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

Reports of corporate espionage appear to be on the rise.  According to U.S.A Today, Starwood Hotels recently sued the Hilton Hotel chain accusing it of stealing trade secrets to help it launch a rival luxury chain quickly and cheaply.  The WSJ.com reports that the lawsuit accuses the Starwood executives "smuggled more than 100,000 documents and electronic files out of Starwood — and that Hilton used the information to create a new luxury hotel brand, called Denizen."

The NY Times reports that Hilton received a federal grand jury subpoena from the U.S. Attorney’s Office for the Southern District of New York asking for documents relating to the two former Starwood executives indicating a criminal investigation is underway.

While the allegations in Starwood/Hilton, if true, are extreme, there has been a dramatic increase in litigation between competitors over the theft of confidential, proprietary and trade secret information.  According to a recent survey conducted by Symantec and the Ponemon Institute, more than 59 percent of ex-employees admitted to stealing former employer's confidential information such as employee records, customer information, and contact lists. The ease that employees can quickly and covertly appropriate large volumes of electronic data using portable storage devices or web-based personal e-mail accounts should cause all employers with confidential, proprietary or trade secret information and intellectual property great concern.

The large percentage of ex-employees that appear to be taking their employers information without permission can expose their next employer to expensive litigation and potential damages.  Whether the new employer will be liable will depend on a number of factors such as whether (and when) the new employer learns of the theft; how the new employer responds to that knowledge; and how the appropriated information was used. 

Employers that hire employees from competitors should take steps to ensure that they do not inadvertently end up in a civil suit or criminal investigation because of the hiring of those employees. Some measures employers can take in hiring employees from competitors include: ensuring that those employees are not under enforceable noncompetion agreements or restrictive covenants that prohibit the contemplated employment; ensure that employees are advised to and heed the warning not to bring any information (confidential or not) from their previous employer; and advising new hires not to use or disclose any their former employers confidential, proprietary or trade secret information.

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With our close proximity to Mexico and the outbreak of reported swine flu infections in that country, Texas employers have a greater need to prepare their workforces for a swine flu pandemic.  There are now reported cases of swine flu in Fort Worth, Richardson, and Guadalupe County (near San Antonio).  Additionally, the World Health Organization's recent increase in the pandemic alert level from phase 3 to phase 4 suggests that employer preparation of the workplace is prudent.

There is a great deal of public information available to employers that desire to prepare for and deal with an influenza pandemic. The U.S. Department of Health & Human Service has a full web page dedicated to workplace planning for a pandemic outbreak. OSHA also has guidance on preparing the workplace for an influenza pandemic.  The IFMA Foundation also has a Pandemic Preparedness Manual that contains specific steps for preparing a business continuity program designed to insure that business operations are not substantially disrupted during a disaster or crisis.

Suggestions for Employers.

• Discourage nonessential business or recreational travel to Mexico and other high risk areas;
• Make sure employees recognize the signs and symptoms of swine flu;
• Instruct employees on influenza avoidance behaviors;
• Discourage sick employees from coming to work;
• Identify and designate "essential personnel" for the organization as key roles in the event nonessential personnel need to be told to stay home;
• Prepare a Business Continuity Plan.

These simple suggestions may help employers minimize the effects of this potential pandemic and better weather the consequences if the pandemic becomes more widespread. 

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As we approach local elections, it is good to remember that Texas law may require an employer to provide an employee with paid time off to vote.  The Texas Election Code makes it a Class C misdemeanor for an employer to refuse to allow an employee to be absent from work on election day for purpose of attending the polls to vote.

An employer is not, however, required to allow time off to vote if the polls are open on election day for voting for two consecutive hours outside of the employee's working hours.  For example, if you have an employee that regularly works 8:30 a.m. to 5:30 p.m. with a one-hour lunch break, an employer may have to give that employee time off from work on election day to attend to the polls and vote. In Texas, the election polls are generally open from 7:00 a.m. until 7:00 p.m. 

Because the term "penalty" means a loss or reduction in wages, an employer should provide paid time off for the employee to attend the polls to vote if the polls are not open on election day for at least two consecutive hours outside the employee's working hours.

An employer can avoid this interruption and the payment for otherwise nonworking time by rescheduling work schedules on election day so that employees have two consecutive hours off while the polls are open (e.g., reschedule the employee to work 8:00 a.m. to 5:00 p.m. on election day). 

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For several years the EEOC has enhanced its education and enforcement efforts using existing laws to protect employees with caregiving responsibilities (i.e., caring for children and ill family members).  This week the Commission issued guidance for employers it describes as "Best Practices" to assist employees in balancing work and family responsibilities.  Best Practices are proactive measures going beyond federal nondiscrimination requirements to help employees achieve a satisfactory work-life balance.

Acting EEOC Chairman Stuart J. Ishimari remarked that "Today we take another step forward, articulating not just the bare minimum required to avoid unlawful discrimination, but also thinking broadly about the ways in which family-friendly workplace policies can improve workers' ability to balance caregiving responsibilities with work."

The new guidance supplements the EEOC's 2007 guidance on Unlawful Treatment of Workers with Caregiving Responsibilities.  In addition to some common sense recommendations (e.g., train managers; develop, disseminate and enforce a strong EEO policy; investigate complaints), the most interesting suggestions to me are those related to flexible work arrangements. Some of the alternative work arrangements suggested include:

• Flexible work hours (i.e., permit a varying starting and stopping time within a certain range);
• Flexible week opportunities (e.g., work week consisting of four 10-hour days);
• Allowing for voluntary rather than mandatory overtime and allowing overtime to be scheduled in advance;
• Telecommuting, work-at-home or flexplace programs;
• Reduced-time options (i.e., part time work or job sharing programs).

EEOC's guidance provides a useful reference for any employer desiring to become more family-friendly and better assist its employees in achieving a balance between family and work. 

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On April 17, 2009, the Supreme Court of Texas continued its trend of finding ways to enforce covenants not to compete in the employment context.   In Mann Frankfort Stein  & Lipp Advisors, Inc. v. Fielding, the Court considered "whether a covenant not to compete in an at-will employment agreement is enforceable when the employee expressly promises not to disclose confidential information, but the employer makes no express return promise to provide confidential information."

Fielding was hired by an accounting and consulting firm as a CPA and Senior Manager in the Tax Department.  When he accepted the at-will senior manager position he was required to sign the firm's standard at-will employment agreement.  The agreement contained a client purchase provision.  The client purchase provision required that in the event Fielding performed work for Mann Frankfort's clients in the year following his termination of employment, Fielding was required to purchase that portion of Mann Frankfort's business the particular clients represented. 

The agreement lacked any affirmative promise from Mann Frankfort to provide confidential information to Fielding.  However, Fielding affirmatively promised not to use or disclose Mann Frankfort's confidential information.  When Fielding left employment and began competing, the parties litigated over the validity and enforceability of the employment agreement and client purchase provisions. 

The evidence showed that after signing the employment agreement Fielding was provided with access to and use of confidential information of Mann Frankfort and its clients.  The information included "clients' names, billing information and pertinent tax and financial information."  When Fielding was hired as a senior manager in the firm's Tax Department, he would be required to have and use information confidential to the firm by the nature of his duties. 

The Court held that the lack of an affirmative promise to provide Fielding with confidential information in the agreement was not fatal to the enforceability of the agreement or the client purchase provisions in this case.  The Court explained that when the nature of the employment will reasonably require the employer to provide confidential information to the employee for him to accomplish his job duties, the employer has implicitly promised to provide the confidential information and the covenant is enforceable as long as the other requirements of the Texas Covenant Not to Compete Act are satisfied.

The effect of this holding will be to make it easier to enforce covenants not to compete in Texas.  Additionally, the Court has at least tacitly endorsed those intermediate court of appeals decisions that have concluded that restrictive covenants other than noncompete provisions (e.g., client purchase provisions or forfeiture clauses) should be analyzed like noncompetition provisions that strictly prohibit competition rather than merely providing a monetary penalty for such competition. 

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Adam Liptak of the New York Times had an interesting preview about an important employment law case scheduled to be argued before the U.S. Supreme Court this month.  In Ricci v. Destafano, scheduled for oral argument on April 22, 2009, the Court is being asked to determine whether the City of New Haven's use, and then abandonment, of a firefighter promotional exam discriminated against white firefighters. 

As  Liptak wrote for the Times, Frank Ricci was an 11-year veteran of New Haven Fire Department who desired to advance to lieutenant.  To qualify for the promotion Ricci had to take a test that the City paid $100,000 to an independent testing company to develop.  The testing company , I/O Solutions, Inc., went to extraordinary lengths to ensure that the test was free of any racial bias.

Ricci wanted the promotion so badly that when the City offered the promotional exam, Ricci "gave up a second job and studied up to 13 hours a day.  Mr. Ricci, who is dyslexic, paid an acquaintance more than $1,000 to read textbooks onto audiotapes. He made flashcards, took practice tests, worked with a study group and participated in mock interviews."

Ricci finished 6th out of the 77 candidates that took the test.  However, because none of the 19 African American firefighters scored high enough to qualify for the promotion, the City threw out the test.  At this point it appears that the City was concerned about being sued by the African American firefighters who scored poorly on the test claiming that the test had a disparate or adverse impact on them.

Instead, Ricci (along with eighteen other firefighters) sued the City claiming that its abandonment of the test because none of the minority candidates qualified for promotion under the test constitutes unlawful discrimination. The trial court recounted that the City's motives for abandoning the test that included fear of public criticism, the possibility of more lawsuits from minority applicants and a desire to promote diversity and manager role models for firefighters.

The case is likely to outline the extent to which an employer can go to further its goal of increasing racial diversity in the workplace.  And while most "reverse discrimination" lawsuits do not tend to do well in Court, the facts in Ricci make for an intriguing case for the Justices to consider.  For more background information and  "pregame" commentary on this case, the National Journal Magazine, the New Haven Independent and the Connecticut Employment Law Blog have some interesting articles.  Adversity.net has the results of the test by score and race.

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I recently wrote about several leave of absence bills pending in the Texas Legislature. On March 25, Congressional Democrats introduced a bill to provide twelve weeks of paid federal family & medical leave --the Family Leave Insurance Act of 2009 (HR 1723).

Unlike the FMLA which only applies to employers with 50 or more employees within a 75 mile radius, the Family Leave Insurance Act of 2009 would apply to employers with 2 or more employees. Employees eligible for the new benefit include employees who earned wages (i.e., paid into the fund) with a covered employer for a minimum of 6 months prior to seeking benefits; and has been employed by the employer with respect to whom paid leave is requested for at least 625 hours of service during the previous 6 months.

Benefits are available to eligible employees who take the leave for the same reasons as FMLA (i.e., the birth or placement of a son or daughter; to care for a serious health condition of the employee or the employee’s family member, including a family service member; or due to a qualifying exigency arising from a close family member who is on or been called up to active military duty).

The employee’s benefit amount is dependent on the employee’s annual income and is calculated on a sliding scale.

• Up to $20,000 is paid 100 percent of that employee's daily earnings;
• More than $20,000 but less $30,000 is paid the greater of 75 percent of that employee's daily earnings; or 100 percent of the daily earnings of an employee with an annual income of $20,000;
• More than $30,000 and not more than $60,000 is paid the greater of 55 percent of that employee's daily earnings; or 75 percent of the daily earnings of an employee with an annual income of $30,000;
• More than $60,000 and not more than $97,000, is paid the greater of 40 percent of that employee's daily earnings; or 55 percent of the daily earnings of an employee with an annual income of $60,000; and
• More than $97,000, an amount equal to 40 percent of the daily earnings of an employee with an annual income of $97,000.

The benefits would be paid from a federal trust fund. The trust fund would be funded from both employer and employee contributions. Employers and employees would both contribute .2 percent of each employee’s wages to the fund beginning on January 1, 2011. Small employers (under 20 employees) would pay a .1 percent premium. The law, if passed, would be administered like state unemployment benefit programs.

Finally, the bill provides anti-retaliation provisions; creates a new civil cause of action against employers that violate the anti-retaliation provisions; as well as potential administrative fines and penalties.

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On April 3, 2009, the Supreme Court of Texas held that a premises owner who hires contractors to perform work on its premises and enters into agreements whereby the owner will provide workers' compensation insurance to the contractor's employees is entitled to the benefit of the exclusivity provisions of the workers' compensation act and cannot be sued for negligence by the contractor's employees.  In other words, a premises owner who contracts to provide workers' compensation for its contractor's employees gets to stand in the shoes of a general contractor and claim the benefit of the exclusivity defense.  For more commentary and analysis on this opinion, see the Supreme Court of Texas Blog.

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According to the Centers for Disease Control, over 35 percent of all Americans are overweight and obese.  Last week, Senators Tom Harkin (D-IA), John Cornyn (R-TX) and Representatives Blumenauer (D-OR) and Mack (R-CA) have introduced the bipartisan Healthy Workforce Act.  (HR 1897, SB 803).  The bills would provide a tax credit to companies that offer effective and comprehensive wellness programs such as health risk assessments, health awareness and behavioral change programs.  According to Senator Harkin's press release the bills would cover 135 million full and part-time employees and provide the tax credits to programs that provide meaningful incentives for program participation and employee committees that tailor programs to meet workforce needs.  Wellness programs typically promote physical activity and disease prevention such as weight loss and exercise programs, smoking cessation programs, and health screening programs.

The bills are supported by the American Heart Association and the U.S. Workplace Wellness Alliance, a group comprised of businesses, health care advocates, and nonprofit organizations dedicated to the vision that a healthier U.S. workforce.

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Today, the U.S. Supreme Court held that provisions in collective bargaining agreements that clearly and unmistakably require union members to submit statutory discrimination claims to the grievance and dispute resolution provisions of the agreement are binding and enforceable. 

In 14 Penn Plaza LLC v. Pyett ,  a dispute arose over a commercial office building's reassignment of night watchmen employees (whose duties were outsourced) to less desirable positions such as light duty cleaners and porters.  The reassigned employees, members of the Service Employee International Union, Local 32BJ, filed a grievance with the union contending that the reassignments violated, among other things, the CBA's ban on age discrimination.  When the grievances were unsuccessful, the Union requested arbitration under the dispute resolution procedures of the CBA.  The union later withdrew the grievances to the extent they complained about age discrimination prohibited by the contract but continued to press for arbitration on the remaining claims.

The disgruntled reassigned employees then filed a charge of discrimination with the EEOC over their reassignment claiming the reassignments were discriminatory.   After the EEOC issued a right to sue letter and the employees sued in federal district court, the defendant filed a motion to compel arbitration relying on the language of the grievance and dispute resolution procedures of the CBA with the union that stated:

§ 30 NO DISCRIMINATION. There shall be no discrimination against any present or future employee by reason of race, creed, color, age, disability, national origin, sex, union membership, or any other characteristic protected by law, including, but not limited to, claims made pursuant to Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the New York State Human Rights Law, the New York City Human Rights Code, . . . or any other similar laws, rules, or regulations. All such claims shall be subject to the grievance and arbitration procedures (Articles V and VI) as the sole and exclusive remedy for violations. Arbitrators shall apply appropriate law in rendering decisions based upon claims of discrimination.

The trial court and Second Circuit Court of Appeal refused to compel arbitration holding that a CBA could not waive the bargaining unit members' right to a judicial forum over statutory civil rights claims created by Congress.

The Supreme Court reversed holding that where the intent to submit statutory discrimination claims to the grievance and dispute resolution procedures of the CBA is clear and unmistakable (an issue that was not in dispute before the court --i.e., the parties agreed that the language was sufficiently explicit) nothing precluded the union's ability to waive its members right to a judicial forum to resolve those discrimination claims.  A majority of the Court rejected the employee's argument that the union was waiving important, substantive rights to be free from age discrimination. 

The Court noted that the union had not waived (nor could it) the employee's right to be free from and to challenge employment actions that were based on unlawful motivations such as age discrimination.  Rather, the Court observed, the Union had merely negotiated for and agreed that such claims would be resolved in a forum other than a judicial one --i.e., arbitration.  Consequently, the Court held that to the extent the employees were to litigate their statutory age discrimination claims they would have to do so within the confines of the grievance and dispute resolution procedures of the CBA.

As a consequence of this ruling it is unlikely that unions will agree in future negotiations that their grievance and arbitration procedures include employment discrimination and civil rights claims.  Placing the unions in the position of using limited resources to arbitrate otherwise individual claims is unlikely to be something that benefits the majority of the bargaining unit members.  This potential conflict of interest is something most unions would prefer to avoid. 

Other commentators have suggested, and I agree, that the holding of this case is likely to be limited because Congress may seek to overturn it as it did with the Court's Ledbetter decision.  See Jottings by an Employer's Lawyer and The Delaware Employment Law Blog . 

Another potential consequence is that the existence of a mandatory arbitration provision in a CBA covering employment discrimination claims may be an important factor the EEOC considers in deciding whether to litigate over a particular charge of discrimination.  Under the current law the EEOC is not be bound by the grievance and arbitration provisions in CBA's (nor individual employment contracts between employees and employers) and it could vindicate an employee's rights in a federal judicial forum notwithstanding the CBA.

Until legislation is passed to overturn 14 Penn Plaza, employers and unions with CBAs that clearly and unmistakably include employment discrimination and civil rights claims in the grievance and dispute resolution provisions will now be forced to resolve those disputes in an arbitral forum.

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