Texas Employment Law Update : Texas Employment Lawyer & Attorney : Russell D. Cawyer : Kelly Hart & Hallman Law Firm : Dallas TX Labor Updates

Lawyers prosecuting and defending wage and hour misclassification cases (i.e., exempt/nonexempt and employee/contractor) will emphasize how fact intensive these inquiries can be.   The importance of factual distinctions in litigating misclassification cases is demonstrated by two cases recently decided by the Fifth Circuit.  In Cromwell v. Driftwood Electrical Contractors, a panel of the court of appeals held that workers performing cable splicing work in New Orleans were not independent contractors and were employees entitled to overtime.  Contrast Cromwell with Thibault v. BellSouth, where a different panel of the court concluded that a cable splicer performing the same work in the same geographic area under similar circumstances, was an independent contractor not entitled to overtime.  This table summarizes some of the relevant facts in Cromwell and Thibault. 

Despite the similarities of the work, subtle differences in the facts resulted in different outcomes.  In misclassification cases over overtime exemptions or employee/contractor status, facts matter.

Full copies of Cromwell and Thibault can be accessed here and here.

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In another cable splicer misclassification case arising in the aftermath of hurricane Katrina, the Fifth Circuit affirmed a trial court decision that Louis Thibault was an independent contractor rather than an employee. Therefore, he was not entitled to overtime under the FLSA.

Thibault owned a business in his home state of Delaware selling picnic tables, storage tables and golf carts. He also owned several rental properties and realized a small income from racing automobiles.  When hurricane Katrina seriously damaged the telephone infrastructure of BellSouth’s grid, Thibault and his friend Bill Peek, drove their RV to Louisiana to perform splicing work on behalf of BellSouth to rebuild the grid.  Peek was an experienced cable splicer but Thibault had never worked as a splicer.  He did have prior experience as a naval aircraft mechanic and according to him easily learned mechanical tasks if shown how to do the task.  Peek taught Thibault the basics of splicing in one evening and Thibault was able to learn the remainder of what he needed to know on the job.

Once in New Orleans, Thibault and Peek worked 14 days shifts (13 days on with 1 day off) 84 hours per week; received a fixed hourly wage ($68 per hour) and were required to provide their own trucks and tools.  BellSouth decided what jobs would be done daily and assigned BellSouth contractors to distribute the assignments. Thibault received his daily assignments from the BellSouth contractor. 

Thibault had intended to work 6-7 months and then return to his home in Delaware. After only three months; however, he was laid off. He earned $51,628 during the three month period. After he was released he sued BellSouth and its contractors for unpaid overtime claiming he was an employee rather than an independent contractor. The trial court concluded that Thibault was an independent contractor and granted summary judgment for the defendants.

A panel of the Fifth Circuit Court of Appeals affirmed the trial court decision. Applying the economic realities test, the panel found Thibault was not an employee. Significant to its decision was the fact that:

• Thibault owned his own business and therefore did not work exclusively for BellSouth and its contractors;
• Thibault intended to work on 7-8 months and then return to Delaware;
• Defendants considered him an independent contract and many other splicers also considered themselves contractors;
• Splicing required little skill and initiative as evidenced by the fact Thibault learned it in one evening;
• Thibault continued to oversee his primary business during the three months he performed splicing work.

In the panel’s opinion, there was insufficient evidence in the summary judgment record to create a genuine issue of material fact that Thibault was an employee. 

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Effective July 29, 2010, the City of Austin requires employers in the construction industry to provide at least ten minute rest breaks to their employees for every four hours worked.  The ordinance applies to all employers engaged in work associated with construction projects including alteration, demolition, building excavation, maintenance and renovation of structures or sites.

Employees working less than 3.5 hours or who spend more than half of the work time engaged in indoor administrative or secretarial activities are not required to be provided rest breaks. Rest breaks required under this ordinance must be completely free from all working activities and cannot be combined with an employee's regular meal period.  Employers are also required to display postings describing the rest break requirements at every construction site in English and Spanish.  The City will prescribe the size, content and locations of signs required by the ordinance under separate rule.

The ordinance provides for a civil penalty of up to $500 for each violation (but only after the employer continues to violate the ordinance after being notified of the offense, in writing, by a City representative).  The ordinance also carries Class C misdemeanor criminal penalties for persons failing to provide required rest breaks and for failing to post required signage.  Strict liability applies to violations and each day that a violation occurs is a separate offense.  Enforcement will be handled on a complaint basis.  The law provides a City enforcement mechanism but does not expressly provide for a private right of action.

A draft of the ordinance can be accessed here.

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The exercise of sound judgment and the uniform, mechanical application of employment policies are not always synonymous. Every FMLA-covered employer in Texas, Mississippi and Louisiana should be interested in the Fifth Circuit’s most recent FMLA case resulting from an employer’s uniform application of its internal FMLA reporting policy. In Saenz v. Harlington Medical Center, the Court decided, what it characterized as a “close question,” that an employee does not necessarily have to comply with an employer’s internally created, heighted notice provision to maintain FMLA protection and that in some cases the employee need only comply with the FMLA’s more relaxed notice requirements. 

The plaintiff in Saenz, suffered from partial complex epileptic seizures that caused her to lose consciousness and become unable to perform her job. This normally incapacitated her for two days at time. Saenz requested and was granted intermittent FMLA leave for this seizure condition. Her employer, Harlingen Medical Center (“Harlingen”) had a policy that required employees to contact its FMLA administrator not later than two days after each leave period pursuant to the intermittent leave request. Under Harlingen’s policy, failure to provide the required notice could lead to a loss of FMLA protection. In the following six months, Saenz used intermittent FMLA leave eleven times and provided the required notice each time.

Thereafter, Saenz began suffering from depression and bipolar disorder that caused hallucination and disorientation. She was admitted the hospital and later committed to a behavioral center for three days of evaluation. Saenz’s mother contacted her daughter’s supervisor to advise of the symptoms and that Saenz would not be reporting to work.   While at the emergency room (in the same hospital where she normally worked), another Harlingen supervisor personally visited Saenz and observed some of her treatment. In the nine days during which she was incapacitated, Saenz was hospitalized, placed under a judicially created guardianship and eventually released into her mother’s care.

Ten days after first becoming incapacitated, Saenz called Harlingen’s FMLA administrator to advise of her depression/bipolar diagnoses and to discuss the five work absences she suffered as a result of her condition. She also requested approval for intermittent FMLA for these new conditions. Eight days later, Saenz received two letters. The first was from the FMLA administrator advising her that her intermittent FMLA leave request was being processed. The second letter was from Harlingen advising her that her employment was being terminated for excessive absenteeism. The termination letter expressly referenced her failure to comply with the two-day call-in policy. 

Saenz sued Harlingen for violations of the FMLA. The trial court dismissed the case holding that that factual issues existed as to whether the employer could rely on its heightened notice provision, namely, the employer’s actual notice of the severity of Saenz’s condition and the lack of evidence that Saenz affirmatively refused to comply with the company’s heightened noticed provisions. The court of appeals also found that fact issues existed as to whether Saenz gave sufficient notice of her need for leave as soon as practicable as required by the FMLA because the evidence showed that her mother told two supervisors of her hallucinations; at least one supervisor visited her in the hospital emergency room and observed Saenz’s treatment; and her mother stayed in constant contact with the employer as to the status of Saenz’s treatment. Based on these facts and this evidentiary record, the court of appeals remanded the case to the trial court for further proceedings.

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I've previously written about the specific requirements that must be included in a covenant not to compete with a licensed physician to make the restrictive covenant enforceable.  The Dallas Court of Appeals recently affirmed a trial court's decision that a noncompetition agreement between a surgical practice and several limited-partner physicians was unenforceable because the agreement lacked one of the statutorily required provisions.  You can access the Court's opinion in Greenville Surgery Center Ltd. v. Beebe here.  In short, the noncompete lacked the buy-out clause required by the statute.  That defect alone was sufficient to render the noncompetition obligation unenforceable.

Beebe should remind Texas employers that when drafting noncompetition agreements, it is important to have a knowledgeable, Texas attorney review the agreement before having employees or partners sign it.

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In its first FMLA opinion, the Texas Supreme Court held that agencies of the State of Texas cannot be sued for FMLA violations arising out of an employee's FMLA leave taken for his own serious health condition.   In University of Texas at El Paso v. Herrera, the Supreme Court of Texas held that, unlike the family care provisions of the FMLA, Congress did not abrogate Texas' sovereign immunity for violations of the FMLA self-care provision and therefore the State of Texas cannot be sued for such violations.

The underlying facts are as follows.  Alfredo Herrera was an HVAC technician for the University of Texas at El Paso.  Herrera sustained a work-related injury to his elbow requiring a nine month leave of absence.  One month after he returned to work, his employment was terminated.  He sued alleging that he was terminated for taking personal medical leave under the self-care provision of the FMLA and exercising his First Amendment rights by complaining about unsafe work conditions.  UTEP challenged the court's jurisdiction over the claim asserting that it was barred by sovereign immunity.  The trial court and court of appeals found that jurisdiction existed. 

Acknowledging that the U.S. Supreme Court held that Congress effectively abrogated state sovereign immunity for the FMLA family-care provisions, the Texas Supreme Court found that there was no evidence in the FMLA legislative history or Congressional findings that women took more personal medical leave (or were thought to do so) than men.  Because, according to the Court, the self-care provisions of the FMLA were not targeted at an identified pattern of gender discrimination on the part of the States, Congress overreached when it attempted to apply the self-care leave provisions to the states. 

While the opinion analyzes complex issues of state sovereignty and Congressional findings, the simple take away from Herrera is that the State of Texas cannot be sued for FMLA violations arising out of an employee's need for leave for self care.   

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The U.S. Department of Labor has "clarified" the reach of the FMLA by offering an interpretation of the meaning of "son or daughter" under the FMLA.  Under the FMLA regulations, a "son or daughter" is defined as:

a biological, adopted, or foster child, a stephchild, a legal ward, or a child of a person standing in loco parentis, who is either under age 18, or age 18 or older and 'incapable of self care because of a mental or physical disability' at the time that FMLA leave is to commence.

The new Administrator's interpretation (and first issued under the FMLA) provides some examples where the the Department would find a parental relationship despite the absence of of a biological or legal relationship such as:

• where an employee provides day-to-day care for his or her unmarried partner’s child (with whom there is no legal or biological relationship) but does not financially support the child;
• where an employee who will share equally in the raising of a child with the child’s biological parent would be entitled to leave for the child’s birth ;
• where an employee who will share equally in the raising of an adopted child with a same sex partner, but who does not have a legal relationship with the child, would be entitled to leave to bond with the child following placement, or to care for the child if the child had a serious health condition, because the employee stands in loco parentis to the child.

You can access a complete copy of the Administrator's interpretation here.

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The Department of Labor's Wage and Hour Division issued its second Administrator's Interpretation.   The Administrator Interpretations are issued by the Division in areas where it believes it is useful to clarify the law as it relates to an entire industry, a category of employees, or to all employees.

Administrator's Interpretation No. 2010-2 discusses the Fair Labor Standards Act's exclusion from work time for certain preliminary and postliminary activities like changing clothes.  The FLSA excludes from compensable time the time spent "changing clothes or washing at the beginning or end of each workday" if that time is excluded from compensable time pursuant to "the express terms or by custom or practice" under a collective bargaining agreement.  Interpretation 2010-2 provides that exclusion from compensable time "does not extend to protective equipment worn by employees that is required by law, by the employer, or due to the nature of the job."  Consequently, the Division takes the position that time spent changing into or out of protective equipment required by law, the employer, or the nature of the job is compensable under the FLSA.

Second, the Interpretation offers the Division's opinion on whether whether noncompensable clothes changing can be a principal activity under the Portal to Portal Act rendering all subsequent activity compensable.  The Portal to Portal Act clarifies what activities are intended to be compensable work time such as work occurring before and after the employee's regular work activities.  Any activity that occurs after the employee's first principal activity and before the last principal activity is compensable.  For example, once an employee performs the first principal activity of the work day, all subsequent activity (e.g., waiting time) is compensable until the last principal activity of the workday.  It is the opinion of the Administrator that changing clothes, even if noncompensable, may be a principal activity such that it can make subsequent activities such as walking and waiting compensable.

You can download the full Administrator's Interpretation here. 

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Mega class-actions attempting to adjudicate discrimination claims on behalf of thousands or tens of thousands of class members are often fundamentally unfair to employers and violate their right to due process. The recent $250M jury verdict against Novartis (5,200 potential class members) and the affirming of a class certification order of up to 1.5 million Wal-Mart workers for various pay and promotional practices highlight the threat that mega-class actions can pose to large employers.

Large class actions adjudicating the claims of hundreds or thousands of employees may be fairly tried when they adjudicate a specific, objective written policy of an employer and significant variables are absent.  However, when large class actions attempt to adjudicate claims involving inherently subjective components (such as unwritten rules or practices with dozens, if not hundreds of variables); individual issues must predominate.  This is especially true when the issue may involve hundreds or thousands of discrete decisions made by different decision-makers (e.g., promotions or job assignments).  A class trial of thousands of discrimination claims tends to devolve into evidence of the personal experiences of a hand-full of class representatives based on a few anecdotal (and usually extreme) examples of conduct (e.g., the Novartis baby-carriage rhyme).  This process deprives an employer of being able to defend the individual employment decisions on a case-by-case basis and sacrifices the employer's right to due process in the name of perceived efficiency or economy.  

The trial of a mega-class action to adjudicate the claims of 1.5 million employees reminds me of Isaac Asimov's 1955 short story "Franchise".  In Franchise, a futuristic United States turns to electronic democracy. Rather than conducting political elections, a supercomputer, Multivac, selects a single "most representative" person from the population. Multivac then questioned the “most representative” person to determine the overall electorate orientation. All elected offices are then filled by candidates the computer deems acceptable to the populace as determined by the "most representative" person.

It would be fundamentally un-American to choose our elected officials by selecting a "single most representative" voter.  It similarly violates fundamental notions of due process and fairness to hold employers liable for wide-spread, systematic discrimination involving dozens of variables in a trial that considers the stories of only a handful of the potential class members.  Courts should reexamine whether an employer's due process rights can be adequately preserved in the collective adjudication of mega-class action of discrimination claims.

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