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

In a discrimination case it is very important to determine whether the plaintiff is alleging direct or circumstantial evidence of discrimination.  This is important because the standard by which a court determines if the case should proceed to trial or not depends on this determination. In Jackson v. Cal-Western Packaging Corp., the U.S. Court of Appeals for the Fifth Circuit applied the Circuit's test for determining whether an age-related comment constitutes direct evidence of discrimination or is merely a stray remark that may constitute circumstantial evidence of discrimination. 

Jackson, a sixty-nine year old employee, had his employment separated following an internal and external harassment investigation that resulting in a determination that he violated the company's anti-harassment policy.   He brought suit alleging that he was terminated because of his age.  His primary piece of evidence supporting his claim was a comment the decisionmaker allegedly made a year earlier.  According to Jackson, the decisionmaker told another coworker that Jackson was an "old, gray-haired fart" and that the coworker would be in charge when Jackson retired.

As the Court reiterated, to constitute direct evidence of discrimination the comment must 1) relate to the protected class of persons that the plaintiffs belongs; 2) be proximate in time to the complained of adverse employment action; 3) made by a person with authority over the employment decision at issue; and 4) relate to the employment decision at issue. Because the comment was made more than a year before Jackson's termination and did not relate to the decision at issue, the court held the comment did not constitute direct evidence of age discrimination. 

Absent direct evidence of age discrimination Jackson was forced to prove, by circumstantial evidence, that the company's stated reasons for his termination were false or untrue.  Stated another way, he had to show that the company did not reasonably believe that he violated the anti-harassment policy (sometime referred to as the "honest belief rule").  Given that the company conducted both internal and external investigations and that witnesses of both sex corroborated the claims made against Jackson, there was no evidence that the company did not reasonably believe that he violated the anti-harassment policy nor evidence that the company's stated reasons for terminating Jackson's employment were false.  Consequently, the Court affirmed the judgment in favor of the employer.

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A trial court's order granting or denying a temporary injunction in a noncompete case is rarely reversed by the court of appeals.  This week the Fourteenth Court of Appeals took the unusual step of reversing a trial court's denial of an employer's application for temporary injunction seeking to prohibit a former employee from engaging in certain competitive activities.

In EMS USA, Inc. v. Shary, EMS brought suit against its former employee (Shary) to enforce the terms of a noncompetition agreement.  The agreement prohibited, in relevant part, Shary from soliciting any of the company's customers existing as of the date of termination.  The trial court issued a temporary restraining order and later held hearings on EMS's application for temporary injunction.  At two temporary injunction hearings the trial court did not take evidence but merely heard oral argument.  Shary argued that the noncompete was overly broad as a matter of law because it was not limited to the customers that he actually dealt with but instead included all customers existing on the date of his termination.  Without taking any evidence, the trial court concluded that EMS had not shown its entitlement to an injunction.

On appeal, EMS argued that the trial court abused its discretion in failing to take evidence addressing the reasonableness of the restrictions; whether the agreement should be reformed; and whether the restrictions were ancillary to or part of an otherwise enforceable agreement such as a personal services agreement. 

The Fourteenth Court of Appeals held that the trial court abused its discretion in denying the temporary injunction without first hearing evidence.  The appellate court found that the trial court should have heard evidence regarding the reasonableness of the restrictions; the circumstances surrounding the execution of the contract; and whether the former employee had dealings with all existing customers of EMS or only part of them.  Consequently, the court of appeals reversed the denial of the temporary injunction and remanded the case to the trial court for further proceedings.

A copy of the opinion is available here.

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Last week, the El Paso Court of Appeals affirmed a judgment in favor of an employer on an unemployment benefit eligibility issue where the employee, abandoned his job.  The employee was a Nationwide Financed Agent from January 2003 until November 2005.  A Financed Agent is an employee-agent of Nationwide who starts an insurance agency and operates it to the point of economic self-sustainability.  At that point the Financed Agent becomes an independent contractor. 

In June 2005, the employee's supervisor met with the employee to discuss his poor job performance.  The employee continued to under perform and the employer attempted to meet with the employee on three successive occasions to address the continued poor performance; however, the employee failed to attend those meetings.  Ultimately, the supervisor telephoned the employee and left a message for him to return the call immediately.  The call went unreturned.  Further investigation revealed that the employee had not been to the office in two months and that he had removed computer equipment and all of his personal belongings from the office.  The supervisor wrote the employee to advise that Nationwide considered his employment to have been abandoned. 

The employee filed for unemployment benefits claiming he quit with good cause.  He contended that he quit with good cause because: 1) he was require to work overtime without being paid time -and-a half; 2) he believed he was about to be laid off; and 3) supervisor acted in bad faith to create a record for his eventual discharge.  The appellate court affirmed the judgment for the employer because:

Uranga had been employed by Nationwide from January of 2003 to November 2005. As an agent, Uranga would have a full day but he was able to set his own office hours. Uranga was aware at the time he was hired of the job responsibilities and the required time commitment. When Uranga's job performance became a problem, Scott met with him to discuss the deficiencies in his operation. Uranga's job performance did not improve and Scott attempted to meet with him again, but Uranga did not attend the scheduled meetings. Scott subsequently discovered that Uranga had been absent from the office for most of the two previous months and he had removed computer equipment and personal belongings. Scott determined Uranga had abandoned his employment and wrote Uranga a letter notifying him that Nationwide considered his employment at an end.

Given these facts, there is nothing surprising or controversial about about the fact the appellate court affirmed the conclusion that the claimant resigned without good cause.  Similarly, the opinion doesn't state any new rules of law.  However, the opinion emphasizes a few points about eligibility for unemployment benefits under Texas law including:

• Leaving a job when work is still available (even when a definite notice of layoff is given) constitutes a voluntary resignation.
• Claimant working under objectionable conditions for a prolonged period of time weighs against a finding that his eventual resignation was for good cause.

A copy of the court's opinion is available here.

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There has been a significant amount of litigation against employers over the compensability of work time for putting on and taking off safety-related clothing and equipment prior to the start of a shift but necessary for the work to be performed.  For example, Pilgrim's Pride Corporation recently agreed to pay $1 million in back wages to settle a donning and doffing case with the U.S. Department of Labor.  

The U.S. Court of Appeals for the Fifth Circuit (the federal appellate court hearing appeals from Texas, Mississippi and Louisiana) recently affirmed a trial court judgment in favor of McWane, Inc. (a cast iron pipe and fitting manufacturer) in a Fair Labor Standards Act collective action filed on behalf of 2,100 employees. The lawsuit sought unpaid wages for time spend putting on and taking off safety gear before and after employees' scheduled shift (i.e., hard hats, steel-toed boots, safety glasses and ear plugs). This is commonly referred to as donning and doffing pay. 

Employees at McWane worked at ten different plants. Three of the plants had collective bargaining agreements (CBA) that expressly excluded donning and doffing time from compensable time. The remaining seven plants had CBAs that were silent on the issue of donning and doffing pay. Employees were paid based on “line time,” which measures shift working time as starting when the first item hits the processing line and ends when the last item leaves the processing line. None of the plants had ever paid (in over 40 years) employees for pre-shift donning and doffing time and the issue had never been previously discussed at union meetings or during contact negotiations (and union officials and employees admitted that they never knew pre- and post-shift changing time was potentially compensable under the FLSA). 

The Fair Labor Standards Act generally requires that employees receive overtime pay for all hours worked in excess of 40 hours per week at one and one-half times the regular rate of pay. An exception exists for time spent changing clothes if it has been excluded by custom or practice under a bona fide collective-bargaining agreement. The McWane employees argued that donning and doffing was subject to exclusion as time worked only when it has been affirmatively bargained away in the labor contract, and therefore no waiver existed in this case because the union representatives did not have knowledge of the right to compensation for this changing time nor any knowledge of or agreement to a policy of nonpayment for that time.

The Fifth Circuit rejected these arguments and sided with other courts of appeals to hold that “even where negotiations never included the issue of non-compensation for changing time, a policy of non-compensation for changing time that has been in effect for a prolonged period of time, and that was in effect at the time the CBA was executed, satisfies the [FLSA’s] requirement of ‘ a custom or practice under a bona fide’ CBA.” The Court further held that burden of establishing the absence of a custom or practice under a CBA is on the plaintiff employees and is not an affirmative defense on which the employer bears the burden of proof.

Access the opinion here: Allen v. McWane, Inc., No. 08-41037 (5th Cir. 2010)

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In Physio GP, Inc. v. Naifeh, the Fourteenth Court of Appeals in Houston held, in a case of first impression, that an individual cannot be held personally liable for a Sabine Pilot cause of action.  A Sabine Pilot or public policy wrongful termination claim is a narrow exception to the general rule of at-will employment in Texas.  A claim may arise when an employee is terminated by his employer solely for refusing to perform an illegal act.  This type of claim was named after the first Texas Supreme Court case to recognize the cause of action.   See Sabine Pilots Serv., Inc. v. Hauck, 687 S.W.2d 733 (Tex. 1985).

In Physio, the plaintiff's claim arose after her employment was terminated, according to her, for refusing to sign altered patient medical treatment records showing medical services that were never provided and that would have led to higher insurance payments for the employer.  The employer contended that the plaintiff was terminated for various performance infractions, including unauthorized treatment on a patient and misuse of company time.  At trial, the employer and individual defendants elected not to defend the case further due to a lack of resources to pay their attorney.  The trial court conducted a bench trial and found that the plaintiff was terminated for refusing to perform an illegal act and entered judgment against the employer and individual defendants. 

On appeal the individual defendants raised an issue left open by Sabine Pilots and the lower court decisions applying the doctrine --i.e., whether an individual supervisor may be held liable for this type of claim.   The Court of Appeals, in a split decision, held that individual supervisors (absent a finding that the supervisor was the alter ego of the employer) cannot be held personally liable for a Sabine Pilot cause of action.

Majority Opinion Here

Dissenting Opinion Here

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The Fourteenth Court of Appeals in Houston recently held that it is the date the employee is provided notice of termination, and not the termination date itself, that commences the statute of limitations in a breach of contract case.  You can read the Memorandum Opinion in Malallah v. Noble Logistic Services, Inc. here.

Bader Malallah entered a three year employment contract with Noble Logistic Services, Inc. (“Noble”) that could be terminated earlier, without notice, for certain enumerated acts or omissions. Prior to the end of the three year term, Noble terminated Malallah’s employment. Four years and seven days after Malallah was first advised that his employment was terminated, but less than four years after his termination was memorialized in writing, Malallah sued for breach of contract.

Noble defended the suit on the grounds that the claims was not filed within the four year statute of limitations that applies to breach of contract claims because it was filed more than four years after Malallah was first given notice of his termination. At trial, the jury found that Malallah was terminated without good cause but also found that his termination occurred on March 2, 2001 (the date he was first given any notice of termination) rather than on March 16, 2001 (the date his termination was memorialized in writing). Therefore, despite the jury's finding that Malallah was terminated without good cause, the the trial court found that the claim was barred by the statute of limitations based on the jury's answer as to the date of termination and entered judgment for Noble. The Houston Court of Appeals [14^th Dist.] affirmed that judgment.

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