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

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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The Supreme Court of Texas served up a significant victory for Waffle House in a case holding that a plaintiff alleging both a statutory sexual harassment claim and a negligent supervision and retention claim based on the same conduct is limited to recovering solely on the statutory remedy.  

Here are the facts as reported by the Court.  Cathie Williams worked as a Waffle House waitress for approximately eight months beginning in 2001.  During her employment she was subjected to offensive sexual comments from a  male co-worker cook.  These remarks were sometimes accompanied by physical gestures or attempts at unwelcome flirting.  Additionally, the harasser occasionally pushed Williams into the counters and grill; rubbed his arm against her breast; and on one occasion came up behind her, held her arms and pressed his body against hers.

Williams complained to the restaurant manager, but the conduct did not stop.  Williams then complained to the district manager.  According to Williams, little effort was made to investigate or remedy the offensive conduct.  Williams ultimately resignedly complaining that she was constructively discharged.

Williams filed her lawsuit against Waffle House alleging a statutory sexual harassment claim under the Texas Commission on Human Rights Act (TCHRA) and a common law negligent supervision and retention claim for retaining the harasser after Williams' complaints.  The jury returned a total verdict on both claims of approximately $3.89 million.  Williams elected her remedies under the common law negligence claim which provided her a greater recovery than the statutory claim (and its caps) allowed.  The trial court ultimately entered judgment in Williams' favor for $900,000.

Waffle House appealed arguing that Williams' common law negligent supervision and retention claims were completely preempted because her exclusive remedy for workplace sexual harassment was the statutory claim under the Texas Commission on Human Rights Act.  Waffle House argued that, at a minimum, the damages had to be reduced to reflect the lower damages caps provided for under the TCHRA.

In its analysis, the Court was persuaded that the statutory remedies should be the exclusive remedies under these facts given the comprehensive procedural rules and remedies the Texas Legislature crafted in creating a statutory sexual harassment claim.  Although not specifically articulated, the Court also appeared to be concerned that plaintiffs subjected to workplace harassment might forego the comprehensive administrative procedures under the TCHRA to pursue potentially more lucrative negligence claims, thereby rendering the Texas Workforce Commission's Civil Rights Division less relevant.

The Court held that a sexual harassment plaintiff cannot recover under a negligence theory where the negligence is entwined with the facts of the complained-of harassment.  Stated differently, where the "negligence is rooted in facts inseparable from those underlying the alleged harassment," the plaintiff's sole remedy is a statutory harassment claim.  However, where a negligence claim arises from facts unrelated to the sexual harassment (e.g., assault-based negligence claim), the TCHRA may not necessarily provide the sole remedy. 

You can download the majority opinion and dissent here. 

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Texas courts routinely enforce arbitration agreements between employers and their employees. In most parts of the state, lawyers representing employees agree to go to arbitration upon being presented with a copy of an arbitration agreement signed by the plaintiff-employee. On occasion, however, there are disputes over the enforceability of an arbitration agreement. The Supreme Court of Texas’ recent opinion spotlights another challenge to an employer’s alternative dispute resolution program.

In In re Odyssey Healthcare, Maria Morales sued her El Paso-based employer (and her supervisor) for negligence after she was injured at work when she tripped on an uneven step at a patient’s home. Odyssey is a non-subscriber (i.e., it does not have workers’ compensation insurance) and provides its employees with an “Occupational Injury Benefit Plan.” All Odyssey employees must enroll in the program as a condition of employment. The program requires that all disputes between the employer and employee must be resolved through mandatory, binding arbitration. The arbitration was to be conducted with an arbitrator selected from a panel based in Dallas. The employer reserved the right to modify or terminate the arbitration program, but only after providing the employees with advance notice.

The plaintiff challenged the arbitration program arguing that it was invalid, unenforceable and substantively unconscionable; it violated the Texas Workers Compensation Act’s non-waiver provisions; the Federal Arbitration Act violated the Tenth Amendment by encroaching on a state’s power to enact and regulate its workers’ compensation system; and the agreement was illusory. The Texas Supreme Court rejected each of these arguments and directed the trial court to vacate its prior order and grant the motion to compel arbitration.

You can access the full opinion here.

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The Fifth Circuit Court of Appeals affirmed that an employer willfully violated the FLSA by excluding “per diem” from the employee’s regular rate of pay and thereby avoiding increased overtime wages. In Gagnon v. United Technisource, Inc., the employer separated the plaintiff’s compensation into straight time, an hourly per diem payable up to the first 40 hours worked each week, and an hourly overtime rate. After a year of employment, the employee received a “raise” for which the employer increased both the per diem and overtime rate by $1, but not the regular rate of pay.

The employee sued for unpaid overtime under the FLSA, while the employer argued that the overtime rate already exceeded that required and that the per diem should not fall under the regular rate of pay because it equaled reimbursable expenses. Rejecting those defenses, the Court agreed that a per diem could be excluded, but reasoned a legitimate per diem would not vary based on number of hours worked. The employer also tried to offset the back overtime wages by the amount of expenses saved when the employee moved closer to work. The employee’s change in address would have resulted in fewer per diem expenses, but the Court reasoned that since the hourly per diem should have been included in regular rate of pay in the first place, the employer could not offset the overtime pay owed.

Texas employers should review their methods of calculating overtime rates to ensure compliance with the FLSA, and specifically to ensure that per diem pay is included in the regular calculation. Failure to properly calculate these rates may render employers vulnerable to significant liabilities in the form of back overtime wages, attorney fees, costs, and liquidated damages. 

The Editor thanks Chandler Craig, a third year law student at the University of Texas who is clerking for the firm, for drafting this post.

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