Texas Employment Law Update

Texas Employment Law Update

A Resource for Texas Employers

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.

Supreme Court Holds Constructive Discharge Administrative Filing Deadlines Commence When Plaintiff Gives Notice of Resignation

Posted in Case Summaries, Discrimination, Retaliation

Plaintiffs and employers often dispute when an employee’s time period for filing a charge of discrimination commences.  Plaintiffs argue that it commences on the date the adverse action is effective (e.g., the termination date) where employers often argue that it commences earlier when the employee is advised of the decision (i.e., notice of termination that is effective at a later date).  In today’s Supreme Court opinion, the Court held that in a federal sector Title VII constructive discharge case, the applicable administrative remedies that must be exhausted commence on the date the employee tenders his notice of resignation and not the later effective date of that resignation.

In Green v. Brennan, an employee of the United States Postal Service believed that he was denied a promotion because of his race and that his supervisor’s wrongly accused him of intentionally delaying the mail –a federal crime.  The USPS and Green reached an agreement that it would not pursue criminal charges against Green and Green would either retire or accept a lesser paying position in a remote location.  Thereafter, Green elected to retire by tendering his notice and then claimed a constructive discharge.  Ninety-six days after signing the non-prosecution agreement but forty-one days after tendering his notice of retirement, Green contacted an EEO counsel to commence his charge of discrimination against the USPS.  Federal sector employees must contact an EEO counselor within 45 days of the discriminatory act complained of in contrast to private-sector employees who must file a charge of discrimination within 300 days of the discriminatory event.  Depending on when Green’s administrative remedy deadline commenced, his claim could have been deemed untimely.

Green’s administrative remedies deadlines could have commenced on several dates:

  • December 16, 2009 when he signed the non-prosecution agreement with USPS to retire or accept a lesser paying position in a remote area;
  • February 9, 2010 when he tendered his notice of resignation for an effective date March 31, 2010;
  • March 31, 2010 the effective date of his resignation.

The courts below both found that the commencement date was the earliest date and therefore Green’s efforts to exhaust his administrative remedies on March 22nd came too late.  The Supreme Court reversed the courts below and held that the “clock for a constructive discharge begins running only after the employee resigns”.  In this case, the employee resigned when he tendered his notice of resignation with a later effective date.  While the regulation that applies to federal sector employees exhausting Title VII administrative remedies is different for private-sector Title VII plaintiffs, the Court noted that the EEOC treats the federal and private-sector limitations identically.  It is likely that the Supreme Court would reach a similar result as it did in Green if it were faced with a private-sector Title VII constructive discharge claim under similar facts.

And perhaps most important outside the constructive discharge context, the Court reaffirmed its commitment that an employee’s charge filing deadline runs from the date when an employer communicates an adverse employment decision to an employee and not the date later date when the decision becomes effective.

You can download the full opinion in Green v. Brennan here.

Follow me on Twitter @RussellCawyer

Use the New Overtime Rules to Correct Misclassified Workers

Posted in Human Resources, Wage & Hour

This week the DOL announced changes to the white collar overtime exemptions that take effect December 1, 2016. Every employment lawyer with a newsletter, blog or soapbox has written some summary of the new regulations. And while the regulations only effect the executive, administrative, professional and high compensated exemptions, Daniel Schwartz, a Connecticut employment lawyer with a highly informative blog, notes that these regulations provide a unique opportunity for employers to correct other positions where it may have potential exposure for misclassified workers.

As Dan wrote last night:

Too often, employers who discover that they have misclassified employees believe that they are in a conundrum. Keep their head down and hope no one notices, or properly classify the employee and keep their fingers crossed that they don’t get sued for back pay. Neither option is a great one for employers who need to get into compliance. . .

But here is where the opportunity comes in: As I highlighted at the start, the new overtime rule has received unprecedented amounts of publicity in the workplace. No doubt most of your employees have now heard something about it. So, some won’t be surprised if they are notified that things are changing for their position as a result of the new rule.

While the rule doesn’t provide amnesty for employers who make such changes, the new rule does remove some of the suspicions employees may have about the changes — even when those changes are perfectly legal. Employees may be more understanding.  Employers can explain truthfully that the new rule has required them to review the classification of all of its employees and the changes are as a result of the rule.

Some employers are aware that they have some positions that are likely misclassified either as exempt or workers as independent contractors. One reason employers don’t reclassify these positions is the lack of any safe harbor provision from liquidated damages or attorney’s fees for voluntary changes in classification and the prospect that such changes will raise a red flag triggering a wage and hour lawsuit.

The new DOL regulations may allow an employer the “cover” to correct these misclassified areas without drawing as much scrutiny as it would in the absence of the regulatory change and the significant public awareness that changes were made. Of course, communications to employees about changes in classification should always truthful.

If your company has positions that might be misclassified, consult the company’s labor and employment counsel to determine the publicity surrounding the new overtime regulations makes it the right time to make changes and get compliant.

Follow me on Twitter @RussellCawyer.

 

 

 

DOL Announces Details of Final Rule Changing Regulations on the Overtime Exemptions

Posted in Human Resources, News & Commentary, Wage & Hour

Last night the U.S. Department of Labor announced details of its long-awaited Final Rule on changes to the regulations interpreting the overtime exemptions to the Fair Labor Standards Act (FLSA).  The FLSA is the federal law requiring most employers to pay minimum wages and overtime to nonexempt employees.  The Final Rule raises the minimum salary an exempt employee must be paid qualify under most frequently used overtime exemptions.  The change is expected to make an additional 4.2 million workers eligible for overtime and is expected to impact managers at retailers, hotels and restaurants.  While the impact may be greatest felt in those businesses, the rule is not limited to those industries.  The Final Rule made no changes to the duties test necessary to qualify for exempt status.

The new rule takes effect December 1, 2016.  This gives employers two hundred days to prepare.  Exempt employees who do not exceed the minimum salary threshold for the salary basis after December 1, 2016 will lose the exemption.

To satisfy the new salary threshold for an exemption requiring an employee be paid on a salary basis, the employee must make an annual salary of $47,476 ($913 per week) up from $23,660 per year ($455 per week).  This is a slight decrease from the proposed salary threshold that was published in the proposed rule.  The rule also raises the salary threshold to qualify as a “highly compensated employee” from $100,000 to $134,004.  This is over a $10,000 increase in the salary that was originally proposed by the Department in the proposed rule.

Nondiscretionary bonuses and incentive payments (including commissions) can satisfy up to 10 percent of the standard salary level so long as those payments are made on a quarterly or more frequent basis.  Employers with shortfalls may make catch-up payments as well.

The salary threshold is set to adjust every three years and is tied to equal to the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region.  The salary threshold for the highly compensated exemption is also set to automatically adjust ever three years and is tied to the 90th percentile of annual earnings of full-time salaried workers nationally.

Employers should act now to take steps to prepare for the effective date.  Preparations include identifying exempt positions where an employee is making less than the new salary threshold.  For each of those positions, the employer must determine how it will treat that employee beginning on December 1, 2016.  Options include:

  • Increasing the employee’s salary to meet the new, higher threshold and maintain the exemption;
  • Convert the employee to nonexempt, track hours and pay overtime; or
  • Limit the employee to 40 hours per week.

Additionally, employers should begin preparing their communications to employees who will no longer qualify for the exemption after December 1st to explain the change; the reasons for the changes; and how the changes will impact how the employee reports his or her time and will be paid.

You can access additional information about the new Final Rule below:

DOL Summary and Overview

FAQ Final Rule: Non-Profit

DOL Final Rule Information for Higher Education

FAQ Final Rule: States and Local Governments

Comparison Table: Current Regulations, Proposed Rule, and Final Rule

If you need additional information about the impact on these changes or how to prepare for and comply with these changes, don’t hesitate to reach out to me.

Follow me on Twitter @RussellCawyer.