Texas Employment Law Update

Texas Employment Law Update

A Resource for Texas Employers

Fifth Circuit Holds Nonemployee Lacks Claim but Employee Can Recover Emotional Distress Damages in FLSA Retaliation Suit

Posted in Case Summaries, Retaliation, Wage & Hour

The Fifth Circuit recently held that a plaintiff-employee in an FLSA retaliation claim can recover damages for emotional distress but that the statute does not provide a retaliation cause of action for a nonemployee spouse. In Pineda v. JTCH Apartments, LLC, an employee of the apartment complex who did maintenance work around the property and his spouse lived at the complex where the employee worked.  The employee was provided reduced rent as part of his compensation.

Pineda, the employee, initiated a lawsuit against his employer (and landlord) for unpaid overtime. Three days after being served with the lawsuit, the employer served the employee and his wife with notice to vacate their apartment for nonpayment of rent.  The overdue rent demanded by the employer equaled the amount of rent reductions the employee received over the term of his employment.

The couple vacated the apartment and then amended their lawsuit to add claims for retaliation. During the trial, the district court refused to charge the jury on the recovery of emotional distress damages for the employee.  The trial court also dismissed the spouse’s retaliation claim because the court concluded that only employees could bring a retaliation claim.  Following a jury trial in favor of the employee the district court entered judgment for the employee but not the wife ($1,426.50 overtime; $3,775.50 for retaliation; $1,476 liquidated damages and $76,732.88 in attorney’s fees).

Plaintiff appealed the dismissal of the spouse’s retaliation claim and the failure to charge the jury on the plaintiff-employee’s recovery of emotional distress damages. Acknowledging that it was an issue of first impression in the Fifth Circuit, the Court first addressed with the FLSA’s anti-retaliation provision provided for emotional distress damages as a remedy for retaliation.  The Court first observed that Congress created an FLSA retaliation cause of action by its 1977 amendments to the FLSA allowing employees to recover wages, liquidated damages and “such legal and equitable relief as may be appropriate.”  This broad form of relief for retaliation plaintiffs encompassed emotional distress damages, the Court explained, because retaliation claims always result from intentional conduct.  In contrast, violations for failure to pay overtime or minimum wage can sometimes result from unintentional conduct and thereby justify more limited relief that excludes recovery for emotional distress.  Consequently, the Court concluded that damages for emotional distress are recoverable to a prevailing plaintiff in an FLSA retaliation claim.

The Court affirmed the trial court’s dismissal of the nonemployee spouse’s claim holding that nonemployees do not have the ability to bring an FLSA retaliation claim. Looking no further than the statutory language creating the cause of action that states that it is unlawful to “discharge or . . .discriminate against any employee . . .”, the Court easily concluded that nonemployees lack the ability to bring such claims.

You can download the full opinion in Pineda v. JTCH Apartments, LLC here.

Texas Court Holds Employees on FMLA Leave Not Qualified to Receive Unemployment Benefits

Posted in Case Summaries, Unemployment

In a Texas case of first impression, Fort Worth Court of Appeals held that an employee on FMLA leave of absence is not entitled to receipt of state unemployment benefits reversing the Texas Workforce Commission’s administrative decision.  In Texas Workforce Commission v. Wichita County, Texas, a county employee applied for state unemployment benefits when she started FMLA leave.  The unemployment hearing officer and Texas Workforce Commission both held that the employee was eligible for state unemployment benefits because she was effectively separated from her last employment when she went on FMLA leave after the employer could not make any accommodations based on her restrictions.

In rejecting the Commission’s interpretation, the Court explained that:

[T]he federal and state statutes generally apply to distinct groups of people: those who cannot perform existing jobs on a temporary basis, desire to return to those jobs, and need protection for the jobs until the reason for leave resolves (FMLA) as opposed to those who desire new jobs and are ready and willing to perform them and need temporary income benefits in the meantime (unemployment under the labor code). We cannot fathom that either Congress or our state legislature intended for a person to be able to proceed down both paths and receive both benefits at the same time.

Thus, although White did not perform services and did not receive wages during her FMLA leave . . . we conclude that she was not qualified to receive unemployment benefits. We hold that the opposite conclusion would be absurd for the reasons stated above and because such a conclusion would thwart the employment-stability purposes of federal and state law by encouraging an individual with protected employment to seek new employment as a condition of obtaining unemployment benefits.  We also agree with the County’s position that the opposite conclusion would amount to a judicial mandate of paid FMLA leave; we are reluctant to reach such a decision in the face of express authorization that such leave may be unpaid under federal law and without clear guidance to the contrary from our state legislature.

Consequently, employees on FMLA leaves of absence (and perhaps other leaves where the employee is still employed by the employer) are not qualified to receive state unemployment benefits.

You can download Texas Workforce Commission v. Wichita County, Texas here.

Court Rejects EEOC Argument that Employer Must Provide Disabled Employee Competition-Free Reassignment to Vacant Position as Reasonable Accommodation

Posted in Uncategorized

Since Congress amended the Americans with Disabilities Act revising the definition of “disability” and greatly expanding the number of individuals who are “disabled” and therefore entitled to reasonable accommodation, employers spend large amounts of time engaging in the interactive process to determine whether there are reasonable accommodations that will enable otherwise qualified individuals to perform the essential functions of the job.

In a decision earlier this week, the U.S. Court of Appeals for the Eleventh Circuit, held that when an employee is unable be accommodated in her present position and the employer allows the employee to seek out reassignment or transfer to another position within the employer’s operations, the employer is not required, as a matter of law, to make that search for another position competition free. The Court further held that the employer’s allowance of thirty days to the employee to search for other internal employment was also reasonable as a matter of law where the employer also agreed to consider extending the time period for any position for which the employee was being considered.

This case is significant in that the EEOC has historically taken the position that not only is reassignment to a vacant position a reasonable accommodation, the employer must also provide the disabled employee with a preference in being reassigned (or a competition-free reassignment) to the vacant position. The Eleventh Circuit has squarely rejected the EEOC’s position that disabled employees seeking reassignment to a vacant position are entitled to a superpriority over other qualified applicants for the position.  The Eleventh Circuit joins the Eighth and Fifth Circuits that have likewise rejected the concept that disabled employees are entitled to affirmative action or preferential treatment in reassignment to a vacant position as a reasonable accommodation.

You read all the facts from EEOC v. St. Joseph’s Hospital, Inc. here.

 

BREAKING NEWS: Federal Judge Blocks DOL Final Rule on White Collar Exemptions

Posted in Uncategorized

Today, a Texas federal judge issued a nationwide preliminary injunction blocking the implementation of the U.S. Department of Labor’s final rule imposing an increased salary level to qualify for the administrative, professional, executive and highly-compensated exemptions to overtime.  Short of an order staying the district judge’s injunction, the DOL’s rule will be on hold, nationwide, indefinitely.

A copy of the Judge’s order is here.

Follow me on Twitter @RussellCawyer.

DOJ to Criminally Prosecute Employers and Individuals that Reach Hiring and Wage Agreements under Federal Antitrust Law

Posted in News & Commentary, Noncompetes and Restrictive Covenants

At the end of October, the U.S. Department of Justice Antitrust Division (DOJ) and Federal Trade Commission (FTC) communicated a significant shift in their enforcement guidance regarding competition among employers to limit or fix terms of employment for potential hires.  In a new publication, Antitrust Guidance for Human Resource Professionals, the DOJ announced its intent to investigate, and criminally prosecute, wage fixing and no-poaching agreements.  Wage fixing agreements include agreements where individuals at different companies (or members of trade associations) agree to fix employee salaries or other terms of compensation at a specific level or within a range.  No poaching agreements include agreements between companies not to solicit or hire each other employees.

In its announcement, the DOJ announced that:

Going forward the DOJ intends to proceed criminally against naked wage-fixing or no-poaching agreements.  These types of agreements eliminate competition in the same irredeemable way as agreements to fix produce prices or allocate customers, which have traditionally been criminally investigated and prosecuted as hardcore cartel conduct.

That announcement that the DOJ intends to investigate and prosecute criminally these kinds of violations should make managers, supervisors and HR professionals take note and refresh their knowledge on the employment practices that could make the employee a target of a federal criminal investigation.  Some of the potential issues are not readily apparent such as a company’s (including non-profit’s) participation in or use of wage survey information or informal sharing of compensation information with other companies.  The DOJ published a short summary of the potential red flags employers should be mindful of in Antitrust Red Flags for Employment Practices.  The enforcement guidance also provide a number of hypothetical situations and its interpretation about whether each would result in a potential antitrust violation.

Since the government intends to criminally prosecute employers and individuals entering into no-poaching and wage fixing agreements, this is something that should be taken seriously.

New Developments in Employee Hiring and Noncompetition

Posted in News & Commentary, Noncompetes and Restrictive Covenants

Last week brought several interesting developments on the issue of restrictive covenants and hiring of employees among competitors including 1) the White House’s call to action (CTA) for the States to restrict use of covenants not to compete; 2) the Department of Justice’s announcement that it intends to criminally prosecute employers and executives entering into wage-fixing and no-poaching agreements; and 3) a new case from a Texas court discussing the enforceability of noncompetition agreements based on the promise to provide specialized training and does not include confidential information.  This week, I intend to address each of these developments.

First, the White House issued its CTA to state legislatures and policy makers calling on those bodies to enact reform designed to reduce or eliminate the use of non-compete agreements in employment.  The CTA builds on a report issued by the White House and U.S. Treasury Department report that found that non-compete agreements constituted an institutional factor that had the potential to hold back wages and entrepreneurship by banning workers from starting a company or going to work for a competitor for a period of time after leaving employment.  According to the CTA, 30 million Americans (1 in 5 workers) are impacted by non-compete agreements.  It is the position of the present administration that “most workers should not be covered by a non-compete agreement.”

The CTA called on the states to reduce the misuse of non-compete agreements to adopt what it terms are “best-practice policy objectives” that include:

  • Banning non-competition agreements for large categories of workers including occupations that promote public health and safety; workers unlikely to possess trade secrets; and workers suffering undue adverse impact of non-competes like workers laid off or terminated without cause
  • Requiring, as an element of enforceability, that the non-compete be proposed before a job offer or promotion is accepted; providing consideration above and beyond continued employment and require employers to better inform workers about the law of the state and the existence of non-compete contracts and how they work
  • Incentivizing employers to draft enforceable contracts and encourage elimination of unenforceable non-competes by proposing use of “red pencil doctrine” that would void (rather than merely reforming) non-competes with unenforceable provisions
  • Add appropriate remedies or penalties for employers that do not comply with state non-compete statutes
  • Encourage use of alternative restrictive covenants like nondisclosure and nonsolicitation agreements rather than non-compete agreements

Other policy documents issued by the White House along with the CTA include:

White House State Call to Action on Non-Compete Agreements

Non-compete Reform: A Policymaker’s Guide to State Policies

While the CTA focuses attention on an issue that rarely get significant attention, I do not expect it to have a persuasive  effect on the Texas legislature for at least several legislative sessions and the use of narrowly tailored non-compete agreements will continue to be used by Texas employers.

Texas Employers May Be Required to Provide Employees Time Off to Vote

Posted in Human Resources

I voted early nearly a week ago and early voting ends today.  However, Texas employers may be required to allow employees time off to vote in the upcoming election.  To learn more about the Texas voting requirements, check out the post I wrote six years ago here.

Other posts on Texas voting are linked here:

Early Employer Planning Can Avoid Interruptions and Payment Obligations On Election Day

Mid-Term Elections Approach: Texas Employer’s Obligation to Provide Employees Time Off to Vote

 

EEOC to Target Companies Using Non-traditional Working Relationships

Posted in Discrimination, News & Commentary, Wage & Hour

Yesterday, the EEOC published its four-year Strategic Enforcement Plan for fiscal years 2017 through 2021.  The Plan is the Commission’s list of areas of priority where it intends to focus its resources in the next four years.  The purpose of the Plan is to identify those areas the Commission believes are likely to have a strategic impact in advancing equal opportunity and freedom from discrimination in the workplace. Strategic impact, to the Commission, means a focus on areas likely to have 1) a significant effect on the development of the law; or 2) on promoting compliance across a large organization, community, or industry.   While many of the areas of emphasis have remained the consistent from past Plans, a new strategic priority caught my attention.

Yesterday’s Plan signaled an intent to address issues “related to complex employment relationships and structures in the 21st century workplace, focusing specifically on temporary workers, staffing agencies, independent contractor relationships, and the on-demand economy.”  Stated another way, the intends to prioritize investigation of and enforcement of charges that, in its opinion, develop (i.e., expand) the applicability of the anti-discrimination laws reach to these working relationships and that target large employers and industries using alternative working relationships like staffing agencies and independent contractors.  This likely means more frequent attempts to hold several companies liable under joint-employer legal theories and challenges to workers’ classification status as independent contractors.

The classification of workers as independent contractor rather than employees has several legal consequences.  Not only are independent contractors ineligible for unemployment benefits, overtime and for employer tax withholdings, the laws holding employers liable for discrimination and harassment generally only apply to the employees of employer.  The Commission is signaling its intent to challenge independent contractor classifications where an inaccurate classification would deprive the worker of the protections of the civil rights laws.

For years I have recommended in these posts that companies using independent contractors should have those arrangements closely scrutinized by their labor and employment counsel so that adverse benefits, wage and hour and tax consequences can be avoided.  The EEOC’s Strategic Enforcement Plan just provides one more reason why those relationships should be closely monitored to ensure workers are properly classified.

You can review the EEOC’s 2017-21 Strategic Enforcement Plan here.

Follow me on Twitter @RussellCawyer.

DOL Publishes Final Rule Requiring Federal Contractors to Provide Paid Sick Leave

Posted in Employee Benefits, News & Commentary

This week the DOL published its final rule requiring federal contractors to provide paid sick leave to employees working on or in connection with federal contracts.  The sick leave required by the final rule would allow an employee to use accrued paid sick leave for their own illness, the need to care for a sick family member, to see a doctor or take a family member to a doctor’s appointment or when the employee or a family member is a victim of domestic abuse, sexual abuse or stalking.  Covered contractors must provide employees with 1 hour of paid sick leave for every 30 hours worked on a covered contract with a cap of 56 hours earned each year (i.e., 7 days).  Paid sick leave accrued but not used in a year, rolls over to the next year but rollovers hours may be capped at 56 hours.

The Department estimates that the final rule will provide or increase paid sick leave benefits to approximately 1.15 million workers.

Key provisions of the final rule include:

  • Prohibitions against interference, discrimination or retaliation in connection with use of paid sick leave;
  • Posting obligations of the paid sick leave rights;
  • Substantial recording keeping and retention requirements on paid sick leave accruals and usuage;
  • Requires segregation of medical records and records of domestic abuse, sexual assault and stalking obtained for purposes of administering paid sick leave program;
  • May only require medical documentation to substantiate the sick leave, under the final rule, for absences of 3 or more days;
  • Not required to pay out accrued paid sick leave on termination unless required under state law.

The final rule will apply to all federal covered contracts that are solicited or awarded after January 1, 2017.

A copy of the Final Rule can be accessed here.

A link to the DOL’s 3 minute video on the final rule is here.

Expect a Showdown at the Supreme Court over Class Action Waivers in the Employment Context

Posted in Arbitration, Jury Waivers, News & Commentary

Arbitration agreements containing class action waivers can be an effective way for employers to mitigate risk against defending large scale mass actions filed by employees. And in the Fifth Circuit, the federal Court of Appeals covering Texas, and three other federal circuits, individual arbitration agreement containing class-action waivers are enforceable.

In a recent Seventh Circuit Court of Appeals panel opinion, the court of appeals covering Illinois, Indiana and Wisconsin, held that individual arbitration agreement containing class-action waivers were not enforceable.  In Lewis v. Epic Systems Corporation, the company required employees to enter into individual arbitration agreements requiring the arbitration of wage and hours disputes.  The agreement did not authorize the arbitrator treat claims as a class or collectively. When Lewis brought an FLSA collective action against his employer, the company moved to compel arbitration.  The trial court refused to enforce the agreement and a panel of the Seventh Circuit Court of Appeals affirmed.

The rationale for the panel’s decision was that the agreement violated the employees’ Section 7 rights under the National Labor Relations Act.  Section 7 rights are those statutory rights that preserve employees’ right to self-organize, form, join or assist unions in collective bargaining and to engage in other concerted activity for employees mutual aid or protection.  Section 7 rights apply to employees in unionized and non-union work environments.  A wage and hour class action was, in the court’s opinion, an attempt to exercise Section 7 rights.

The court ignored, and did not discuss, the other Section 7 rights of employees that the class action waiver advanced.  Section 7 also explicitly gives an employee the right to refrain from engaging in concerted activity.  Section 7 provides, in relevant part, that “Employees shall have the right to …engage in other concerted activities…and shall also have the right to refrain from any or all such activities…”  Section 7’s “refrain from” language gives support to the legal conclusion that an employee’s waiver of the FLSA procedural right to litigate collectively is permissible under the NLRA.  And in my opinion, an employee entering into a class action waiver is exercising his or her right to refrain from participating in a wage and hour collective action.  At a minimum, the “refrain from” language should minimize or neutralize the importance of the argument that Section 7 only prohibits class action waivers.  When read as a whole, if Section 7 protects the employees’ right to engage in “concerted activity” and concerted activity includes filing wage and hour collective actions, then Section 7’s “refrain from” language must also be read to authorize class action waivers.

Because four federal courts of appeals have reached the opposite conclusion from the Lewis panel, expect this issue to be appealed to the Supreme Court to resolve the circuit split.  Employers utilizing arbitration agreements containing class action waivers should watch closely for developments in this area.  If companies do not get the benefit of class action waivers through their arbitration programs, they may reconsider whether mandatory arbitration of other employment disputes provides them with sufficient benefit to retain those programs.

You can read the Seventh Circuit decision in Lewis v Epic Systems Corporation here.