dr. Hi Tech, the Research Director of Q Corp., a Massachusetts corporation with its sole office in Braintree, MA. M is in a field of hand-held computer technology. Q is in the field of software development for computer servers. Hi latest three-year employment agreement with Q is replete with a broad array of post-employment restrictive covenants. After a number of meetings and much negotiation, M and Hi have come to terms for Hi to switch over to M on two-weeks' notice to Q. Hi just gave that notice & that fact is now widely known at Q.

Meanwhile, Ms. Ursula Erstwhile, Hi's most recent secretarial assistant - he has been through quite a few during his time at Q - has complained to Q's Human Resources Director that Hi would regularly tease her about having "buns of steel" for her ability to close file drawers hands-free. Ursula also said that once, after she protested to him when he said this, he told her not to be upset and called her "the prettiest little [ethnically derogatory term] he had ever seen." When asked why she had said nothing about these occurrences before, Ursula told the HR Director that she had heard what had happened to Hi's previous assistants and was afraid that Hi would see that she was fired or demoted if she complained. Ursula wound up by saying that Hi's notice led her to talk with a lawyer and that she is ready to take this through all of the available avenues for redress.

As part of its reaction to Hi's announcement, Q has had its Accounting Dept. review all of Hi's travel-expense-reimbursement vouchers for the last year to see if they can find anything unusual in them. The Accounting Dept. reports that those T & E records for Hi show an unusual number of airline, hotel and meal expenses for travel to Boulder which cannot immediately be accounted for by Q's business needs. The Accounting Dept. has also flagged a July, 2015agreement with a software vendor that calls for Q to pay it significant sums for special software development. The software to be developed is only very generally described in this agreement, and there is no specified deadline for delivery of the completed software. "Progress payments" have been made under the agreement in the amount of $200,000 with another $200,000 due at the end of this month. The agreement is signed by Hi as "Director of Research, Q Corp.", and the vouchers authorizing payment of the $200,000 in $10,000 increments - right at the point of Hi's sole-authorization approval limit at Q -- have all been signed by Hi alone. Describe specifically how you would expect Q, M, Hi and Ursula to act in these circumstances.

Issue #1: Sexual Harrasment/Hostile Work Environment

As soon as Q recieved the sexual harrassment/assault allegations, they have a duty to investigate. The investigation should be completed by an independent third party. Since the allegations include actions that could constitute assault (an intentional act that puts another person in reasonable apprehension of imminent harmful or offensive contact) strong consideration should be given to whether law enforcement should be part of the investigation.

The duty to investigate has been made clear in 2 Supreme Court cases:

In Faragher v. City of Boca Raton, 524 U.S. 775 (1998), and Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998), Court held that under Title VII [Civil Rights Act of 1964], an employer is vicariously liable for severe or pervasive workplace harassment by a supervisor of the victim.

Issue #2: Contacts/Internal Controls
Q should also investigate the vague contract. For a contract to be legally binding it must contain: consideration, offer and acceptance, legal purpose, capable parties, and mutual assent. Given that the terms around the consideration for Q are either intentionally or unintentionally vague, the contract may not be valid.

Also, because the total amount of the contract exceeds Hi's signing authority, Q should investigate how its corporate controls did not prevent the abuse of purchasing limits. It's not likely this can be a reason for voiding the contract; given Dr. Hi's title and role within the company it could be assumed that he has Apparent Authority.

Issue #3: Noncompetition Agreement(s)
Q, Inc. should not look to enforce its non-competition agreement with Dr. Hi for multiple reasons:
1) He does not appear to be an employee worth retaining
2) Massachusetts law is very restrictive with regard to non-competition agreements. The agreement is probably not enforceable on grounds of reasonableness (restricting employment in another state is not likely and proving that the businesses are direct competitors is not likely) and showing that it is protecting legitimate business interests (like a trade secret) does not seem probable.

Q should look to see where they have other noncompetition agreements and its overall policy in seeking them with potential employees. The use of them should be very narrow, where the loss of an employee to a competitor would severely damage the business.

Issue #4: Expense Report Fraud/Larceny
It does appear that Dr. Hi has committed expense report fraud with personal travel expenses. If confirmed, Massachusetts law states that theft of greater than $250 is a charge of larceny, a felony. Q should turn this information over to law enforcement and cooperate with them for a full investigation of the possible crime.
Q should also review its procedures for approval of expense reports and understand why the possible fraud was not caught during the normal expense report approval process.

Issue #5: Defamation/Reference Check
Q is not required to provide proactive information to M about their new employee, unless they felt, following their investigation, that Dr. Hi's behavior was so egregious that it would put people in harm's way. They should also consider the ethical considerations of disclosing the information to M; while not required to notify M, Q should consider the "golden rule" and decide whether if roles were reversed would they want to be notified.

That being said, the downside of proactively contacting M, is that it could be viewed as tortious interference with that business relationship (between M and Dr. Hi). Both Massachusetts and Colorado law provide for limited liability for past employers providing information, but the possibility of a defamation suit from Dr. Hi should be weighed.

Whichever direction Q goes, any reference check or information shared with M should be done by a labor attorney and not treated as a standard human resources reference check.

M, LLC.
There are no clear issues for M to proactively tackle, but they will need to carefully consider Dr. Hi's employment if contacted by Q. If contacted by Q before Dr. Hi's start date, the prudent decision would be to delay his start date until the completion of the investigation.

Dr. Hi

Issue #1: Criminal Assault/Harassment
If the allegations are true, Dr. Hi has likely committed criminal assault through his actions towards Ursula and should retain criminal counsel once made aware of the investigation.

If the allegations are false, Dr Hi should document any evidence that would disprove these harassment allegations, including identifying any witnesses that contest these allegations.

Issue #2: Civil Assault/Harassment
If the allegations are true, Dr. Hi likely has tort liability for intentional infliction of emotional distress, negligent infliction of emotional distress, assault, battery, defamation, and invasion of privacy and could be subject to significant penalties. He should seek counsel once made aware of the investigation.

Issue #3: Larceny/Expense Report Fraud
If Dr. Hi, did use an expense report to get M to pay for his personal travel expenses to Colorado (possibility to visit M), he has committed a felony. He should retain criminal counsel.

If Dr. Hi was expensing business related transactions, he should document any evidence in terms of business needs to support travel and expenses to Boulder for the last year;

Issue #4: Noncompetition Agreement
If found to be a valid agreement, Dr. Hi could be in violation of his noncompetition agreement with Q. Given the difficulty of enforcement of these agreements in Massachusetts and the serious other issues Dr. Hi is facing, giving attention to the non-competition should be a low priority.

Issue # 5: Employee Misconduct/Larceny
If the contract is found to be for personal gain, Dr. Hi could be found in violation of Q's Company Code of Conduct and Ethics and violation for general business ethics with having a conflict of interest. If the contract was in fact for Q related business, Dr. Hi should document any evidence to support business reasons for the agreement. Documentation should include any link to ongoing project, research plan or business plan that Q has authorized either in the preconcept or development phases of a project's life cycle.

If the payments to the software company were found to be for personal gain, Dr. Hi would have committed a felony for authorizing payments up to $200,000. Dr. Hi should retain criminal counsel. If the contract and payments were legitimate, Dr. Hi should document any evidence to support authorized payments to the software vendor such as detailed project plans and evidence of meeting deliverables which may be found in parol evidence that has not been documented in the original agreement.

Ursula

Issue #1: Failure to File Timely Sexual Harassment Claim to Employer
Ursula's complaint to Human Resources about Hi's alleged behavior appears to be delayed. The harassment by Hi has allegedly been going on for some period of time. Although not easy given the context of the situation in its entirety, timely reporting is necessary if Ursula desires to file a federal or state agency harassment claim. Ursula should continue consulting her attorney for legal advice on the next steps. Ursula's immediate response will depend on Q's actions following her complaint to the company and any supporting documentation that can be provided. If the company's response is not adequate, Ursula's options may be limited depending on when the last alleged sexual harassment act took place.

Issue #2: Failure to File Timely Federal/State Agency Harassment Claim
If Ursula has been subjected to discriminatory harssment, she may file a complaint with the United States Equal Opportunity Commision ("EEOC") and/or the Massachusetts Commision Against Discrimination ("MCAD").

The EEOC requires an individual to file a claim within 180 days of the last incident of harassment. State laws may override the EEOC's rule and extend the statute of limitations to 300 days from the last incident of harassment. MCAD requires an individual to file a claim within 300 days of the last incident of harassment. The last incident of harassment will determine what options Ursula has at the federal and state level. It is important Ursuala keep legal counsel and allow them to begin their fact finding process as they investigate the matter.