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

Daniel Schwartz at the Connecticut Employment Law Blog has an interesting post today about the effect the American Psychiatric Association's proposed changes the Diagnostic & Statistical Manual could have to the Connecticut body of disability discrimination law.  While Connecticut is unique, according to Schwartz, in its definition of disability and expressly includes mental conditions listed in the current DSM as disabilities, I wrote (facetiously) last year that under the ADA's new, expanded (and inclusive) definition of disability, having a disorder that compelled excessive masturbation (i.e., hypersexual disorder) could qualify as a disability under the American with Disabilities Act entitling an employee to all manner of reasonable accommodation in the workplace.

In determining whether a mental impairment qualifies as a disability under the ADA, plaintiffs sometimes argue that because the mental impairment is a recognized disorder under the DSM, it qualifies as a mental impairment under the ADA.  While the identification of a mental disorder in the DSM is not alone sufficient to satisfactorily show that an individual with that disorder is disabled, given the lower standard necessary to show that an impairment substantially limits a major life activity, it is not a stretch to believe that a trial court would find a genuine issue of material fact as to whether a mental disorder like hypersexuality, qualified as a disability.   I predict that eventually, Congress' massive expansion of the ADA will compel a trial court to recognize an individual as disabled under circumstances that were never contemplated by Congress and will be viewed as outrageous to much of the general public.  Until that occurs, and the media uncovers and widely reports it, there is little likelihood that Congress will revisit (or rein in) its extension of ADA rights.  

Related Links:

Could the EEOC Sue on Behalf of an Employee Who Wanted the Right to Masturbate at Work?

Proposed DSM-5

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Covenant not to compete cases normally arise when an employer seeks to enforce a restrictive covenant by having a former employee enjoined from breaching the covenant and working for a competitor.  They can also arise when the employee is not expressly prohibited from competing, but is subjected to severe economic penalty if he engages in competition.  The recent case of Drennen v. Exxon Mobile Corporation from the Fourteenth Court of Appeals exemplifies the forfeiture scenario and the consequences that can arise when those programs do not comply with the Texas Covenant not to Compete Act.

In Drennen, the plaintiff worked for Exxon for 31 years.  In August 2007, he tendered his retirement papers.  During his employment, Drennen participated in Exxon's Incentive Program that awarded restricted stock awards and bonuses to reward high-performing employees and to dissuade high-achieving executive-level employees from leaving Exxon to work for competitors.  At his retirement, Drennen had 73,900 shares (approximately $6.2 million) of Exxon stock through the Incentive Program.  

The Incentive Program allowed Exxon to cancel the employee's awards if he engaged in "detrimental activity."  Detrimental activity was defined, in relevant part, as the employee's acceptance of duties to a third party that creates or appears to create a material conflict of interest and includes becoming "employed or otherwise engaged by an entity that regulates, deals with, or competes with" Exxon.  The Incentive Program provided that New York law would be used to govern the agreement.  The program also lacked any restrictions as to time, geographic area or scope of activity that might constitute detrimental activity.

After Drennen retired, he interviewed for a position with the Hess Corporation --a global, integrated energy company.  Drennen informed Exxon that he was considering taking a position with Hess and Exxon warned Drennen that he would likely forfeit his incentive awards if he accepted the position.  Nonetheless, Drennen accepted the job with Hess and Exxon notified Drennen that his incentive awards were canceled. 

Drennen sued Exxon on a variety of theories.  Exxon won following a jury trial.  Drennen appealed arguing that the "detrimental activity" clause of the Incentive Program was tantamount to a noncompete that was unenforceable under Texas law.  In reviewing the case, the Court of Appeals had to determine two interrelated questions: 1) is the detrimental activity clause a noncompetition provision; and 2) does New York or Texas law govern the interpretation of the program.

The Court first analyzed whether the enforceability of the "detrimental-activity" provisions differed under New York and Texas law.  According to the Court, the "detrimental-activity" provision was enforceable under New York law (Drennen loses) but not enforceable under Texas law (Drennen wins).   The Court reasoned that under Texas law, "covenants that place limits on former employees’ professional mobility are restraints of trade and are governed by the Covenants Not to Compete Act."  According to the Court, the Act applies regardless of whether the agreement at issue expressly prohibits an employee from competing or subjects the employee to severe economic penalty if he engages in competition.  Because the "detrimental-activity" provision subjected Drennen to a severe economic penalty if he competed (i.e., a forfeiture of over six million dollars), the Act applied.  It was undisputed that the Incentive Program lacked limitations as to time, geographical area and scope of activity to be restrained. 

Having determined that New York and Texas law differed in conclusion of the enforceability of the “detrimental-activity” provision, the court then made the outcome determinative decision of what law should apply. While noting that parties are frequently permitted to elect the law that will govern their transactions, the appellate court concluded that Texas rather than New York law applied because Texas has a materially greater interest in the dispute between the parties. Texas has a strong public policy interest in determining the enforceability of covenants not to compete used in this state. Drennen worked the majority of his career in Texas; he signed the agreements in Texas; he currently resides in Texas and Exxon is based in Texas.  The court rejected Exxon's argument that, as a large multi-national corporation, it has a stronger interest in uniform application of its employment agreements than Texas’s public policy interest because the Incentive Program at issue provides exceptions to New York law application for foreign-national employees that there was no showing that making other exceptions would significantly impede Exxon's operations.  Because Texas law dictated that the "detrimental-activity" provision was not enforceable the court ordered that Drennen's awards be returned to him. 

Because of the amount in controversy and the fact that the ruling likely impacts recipients of awards under an Incentive Program that is probably widely used (and has been in place since at least 1993),  I expect that Exxon seek rehearing en banc or file a petition for review with the Texas Supreme Court.

You can download a full copy of the court's opinion here.

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The Texas Association of Responsible Nonsubscribers (TXANS) Texas' leading proponent of sound and ethical practices relating to injury prevention and the provision of quality workplace injury benefits by non-subscribers to workers' compensation.  TXANS is hosting its 22nd Annual Nonsubscriber Conference and Exhibition March 22, 2012 in Austin, Texas.  I'll be speaking at the conference.   Some of the other topics that will be covered during the conference, to both subscribers and nonsubscribers, include:

• New Transportation Regulations: Managing Transportation Risks Effectively
• ERISA Update: Fiduciary Duties and Liabilities
• New Regulations to Protect Returning Service Members: Understanding USERRA
• Engaging Employee to Gain Competitive Advantage
• Misclassification of Employees: Avoiding Costly Tax & Legal Consequences
• Union-Free but no Scot-Free: A Warning for Non-Union Employers
• Navigating the Texas Unemployment Compensation System

You can access the Conference Brochure and register for the event here.

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A while back I took the plaintiff's deposition in a sex discrimination and harassment case where the plaintiff's primary answer to any question that called for facts that might undermine her claim was "I don't know" or "I don't recall."  The deposition looked a lot like this one.

At a break, my client representative expressed a great deal of frustration because she believed the the Plaintiff was not answering the questions truthfully.  My client didn't think the deposition was going very well because the Plaintiff wasn't providing good answers on the questions that would undermine her claim.  Despite my client's uneasiness for the former employee's, I knew the deposition was going fine. 

You see, the Plaintiff was unable to remember the specifics of any particular action or conversation she had with my client's key representatives.  I knew that my witnesses, on the other hand, had very clear and specific recollections about what was said and done with respect to the plaintiff and her employment.  Once the plaintiff has repeatedly claimed, under oath, that she doesn't know or doesn't recall things that were said or done, there will be no other witness to dispute my witness' version of events.  And, if the plaintiff is able to miraculously remember all of the key dates and details of the things she denied knowledge of in her deposition, her credibility at trial will surely be damaged.  Rarely do our memories get better with time.  Credibility wins trials.

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On February 29, 2012 at 10:30 a.m. (Central), Paige Biggs and I will be hosting my firm's first-ever webinar.  Our topic:  Investigating Employee Complaints in the 21st Century:  Comprehensive Investigations of Complaints of Discrimination, Harassment and Misconduct. 

During the presentation, we'll cover:

• Essential items to include in an anti-harassment/discrimination policy and compliant procedure;
• Selecting the investigator;
• Who to interview and what to ask;
• Details on how to properly administer a complaint procedure;
• Best practices for conducting a prompt, thorough and impartial workplace investigation;
• Key considerations in making credibility determinations to resolve he said/she said dilemmas that might arise during a workplace investigation

You can register for this complimentary webinar here.  The webinar has been submitted to the HR Certification Institute for review.  

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From time to time I'm approached by a small company that has given an employee partial ownership in the company.  While I haven't yet had one written on the back of a bar napkin, the agreements usually aren't much more sophisticated than this (or formal either).  By the time I'm consulted, like many once-good marriages, the employment relationship has ended the employer would like to have the former employee out of the company's ownership structure.  What is the company to do?  Unless the company has the right to buy the employee out, the employer may be left with a carrots and sticks strategy.

Anytime you consider granting an employee partial ownership in the company, you should retain a lawyer experienced in drafting these kinds of arrangements.  The lawyer will ensure that the appropriate documents are drafted that provide the employer the right to buy-out the employee's interest upon the occurrence of certain triggering events such as the termination of employment.  The documents will likely provide a clear and specific manner of valuing the employee's interest.  Inevitably, the agreement will contractually require the employee to assign his or her interest back to the company in return for the required payment.

If you lack good contractual documents, you're left with carrots and sticks.  By that I mean that the employer may be left having the employee agree to return the interest either by paying more than what the interest might be worth (i.e., the carrot) or holding the employee to all of the obligations that ownership of the company might require (i.e, the stick).

The best course of action is to spend the effort on the front end and have the agreement written in such a way that the employer and employee recognize the benefits of partial ownership but provide a clear and meaningful strategy for the business divorce if and when the employment relationship ends.

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The Dodd-Frank Act created a "reward" (bounty) program for  whistle blowers that voluntarily provide original information of fraud or unlawful activity in violation of the Sarbanes-Oxley Act, the Foreign Corrupt Practices Act and other securities law violations.  The Dodd-Frank Act also provides whistle blowers protection from retaliation and renders pre-dispute arbitration agreements of whistle blower or retaliation claims unenforceable.  

As a result of the provisions regarding pre-dispute arbitration agreements, a number of plaintiff-employees have attempted to invalidate their arbitration agreements based on the Dodd-Frank and Sarbanes-Oxley Act provisions.  A recent federal trial court opinions illustrates the limits of those efforts.

In Holmes v. Air Liquide, Inc., the plaintiff asserted claims under the ADA, Texas Labor Code and Title VII following his termination.  During his employment with the company, he signed an arbitration agreement agreeing to submit all disputes to mandatory, binding arbitration.  When the employer sought to compel the case to arbitration, the plaintiff argued that the agreement was rendered invalid and unenforceable with the passage of Dodd-Frank.  While ducking the issue of whether the invalidity of pre-dispute arbitration agreements applies only to claims asserted under Dodd-Frank (as opposed to other federal statutes like the ones Holmes sued on), the Court held the arbitration agreement was valid and enforceable because the agreement was entered before the passage of Dodd-Frank and the statute should not be applied retroactively.  Consequently, the Court enforced the arbitration agreement and compelled the parties to engage in arbitration.

A full copy of the Court's opinion is available for download here.

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Every once in a while I write a post just for fun. One example was the post I wrote about religious reasonable accommodation and the Church of the Flying Spaghetti Monster.  Today is another fun post I felt compelled to write to justify the hour I spent watching funny video's this weekend --the first weekend without real football (Yes, I know the Pro Bowl was last weekend but that is not real football).  

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When competitors make agreements with one another about what they will charge, the territories they will divide, the customers each will sell or the employees they will hire, red flags should raise because antitrust issues may be implicated. Last year I wrote about the settlement several Silicon Valley technology companies reached with the US Department of Justice's Antitrust Division over their agreements not to cold-call recruit each others employees. 

Last week, Bloomberg reported on the follow-along civil claim being asserted by a group of tech company employees who claim that their wages were unlawfully depressed by the agreements that were the subject of the DOJ settlement.  According to lawyers for the plaintiffs, the unlawful conspiracy to violate the antitrust laws had the effect of artificially depressing employee wages that could amount to hundreds of millions of dollars.  Regardless of the merits of the civil conspiracy action, it has and will take millions of dollars for the employers to defend the DOJ Antitrust investigation and the resulting civil action.  Competitors must  be careful when they work with one another to ensure not only that their actions comply with the relevant employment laws, but also with state and federal antitrust laws.

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Today the Texas Supreme Court held that when an employee is employed by two employers (a staff leasing company and client company in this case) and both employers have workers' compensation insurance, the workers' compensation exclusivity provisions apply to bar negligence claims asserted by the deceased employee's parents.

You can review a copy of the Court's opinion here.

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Yesterday I had the privilege to serve on a panel discussion of employment defense attorneys covering Title VII Litigation: Persistent Evidentiary Challenges.  We had lawyers from twenty-two states registered for the program.  If you have an evidentiary question involving a discrimination, retaliation or harassment claim, these materials may provide you a head start on your research or quick answer to your issue.

You can download a copy of the presentation materials here.

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24 Hour Fitness operates health clubs and fitness facilities across the country.  As part of its operations, 24 Hour Fitness employs sales representatives.  As a condition of employment, employees are required to enter into arbitration agreements to arbitrate their employment disputes with their employer.  FLSA claims (i.e., overtime and minimum wage claims) are covered within the scope of the arbitration agreement.  John Carey was a sales representative for 24 Hour Fitness.  He signed a handbook acknowledgment containing the arbitration agreement.  Not only did the arbitration agreement require the arbitration of disputes, it further provided that disputes could not be brought as class actions or in representative capacities.  Unfortunately for the employer, the handbook also included a provision that permitted it to revise, delete or add to the handbook at any time and that it would communicate those changes to the employees through official written notices.  Nothing in the policy precluded the employer from applying changes to the arbitration agreement retroactively. 

After Carey's employment ended, he filed an FLSA collective action seeking unpaid overtime on behalf of all similarly-situated employees.  24 Hour Fitness moved the court to compel arbitration.  Carey, in response, argued that he agreement was illusory because the employer retained the right to unilaterally amend the agreement. 

The Fifth Circuit Court of Appeals found against the employer holding that its arbitration agreement was unenforceable.  The Court held that the arbitration agreement was illusory because: 1) 24 Hour Fitness retained the right to alter, amend or changes the policy at any time; 2) the policy did not foreclose the prospect of unilateral amendments to claims existing on or before the amendment; and 3) nothing in the policy precluded the employer from applying any of its changes retroactively.  As a result, 24 Hour Fitness will be left to defend Carey's lawsuit in Court, with a jury, and potentially as a collective action. 

The take-away form the opinion is that regardless of the type of ADR you use (e.g., arbitration, waiver of jury trial), if the agreement is contained in an employee handbook, ensure that the handbook's express contractual disclaimer contained in the handbook (You know, that provision that says nothing contained in this agreement is intended to create an express or implied contract) carves out those ADR procedures and specifically states that such provisions are intended to be contractual in nature; that the employer and employee are bound by such provisions and that neither party may alter or amend the contract unilaterally.  At a minimum, if the employer wants to retain the right to unilaterally amend the policy, it should state that the employer cannot amend it to apply retroactively to claims that existed prior to the amendment and notice to the employee. 

A full copy of Carey v. 24 Hour Fitness is available here. 

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As I was driving home last night, NPR played a clip from the 1947 folk song "16 Tons."  Its a catchy tune about 1940's coal mining.  The chorus of the song has the coal miner asking St. Peter to delay his death because he owes his soul to the company store.  Employers used to provide "company stores" for employees where they could purchase items (usually at inflated prices) from a store owned by the employer.  Employees "paid" for their purchases through debts secured against their wages.  Here is Tennessee Ernie Ford's rendition of "16 Tons."

While there are few employers that maintain "company stores," many states have enacted laws that prohibit employers from requiring employees to purchase the employer's products. Some employers have been sued because they maintained policies that require employees to buy and wear their brands while working --the modern equivalent of the "company store."    

Texas has a law that prohibits employers from requiring, through coersion, employees to purchase items from the employer.  The Texas Labor Code provides a modest monetary penalty for any person that requires or attempts to require an employee to purchase food, clothing or merchandise from a place or store. Despite the fact that this law has been in place since 1993, there are no Texas cases citing the section.  This suggests that Texas employers are not requiring employees to purchase items from the employer or the statute's lack of a civil remedy (i.e., a cause of action to sue for in court) means that these practices aren't seeing the light of courthouse.

A copy of the Texas Labor Code provision is available here.

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A new Fifth Circuit case reveals the consequence that can occur when an employer and its managers fail to take harassment complaints seriously; fail to promptly and thoroughly investigate the complaints; and reach conclusions following the investigation that just plain wrong.   In Cherry v. Shaw Coastal Inc., a male employee (Cherry) complained that his immediate male supervisor was making making inappropriate comments of a sexual nature and causing unwanted physical contact. Because I don't want this blog to show up in Google's search results for unsavory topics, I'll let you read the opinion itself the graphic details of the egregious, same-sex sexual harassment that was experienced by Cherry.  Needless to say, it included unwelcome comments of a sexual nature and unwanted touching that the jury concluded amounted to sexual harassment by the male co-worker.

The conduct of was so severe that one of Cherry's co-workers initially complained about what he witnessed.  Cherry also made repeated complaints to the managers in his supervisory chain.  The supervisors receiving the complaints failed forward them to human resources as required by company policy and instead questioned whether the conduct complained of was merely horsing around.  Cherry ultimately went directly to human resources and made a complaint.  Despite the fact that Cherry made an estimated ten complaints, had an eyewitness to the harassment, and text messages demonstrating the unwelcome sexual comments, the company's human resources staff concluded there was "insufficient evidence" to corroborate the complaint.  Cherry and the alleged harasser were placed on different work crews, but Cherry complained that he continued to get "dirty looks" from the alleged harasser.  Finally, six months after the first complaints of harassment occurred, Cherry resigned his employment specifically pointing the on-going harassment and retaliation to which he claimed he he was subjected.

A jury found in favor of the Cherry on the sexual harassment claim but the trial court entered judgment in favor of the company.  On appeal, the court of appeals reversed the trial court.  The Court found that the Company had done enough to avoid a punitive damages finding (i.e., that the company did not act with malice or reckless disregard) because it had a policy against sexual harassment with a complaint procedure and, while not acting promptly, ultimately transferred the harasser to a different crew.

As to liability for the sexual harassment, the Court found that there was sufficient evidence to support the jury's verdict and that the company did not act promptly.  The Court concluded that the human resources department's decision not to act because of "insufficient evidence" could be reasonably interpreted as a failure to take prompt remedial action.  Consequently, the appeals court reversed the judgment in favor of the employer and directed the trial court to enter judgment in favor of the plaintiff-employee on the sexual harassment claim.

You can take a few things away from the Cherry opinion:

• Ensure supervisors are trained on their responsibilities under the company's sexual harassment policy and make sure they forward complaints they receive to human resources for investigation;
• Don't conclude there is insufficient evidence of company violations where the complaining employee has eyewitness corroboration and text messages to support his claim;
• Investigate all complaints of alleged harassment promptly.

A full copy of the Court's opinion is available here.

Follow me on Twitter @RussellCawyer.

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Last week there was a lot of coverage about Mitt Romney's remarks on being able to terminate those who provide services to him.  In viewing his remarks, I think the criticism of his comments comes, not so much from what he said, but how he said it.  In a somewhat cavalier manner, Romney said he liked have the option to be able fire people; not that he liked firing them.   Here is the context of what he had to say:

Romney's remarks have been construed to mean that he likes firing people; something I don't think he said or meant.  However, I've written before on the dynamics of terminating the employment relationship with employees.  Studies have shown that losing a job can be one of the most stressful life events one can experience --akin to the loss of a family member or divorce.  And while terminating the employment of an employee is not normally easy, it is an inevitable part of most manager, supervisor and human resource professional's job.  

Terminating the employment relationship with an employee is a serious matter and should be treated as such.  When communicating the decision, an employer should be guided by being as compassionate as is possible under the circumstances.  That doesn't mean that the decision is debated with the employee.  Rather, it goes more into delivering the planning of the announcement. Plan to communicate the decision in a way that will minimize the trauma to the employee to the extent possible.  Take steps to ensure that the employee is not unduly embarrassed by the decision.  It is good to remember that we are all human before communicating an employment termination decision, particularly where there is not egregious.  We all have families to support and the decisions made by employers, and the employees who call upon employers to make those decisions, have consequences.  Communicate adverse employment actions to employees accordingly.  And never, never (whether you are running for President or not) tell anyone you like firing people.

Follow me on Twitter @RussellCawyer.  

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There are a few pockets in the state where lawyers representing employees still vigorously fight the arbitration agreements their clients signed with employers agreeing to arbitrate all disputes. One of the pockets is in El Paso, Texas as evidenced by the number of opinions out of the court of appeals addressing the enforceability of an arbitration agreement between employers and employees.

An example of one of these challenges is found in the recent opinion of Mendivil v. Zanios Foods, Inc.  In Mendivil, the plaintiff-employee challenged the arbitration agreement he signed with his employer when he wanted to sue in court under a workers’ compensation retaliation theory. Mendivil challenged the agreement on a variety of grounds including the fact his employer did not promise to arbitrate its disputes with Mendivil; he had to arbitrate his claims in New Mexico rather than El Paso; he had give notice of intent to arbitrate within thirty days of the incident and respond to all correspondence from his employer within ten days or waive arbitration; and he had to pay for one-half of the arbitration fees. In legalese, Mendivil claimed the agreement was illusory and not supported by adequate consideration (because the employer made no return promises) and was legally unconscionable (because it made him arbitrate far away, bear one-half of the arbitration expenses and make requests for arbitration on short time tables). 

The court of appeals considered Mendivil’s challenge to the trial court’s order to arbitrate. The appeals court was persuaded that the agreement was unsupported by adequate consideration because the employer made no promises to Mendivil and that alone was sufficient to warrant reversal of the trial court’s arbitration order.   

The takeaway from this case is twofold. First, an employer that desires to enforce an arbitration programs with its workforce must make sure the agreement is supported by valuable consideration. This is usually accomplished by having the employer make the return promise to arbitrate all of its disputes it has with employees. The mutual promises to arbitrate claims will almost always suffice as adequate consideration to support the arbitration agreement. Second, arbitration is meant to be a meaningful alternative to a judicial forum. Where a party uses the arbitration agreement to impose onerous conditions far more restrictive than would be found in a judicial forum, the court will view the enforceability of the agreement more skeptically. Remember, pigs get fat but hogs get slaughtered.

You can download a full copy of the Court’s opinion in Mendivil v. Zanios Foods, Inc. here.

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Wow!  That is all I could say after I read the recent NLRB decision holding that an employer's requirement that employee sign mandatory arbitration agreements waiving the right to litigate claims in a collective or class action violates the National Labor Relations Act.  

In the case styled D.R. Horton, Inc. and Michael Cuda, the Board considered an arbitration program used nationwide by the home builder employer.  The arbitration agreement, signed by all employees, required that all disputes be resolved through arbitration and that no disputes would be arbitrated on a class or collective basis in any forum, judicial or arbitral.  When Michael Cuda sought to bring a nationwide wage and hour class action on behalf of all of the company's superintendents, the company sought to enforce the arbitration agreement and its mandate that claims be litigated individually --not collectively.  Cuda filed an unfair practice charge claiming that the waiver of arbitrating or litigating claims on a representative, class or collective action basis violated the employees' Section 7 rights to engage in mutual aid or protection.  

Since the U.S. Supreme Court decision in Concepcion, more employers have incorporated strategies to ensure that claims are litigated on a level playing field by requiring employees to arbitrate or litigate those claims on an individual (or non-class action) basis.  Notwithstanding the Board's commentary to the contrary (i.e., the Board professed that the decision would impact few agreements), the Board's decision will have widespread ramifications on companies use of arbitration programs.  Despite the disadvantages that arbitration carries, one advantage was the widespread belief that employers could better manage the prospect of having to litigate class actions with large numbers of their workforce through arbitration agreements designed to decide claims on an individual basis. The decision in D.R. Horton eliminates that potential advantage of arbitration.  Moreover, the Board's decision is not limited to arbitration programs and its rationale may be applied outside of arbitration agreements such as agreements with individual employees

Finally, because it is a decision applying federal labor law, a law that applies to most employers and employees, the Board's position could have wide-reaching, adverse consequences for employers seeking to control the risk of defending against class or collective actions.  This is an important decision that warrants following through the inevitable appeal that D.R. Horton will make.

You can download a full copy of the Board's decision here.

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The federal False Claims Act (aka Qui Tam statute) provides a cause of action for an employee who is retaliated against for attempting to prevent its employer from making fraudulent claims for payment to the United States.  An open issue in the Fifth Circuit (the federal court of appeals covering appeals from Texas, Louisiana and Mississippi) was how quickly a plaintiff had to file a lawsuit for retaliation under the statute. In Riddle v. Dyncorp Inter. Inc., the Court clarified that the appropriate statute of limitations for an FCA retaliation claim in Texas is two years.  

In Riddle, the plaintiff alleged that he was a senior employment manager for Dyncorp until he was terminated.  Prior to his termination, Dyncorp, according to Riddle, contracted with the federal government to create a database but took no meaningful steps to fulfill the obligation.  He claims that when he protested the inaction, he was marginalized at work and eventually fired.  He filed his complaint against Dyncorp and three employees 178 days after his termination.  The company moved to dismiss the complaint alleging that a 90 day statute of limitations (borrowed from the Texas Whistleblower Act) applied to the claim and was untimely.  The trial court accepted this argument and dismissed the complaint.

On appeal, the Fifth Circuit Court of Appeals reversed the trial court and concluded that a two year statute of limitations applied to the claim.  When a federal cause of action fails to set a statute of limitations, the court is required to look at the most closely applicable state law claim and apply its statute of limitations.  Here, the court of appeals had to determine whether the 90 days statute of limitations from the Texas Whistleblower Act or the general two year statute of limitations applying to personal injury claims and is the default limitations period under Texas law applied.  Given that the Texas Whistleblower Act applies only to public employees and requires the exhaustion of any administrative appeals processes of the public employer, the Court found a sufficient number of differences between the FCA and TWA such that the 90 day limitations period was inapplicable.  Instead, the Court held that an FCA retaliation claim is more closely akin to a Sabine Pilot wrongful discharge claim (i.e., termination for refusal to perform an illegal act) because it is available to all employees (except those covered by contract or CBA) and has no administrative prerequisites that must be exhausted before bringing suit.  The Sabine Pilot claim has a two year statute of limitations.  Consequently, the Court concluded that the two year limitations period was appropriate, reversed the trial court's dismissal, and remanded the case back to the trial court for further proceedings.

A full copy of the Court's opinion is available here.

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The current federal administration is making significant changes in employment law through its rulemaking and regulatory authority rather than seeking Acts of Congress.  Another example of this method of legislature-through-rulemaking is the new federal regulation taking effect on January 3, 2012 that prohibit all commercial motor vehicle drivers from using hand-held telephones while driving.  The new rules provide significant penalties for drivers and employers of drivers caught violating them.

In summary, the final rule provides as follows:

• Restricts use of hand-held mobile telephone by drivers of commercial motor vehicles;
• Prohibits employers of CMV drivers from requiring or allowing drivers to use hand-held mobile telephones while driving and provides a civil monetary penalty of up to $11,000 per violation;
• Imposes new driver disqualification sanctions for drivers violating the rules, or state law equivalents, on multiple occasions;
• Requires states, within three years, to implement the new rules regarding disqualifying CDL drivers for violating the new serious traffic violation of using a hand-held mobile telephone while driving a commercial motor vehicle;
• Provides limited exceptions for communications to law enforcement personnel and emergency services;
• Applies to school bus drivers and drivers of small, passenger-carrying vehicles (designed to transport 9-15 passengers), not for direct compensation that were otherwise exempt from the Federal Motor Carrier Safety Regulations;
• Defines "use [of] a hand-held mobile telephone" to include holding, dialing and reaching in a proscribed manner to conduct voice communication;
• Includes "push-to-talk" functions within definition of hand-held mobile telephone. 

If you are a CDL driver or employer of CDL drivers, you should review these regulations carefully and update your fleet management and employee handbook policies accordingly.  A full copy of the final regulation can be accessed here.

Follow me on Twitter @RussellCawyer.

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The Federal Judicial Center has announced a new pilot program to streamline discovery in employment disputes filed in federal court.  The program, announced in November, would compel initial discovery for certain employment cases where an adverse action is alleged.  Under the program, parties would have to produce, as part of initial disclosures, commons discovery items that are asked in almost every case.  For example:

Plaintiff must produce:

• Communications with the employer concerning the factual allegations or claims at issue;
• All other claims, charges, complaints or lawsuits that rely on the same factual allegations or claims at issue in the suit;
• Documents concerning the formation and termination of the employment relationship;
• Documents concerning the terms and conditions of the employment relationship;
• Diaries, journals and calender entries maintained by plaintiff about the facts or claims in the lawsuit;
• Current resume;
• Documents concerning claims for unemployment benefits;
• Communications with prospective employers; job search efforts; offers; job descriptions; income and benefits of subsequent employment (although the program places limitations on the employer's ability to obtain discovery from these third-party prospective or current employers);
• Documents regarding the termination of any subsequent employment;
• Any other document the plaintiff relies on to support his or her claims.

Employer's must produce

• Communications between the plaintiff and the employer (its managers, supervisors and human resources representatives);
• Responses to complaints, claims, lawsuits or charges by the plaintiff that rely on the same facts or claims as the subject suit;
• Documents concerning the formation and termination of the employment relationship;
• Plaintiff's personnel file;
• Plaintiff's performance evaluations and formal discipline;
• Documents relied up on to make the employment decision at issue;
• Workplace policies relevant to the adverse action;
• Table of contents or index for the employee handbook or code of conduct;
• Job description for the position held by plaintiff;
• Documents showing the plaintiff's compensation and benefits;
• Agreements between the parties to arbitrate or waive trial by jury of disputes;
• Non-privileged documents concerning any investigations done by the employer of the plaintiff's complaints or allegations;
• Documents concerning unemployment benefits;
• Any other document on which the employer relies to support its defenses; affirmative defenses or counterclaims including any other document describing the reasons for the adverse action.

The initial disclosures must be made within 30 days of the employer's first responsive pleading or motion thereby speeding the exchange of information between the parties.  The standing order also contains a model protective order for use in these proceedings.  Other than the limitation (or delay) on employers being able to subpoena records from the plaintiff's subsequent employers, this programs sounds very interesting.  It is not unlike some of the standing discovery orders that are used by the California state courts.  I am hopeful that it will reduce some of the cost involved in defending employment claims for employers that are litigated in federal court.  I look forward to seeing how it works and expect it to be a success since the mandatory disclosure subjects are discovery items requested in almost every employment discrimination or retaliation case.

H/T to Molly DiBianca and Jon Hyman who first wrote about the new program.  (here and here) 

Follow me on Twitter @RussellCawyer.

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In reading a recent Fifth Circuit opinion affirming the dismissal of a employee's claim of racial harassment involving the display of a noose, I am reminded of Mark Twain's quote, "If you tell the truth, you don't have to remember anything."  Its good advice to live by and even better advice for deponents and witnesses.

Nickey Brown brought a Title VII racial harassment claim against his employer, Oil States Skagit Smatco, alleging that his co-workers made racially derogatory remarks about him, subjected him to offensive racial graffiti and displayed a noose in his workplace.  These allegations often have EEOC Cause Finding and large financial settlement written all over them.  However, in this case, the district court dismissed Brown's claims.  Why?  Brown provided materially inconsistent explanations for why he left his employment with his employer.

Not only was Brown a party to his Title VII action against his employer, he was also a party in a personal injury lawsuit.  In a deposition for his personal injury lawsuit he testified that he left employment because he was in pain all the time due to the injuries sustained in the automobile accident.  However, in this racial harassment case he testified that he left his job because of the severe harassment he endured.  Because of the directly inconsistent testimony, the trial court sanctioned Brown with dismissal of his lawsuit.  The Fifth Circuit upheld this decision.  You can read a full copy of the opinion here.

Follow me on Twitter @RussellCawyer.

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It's rare for employers state-wide to get good news in this troubled economy.  Today, however, the Texas Workforce Commission presented Texas employers with an early Christmas present in the form of the newly released 2012 unemployment tax rates.   The tax rates range from .61 to 7.58 percent on the first $9,000 in wages paid to each employee down from a range of .78 to 8.25 percent. 

The Commission is mailing each Texas employer its specific 2012 tax rate today and should be received later this week.  To understand how your unemployment tax rate is calculated, you can review these sources:

Calculating the Texas Unemployment Tax Rate

Calculate Your Unemployment Tax

Your Tax Rates -2012

Follow me on Twitter @RussellCawyer.

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If you attend many EEOC meditations or the meditations of lawsuits, you know it is important to keep an accurate record of the parties' respective settlement offers.  This is useful in trying to glean where the parties are going and whether there may be an overlap in their respective settlement positions.  Picture it Settled recently released a new Free Iphone App to assist in tracking and making settlement offers.  Picture it Settled Lite allows a party to track the dollar amount and time of each parties offers; assist a party in making subsequent offers based on prior moves in dollars or as percentages of offers; and even predicts when, in terms of time, the parties, based on their prior concessions, might reach an agreement.  While the applications is not an adequate substitute for the strategy and tactical issues that go into mediation bargaining, it is useful in that it quickly provides some common calculations parties use during the course of mediation.

Try the App and let me know what you think. You can download Picture it Settled Lite at the Itunes Store.  The company states that an Android application is also available.

Follow me on Twitter @RussellCawyer.

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The Texas Workforce Commission will announce the new 2012 state unemployment tax rates on December 12, 2011.  The Commission will also mail each employer its 2012 unemployment tax determinations on that day.

Follow me on Twitter @RussellCawyer.

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Last weekend, the Dallas Cowboys lost a close game to the Arizona Cardinals.  If you watched the game, you know how it ended (and probably have a bad taste in your mouth).  For those of you who didn't see the game, here is a summary of what occurred.  

With two minutes left it the 4th Quarter and the score tied 13-13, Dallas is driving down field.  At about 28 seconds left in the game and still possessing 2 timeouts, Quarterback Tony Romo completes a pass to Dez Bryant to Arizona's 32 yard line making a first down.  Rather than calling a time-out to run a few plays to gain a few yards for a shorter game winning field goal attempt, Dallas ran the clock down to 7 seconds before stopping the clock.  Then, a split second before his kicker kicks the field goal, Dallas head coach Jason Garrett called a timeout --but not before the kicker knocked the 49 yard field goal through the uprights.  Because Garrett called the timeout, the kick had to be redone and was missed.  The teams went to overtime where the Cowboys lost.

In the post-game press conference, Garrett refused to accept blame for any of the poor time management and decisions made in the final minute of the game. Moreover, with 24 hours to reflect on the events of the game (and every sports radio and television talk show critical of his decision), in Garrett's Monday press conference, he did not accept blame nor did he concede that perhaps he should have made different decisions.  His explanations appeared, to some, to be of questionable believability.

And here is where the lesson lies for employers.  From time-to-time we all make mistakes. When an employer, with the benefit of hindsight, makes an obvious mistake in the manner or treatment of an HR issue, the employer should not attempt a cover-up or set forth explanations of dubious believability.  Rather, the employer should consider whether a sincere apology is in order along with taking steps to minimize or correct the mistake.  Of course acknowledging or admitting to a mistake may be used against the employer as an admission and can carry adverse legal consequences.  It may, however, help the employer avoid a lawsuit altogether. 

Garrett's explanations for his game day decisions, in my opinion, did far more to undermine faith in his judgment and credibility than a simple acknowledgment of his mistake would have done.  Employers can learn from his mistake.

Follow me on Twitter @RussellCawyer.

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What do you get as a holiday gift for the HR person who has everything?  Here are 5 suggestions:

1. The Nothing Surprises Me, I Work in HR Ipad Case (It would be nice if the Ipad were supplied too).
2. Show me Your Resume Wall Clock.
3. The Essential HR Handbook: A Quick and Handy Resource for any Manager or Human Resource Professional by Sharon Armstrong and Barbara Mitchell 
4. The Employer's Legal Handbook by Fred Feingold, J.D.  
5. An 8 lb Smoked Turkey from Greenberg Smoked Turkey, Inc.  I couldn't find a way to link this an HR subject, but a Greenberg Smoked Turkey is so darned good I had to include it on the list.

Of course what would really be nice is an increase in the 2012 HR training budget; the ability to provide merit increases to worthy employees; and job growth and security. 

Follow me on Twitter @RussellCawyer.

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A service letter is a letter issued by a former employer stating an employee's dates of employment; position held; and reasons for separation of employment.  There are two uses employees typically make of service letters.  First, they are used to document or confirm a segment of the employee's work history or to use to qualify for unemployment benefits.  More frequently, however, service letter are requested by employees who have left employment involuntarily and are considering some form of legal action against the employer and want to take the letter to an attorney.  Texas has a service letter statute on the books that purports to require the employer to provide an employee the truthful reason for discharge.  It provides that:

A corporation, company, or individual may give, on application from a discharged employee or a person desiring to employ the employee, a written truthful statement of the reason for the discharge. The statement may not be used as the cause for a civil or criminal action for libel against the person who furnishes the statement.

The Texas Attorney General has a long-standing opinion that Texas' service letter statute is unconstitutional.  Consequently, Texas employers are under no obligation to issue, under the service letter statute, a written explanation of the reasons for an employee's discharge.

Follow me on Twitter @RussellCawyer.

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With many employers considering whether and when to pay end-of-year or holiday bonuses, I thought it was a good time to review the rules for when bonuses or other compensation must be included in the regular rate of pay for purposes of paying overtime.  This is one issue that still trips up Texas employers.

Nonexempt employees are entitled to overtime compensation at 1.5 times the regular rate of pay for most hours worked in excess of 40 per week.  In determining the regular rate of pay an employer is to include all compensation paid to an employee unless it falls into one of nine general statutory exclusions.  Many end-of-year holiday bonuses will  fall into a statutory exclusion.  However, where the bonus is dependent on hours worked, productivity or efficiency, the bonus should be included in the regular rate of pay for nonexempt employees. 

Assume an employee receives a $5,200 end-of-year bonus that should be included in the regular rate of pay.  Presumably, that bonus was earned in equal portions over the course of the year despite the fact that it is paid in one workweek at the end of the year.  One hundred dollars of the bonus will be attributed to each workweek in the year.  If an employee worked overtime in a workweek, $100 of the end of year bonus has not been included in the wages for that week for purposes of determining the proper overtime rate.  Consequently, the employer must go back and recalculate the overtime pay for the week to make-up the fractional underpayment.  These underpayments are usually small, but they provide an employer with potential overtime exposure and the costs of defending such a claim normally far exceed the unpaid overtime.  

The takeaway from this post is to remember that if an employer is making a bonus or other payment that is not specifically excluded from the regular rate of pay, the employer may need to go back and make overtime adjustment payments to nonexempt employees for the pay periods over which the overtime was earned and in which the employees worked overtime.  This can be complex to perform and is beyond the scope of this post but a labor and employment attorney Board Certified by the Texas Board of Legal Specialization can help you calculate this overtime adjustment.

Follow me on Twitter @RussellCawyer.

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It is almost 2012 and here is a list of seven items you want to make sure you have, or consider adding, to your employee handbook for the new year.  

• Social Media Policy providing employees with proper guidance on acceptable and unacceptable uses of social media and containing a disclaimer that no provision of the policy is intended to infringe on employees' NLRA Section 7 rights (i.e., to engage in concerted activity for their mutual aid and protection and to collectively bargain).
• Social media policy that incorporates provisions regarding employee endorsements that comply with the Federal Trade Commissions guidance on those endorsements.
• Consider adding a mutual Waiver of Jury Trial or class action/collective action waiver --or some other form of alternative dispute resolution.  Check with your employment attorney to make sure the form in which you implement this renders it enforceable.
• Updated FMLA policy implementing the changes from 2008 and 2009 amendments if you have not had the policy updated since then.  
• Policy regarding the employer's commitment to providing reasonable accommodation to qualified individuals with disabilities and explaining the process an employee can initiate to request reasonable accommodation.
• Ensuring that any neutral absence control or maximum duration of leave policy carves out protected leave such as FMLA, military leave and leave provided as a reasonable accommodation to a qualified individual with a disability.
• A provision prohibiting the surreptitious audio or video recording by employees during working hours or while on the employer's property along with a NLRA section 7 disclaimer.

Follow me on Twitter @RussellCawyer.

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I want to thank my clients and other readers of the Texas Employment Law Update for your loyalty and support.  More importantly, I hope that you and your families have a safe and happy Thanksgiving holiday.  For my part, our family will be spending a traditional Thanksgiving (traditional for us) with extended family and friends, both a smoked and cajun fried turkey, and as much football as is humanly possible to consume in a single day.  While I won't be participating, much of my family will brave the Black Friday crowds looking for deals and kicking the holiday season off in full force.

Despite the fact I'll be enjoying the holiday, employment law and related-matters won't be far from my mind.

Here are a few Thanksgiving-related employment items for your consumption.

Department of Labor is encouraging retailers to take steps to provide for crowd managment and safety during Black Friday sales.  Additional resources for retailers, employees and shoppers related to Black Friday sales and safety can be found here.

Facts about Texas Employment Law and Thanksgiving.

• Texas has no law requiring employers to provide a day off at Thanksgiving.
• Texas law does not require premium pay for working on holidays like Thanksgiving.
• Employees on FMLA leave may be entitled to the paid Thanksgiving holiday under company policy if the company's policy provides holiday pay if the employee were on vacation instead of FMLA leave.  

Next week I'll turn to seven things you should consider adding or confirming are in your employee handbook for 2012.

Happy Thanksgiving!

Follow me on Twitter @RussellCawyer.

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Yesterday, the President signed a bill that is good for veterans and employers.  The law provides new and enhanced tax credits for employers hiring veterans.  The law, effective immediately, allows employers to claim certain tax credits for hiring unemployed veterans ($2,400 in the case of a veteran unemployed at least 1 month; $5,600 for a veteran unemployed at least 6 months; and $9,600 for hiring an unemployed veteran with service-related disabilities).  You can review a full copy of the act here.  Its nice to be able to write about a new law that provides benefits for both employers and employee --particularly for our veterans that have served this country so well.

Follow me on Twitter @RussellCawyer. 

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Recently, the Supreme Court of Texas heard oral arguments in an interesting case regarding the outer limits of the attorney-client privilege with respect to a workers' compensation insurance carrier attorney's communications with its insured.  The communications at issue were made between the carriers and the insured/employer during the administrative proceeding before the Texas Workers' Compensation Commission over the compensability of a workers' compensation claim.  The case is styled In re XL Specialty Insurance Company and Cambridge Integrated Services Group Inc. (No. 10-0960).

At issue is a trial court's order that the workers' compensation insurance carriers turn over, in a civil lawsuit over the allegedly bad faith denial of workers' compensation benefits, communications they had with their insured/employer during the course of the underlying administrative litigation over the compensability of the workers' compensation claim. 

This case could have important ramifications for the Texas law of attorney-client privilege of communications between an insured and its insurance company's counsel.  Employers, and their attorneys, routinely communicate with insurance companies about the status of potential and pending claims.  Similarly, counsel for insureds routinely provide litigation updates about the potential strengths, weaknesses, potential exposure and likely outcomes on pending litigation.  These types of communications are normally treated as confidential and subject to the attorney-client privilege under the common legal interest doctrine (i.e., the privilege extends communications between parties or attorneys that share a common legal interest).  And while the case before the court is slightly different from the way EPL claims are handled because the insured/employer is not party (and is therefore a third-party) to the underlying lawsuit, the Court's pronouncements regarding the limits of the attorney-client privilege could have wide reaching effects on the manner in which employers communicate with their insurance carriers about pending claims.

We'll have more from this case when the Court renders its opinion in the case. 

Follow me on Twitter @RussellCawyer.

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Several years ago I took the deposition of the business owner who hired several employees from a competitor in violation of a noncompetition agreement the employees had with the competitor.  As part of enforcing the agreements against the former employees, the competitor sued the new employer for tortious interference with contract because the new employer/business owner was aware of the noncompetition agreements and hired the employees nonetheless.

During the deposition the indignant business owner repeatedly justified the hiring of the employees that had noncompete agreements as being appropriate because, "Texas is a right to work state!"  It made me realize that some employers, and probably many employees, don't know what it means to be a right to work state.  Here is what it means.

A right to work state is one in which prohibits employers and unions from agreeing to make membership in a union a condition of employment.  The fact that Texas is a right to work state has no effect on the enforceability of a noncompete agreement nor does it provide any legal excuse or justification to ignore the employees prospective employees have with their former employers.   So if you are a business owner considering hiring employees from a competitor who have noncompetition agreements, don't think that the fact that Texas is a right to work state will justify that behavior and contact a labor and employment lawyer to ensure that the hiring of those employees will not result in litigation.  There may be other good and sufficient grounds to have the noncompetition agreements set aside, but the the fact Texas is a right to work state is not one of them.

Follow me on Twitter @RussellCawyer.

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If you have not experienced it already, the EEOC is very active under the Obama administration.  Proof of this heightened activity is evident in the most recent statistics released by the EEOC for the fiscal year ending September 20, 2011.

Here is a summary of some of the highlights from the EEOC FY 2010 statistics (the Commission's fiscal year ends September 30, 2011)

• Total Charges of Discrimination filed reaches all time high of 99,922 (an increase of 6,645).
• Cause findings of discrimination were up over 1,000 from last year (and the highest number in 5 years).
• Disability charges of discrimination increased by almost 5,000 totaling a full 25% of all charges filed (expect that percentage to increase under the ADAA).  Only race, retaliation and disability showed an increase in percentage of total charges over last year.
• EEOC's backlog of charges is decreasing indicating that the Commission is processing charges faster.
• Conducted or are conducting 580 systemic investigation and filed 23 lawsuits alleging systemic allegations of discrimination.

Unless a projected budget cut decreases the EEOC's ability to process charges and conduct investigations and litigation, it is expected that next year's charge filing statistics will meet or exceed this year's record numbers.

Follow me on Twitter @RussellCawyer.

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Its the time of the year again when companies begin planning whether and how to sponsor an end-of-year holiday parties.  Two years ago I wrote about how companies can plan their employer-sponsored celebrations to reduce potential liability resulting from those events.  The advice is as timely today as it was two years ago.  You can access my 9 tips to consider when planning the end-of-year holiday here:  Keeping Off Santa's Naughty List Because of What You Did at the Company Christmas Party: Minimizing Employer Liability Arising From Employer-Sponsored Holiday Parties .
 

Follow me on Twitter @RussellCawyer.

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Many employers understand the need for having a neutral reference policy (i.e., a policy whereby only dates of employments, positions held and sometimes last salary is disclosed). The policies help prevent and defend against potential defamation claims by former employees. Last week, I attended a panel discussion on Post Employment Conduct by Employers and Employees:  Not the Time to Let Your Guard Down at the ABA 5^th Annual Labor and Employment Law Conference. 

During conference, Jeffrey Shane of Allison & Taylor made an interesting presentation on the services his company provides. Allison & Taylor specializes in conducting personalized reference checks. One aspect of the company’s business is conducting reference checks on behalf of applicants who believe they are getting negative references from their prior employers and supervisors. The company boasts over 300 attorneys with whom they’ve worked and a 100 percent success rate in stopping untruthful negative references that they discover.

So, if you are an employer that has a negative reference policy, or a supervisor working at a company with such a policy, beware. If you are not following the policy, every reference check you get may not necessarily be on behalf of a genuine prospective employer and may instead be being used to establish evidence for a defamation claim.  Remember, defamation claims are one of the relatively few employment law claims where supervisors can sued and held individually liable.  Thumper said it best, "If you can't say something nice, don't say nothin' at all."

Follow me on Twitter @RussellCawyer.

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I have already written about the Herman Cain story and won't opine further on it here except to say, I have no idea who is telling the truth in the he-said-she-said (and she-said; and she said) story.  The headlines do remind me about what little rights the accused harasser has when, as Herman Cain claims, a false complaint of harassment has been made.   And before you start sending me the hate mail over this HSO, read the remainder of this post.

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The recent scandal at Penn State University is both shocking and troubling.  That high level officials of a such a prestigious university would allegedly overlook or cover-up allegations of the sexual abuse of a child is truly reprehensible.  Notwithstanding the intense media coverage of these events, each of those accused is presumed innocent until proven guilty.  But how does the scandal at Penn State tie into Texas employment law?  Here is the nexus.

Texas, like many other states, is a mandatory reporting state when it comes to the suspected abuse or neglect of a child.  Every person who has cause to believe that a child is being abused or neglected is required to report it.  Certain Texas professionals are required to report with 48 hours.  Similarly, federal law requires employers and IT professionals to report violations of involving child pornography on employer computers to the Cyber Tip Line at the National Center for Missing and Exploited Children (who will in turn report to the appropriate law enforcement agencies).  Employers and employees must understand their legal reporting requirements.

Employees and employers who believe that child abuse or neglect is occurring or that an employer's computer system possess child pornography should immediately report their concern to the in-house legal department or human resources and also to the NCMEC, the Texas Department of Family and Protective Services or another appropriate law enforcement agency.  Failure to do so may subject the employer and employee to significant criminal jeopardy, fines and a a potential Penn State size media catastrophe --not to mention delaying an end to the abuse of the child.

Follow me on Twitter @RussellCawyer.

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The Fort Worth Star Telegram has reported that the Texas Rangers are investigating the leak of Manager Ron Washington's pre-game speech to the team before Game 7 of the World Series.  The speech was reportedly taped by a member of the clubhouse staff and then leaked to JoeSportsFan.com.  You can listen to the full recording here.  (Foul Language Warning).

Where every employee, customer and vendor carries a high capacity telephone, video camera and tape recorder in the form of a PDA or smart phone, employers should adopt written policies prohibiting employees from making video or audio recordings during working time and while on the employer's property.  These audio and video recordings can be posted to Facebook, YouTube or Twitter and can have the effect of embarrassing an corporation or disclosing confidential, trade secret information.  Written policies provide a deterrent for employees who would attempt to harm the company through surreptitious records and provide a basis for disciplining employees who violate the policy.  And of course, if employees record communications in Texas to which they are not a party, they are potentially subject to criminal prosecution.  Keep in mind that any policies that prohibit these recordings must either be tailored so as to not violate employees' NLRA Section 7 rights or should contain a disclaimer that the policy is not intended to nor will it be applied to trample on those rights.

Follow me on Twitter @RussellCawyer.

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Last week I was in Seattle attending the ABA's 5th Annual Labor and Employment Law Conference.  While there have been a number of interesting and informative sessions, I wanted pass along an interesting demonstration that was done by Dr. Anthony Greenwald to demonstrate implicit bias (i.e., the internal, subconscious stereotypes we all allegedly have from our past experiences).

In large scale class actions, lawyers representing the classes have attempted to show systemic discrimination in corporations using, in part, implicit bias science.  Implicit bias science attempts to measure the extent to which individuals have implicit bias and how such bias might be predictive of discrimination.  Dr. Greenwald is the developer of the Implicit Association Test.  The test is designed to measure implicit attitudes people may harbor but are unaware of or would otherwise be unwilling to admit.

For example, in the test demonstrated last week, the group was shown a series of names and asked to answer whether the names were male or female names.  Response times were measured and the quicker the response time, the easier a person's brain has in processing a response.  Next, the group was shown a series of job titles and asked categorize each as being a leadership position or non-leadership position (e.g., Boss, Supervisor, Leader, Executive, Assistant, Co-worker etc).  After measuring response times, the group's response times tended to show that male names more closely correlated with leadership positions and female names correlated with non-leadership positions.  This, the test administrator believes, shows that the implicit bias of our group was to associates leadership job titles with males and lower job titles with females.  Dr. Greenwald observed that he has measured implicit bias in many areas such race, gender, appearance (obesity) and age; all useful things in employment discrimination cases --if valid.

While I didn't come away from the demonstration with the belief that the IAT is useful evidence to prove discrimination or predictive of discriminatory behavior, it was interesting.  Do you have implicit bias?  Dr. Greenwald's computer based test is available on-line and you can take it here (We took the Gender Career IAT).  What do you think?  Are you more likely to discriminate because your implicit bias?

Follow me on Twitter @RussellCawyer.

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 Herman Cain is in the news for all the wrong reasons.  During his tenure at the National Restaurant  Association the Association apparently settled two complaints of sexual harassment involving Cain.  

I have no idea what the underlying allegations were against Cain or whether the settlements were made to avoid inconvenience and buy peace or because the allegations had legs and carried potential exposure.  I know one thing about the Cain complaints --continued defense of the complaints would carry additional significant expense to the Association.

Employers settle employment disputes for all manner of reasons; but rarely because the employer believes it violated the law.  Litigation is expensive, distracting and inconvenient for companies.  While the statutory damages caps for federal employment civil rights claims have not increased in twenty years, the rates of attorneys defending those cases have increased many times over.  A $300,000 damages cap case in 1991 was much more significant compared with the fees that would be incurred in defending that case.  Today, the attorney's fees incurred in defending the same case would be a much greater percentage of the potential damages as it would have been in 1991. 

For the same reasons employers should not use arrest records in making hiring decisions (i.e., arrests are no indicia of guilt), the mere fact a company settled an employment dispute is no indication that the law was violated.

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By the time most of you read this, I will be headed to Seattle for the ABA's 5th Annual Labor and Employment Law Conference.  Attended this year by approximately 1,300 labor and employment attorneys from across the country, the ABA's conference provides some of the most comprehensive coverage of current developments in U.S. labor and employment law.

One great thing about the annual ABA conference is that it makes the program materials available on-line.  If you can't get to Seattle this year, but want to review the materials, check out the dozens of papers that will be presented at this year's conference here.

Also, if you want to follow the Seattle Conference live on Twitter, you can by following @abalel or #abalel.

Follow me on Twitter @RussellCawyer.

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In a recent pre-ADAA case, the Fifth Circuit Court of Appeals held that a former UPS employee's limitations caused by Type II diabetes were not disabling and that UPS did not fail to provide reasonable accommodation to a known disability.  Despite the fact that this case was based on pre-ADAA law, there are still some useful takeaways that will apply notwithstanding the ADAA.

Rommel Griffin was a 28-year employee of UPS who suffered from Type II diabetes.  He worked in a supervisor/management capacity on the twilight shift from 2 to 10 p.m.  After Hurricane Katrina, Griffin experienced unusual numbness and pain that his doctor attributed to stress.  He took a paid leave of absence to complete an outpatient behavioral counseling program.  After completing this program, Griffin was better able to manage his stress and his symptoms improved.

Griffin was released to return to work and upon his return learned that his job had been filled.  Griffin sought out two other positions; neither of which he was awarded.  Ultimately, he was assigned the position he previously held; albeit on the midnight shift.  Upon being told he was assigned to the midnight shift, Griffin delivered a letter titled "Accommodation Request" where he said that that his doctors required that his schedule be adjusted to daytime hours to accommodate his diabetes.  UPS requested additional information from Griffin and his doctors to evaluate the request for accommodation. 

In response to UPS's request, and key to the court's decision, were Griffin and his doctor's response.  Griffin wrote a letter stating that "My diabetes is a condition that does not have to be a disability if I manage it properly, but to do so I will need UPS to make the accommodation to permit me to work days."  His healthcare provider indicated "No" in response to the question regarding whether Griffin's impairments substantially limited his ability to perform any major life activities other than working.  None of the information provided by the physicians said that Griffin needed daytime work hours.  As a result of this information, UPS denied Griffin's request for accommodation.  Shortly thereafter, Griffin tendered his notice of retirement.  Prior to this retirement, he made no complaints to human resources about the denial of accommodation nor did he participate in UPS's formal dispute resolution program.  Like UPS, the trial court also concluded that Griffin was not disabled and granted judgment in favor of the company.

On appeal, the court reviewed the decision that Griffin was not disabled.   The court noted that Griffin had been able to manage his diabetes for years, without complication, so long as he maintained his regimen of medication, meals and rest.  In this mitigated state, pre-ADAA law, Griffin's impairments could not be considered to be substantially limited.  Importantly, the court observed that neither it, not the Supreme Court, has recognized the concept of per se disabilities and that Griffin's limitations were on the moderate end of the diabetes spectrum thereby not amounting to significant limitations on any major life activity.  Consequently, the court of appeals also found that Griffin was not disabled. 

Similarly, the court also affirmed judgment against Griffin on his failure to provide reasonable accommodation claim.  The court affirmed judgment on this claim because there was no evidence that UPS was unwilling to engage in a good faith, interactive process regarding his request for accommodation.  None of the information submitted by Griffin's doctors requested that he be assigned only daytime hours.  Moreover, Griffin admitted that his diabetes does not have to be a disability if managed properly. 

It should be clear that the Court's analysis of whether Griffin was disabled or diabetes qualifies as a disability has been superseded by the ADAA.  However, there are still some good analysis that survives the changes made in the ADAA.  First, where the information provided by the employee's doctor fails to demonstrate that the employee is disabled or that the particular accommodation requested is necessary because of the employee's disability, the employer does not fail to provide reasonable accommodation to a known disability.  Second, where the employee terminates the interactive process through voluntary resignation or retirement, a failure to provide reasonable accommodation claim is difficult to maintain because it is difficult for the court to determine what measures would have been taken had the accommodation discussions continued.

You can download a full copy of Griffin v. UPS, Inc. here.

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Some of you may have noticed that my regular blogging activity has been less-regular.  With the Texas Rangers winning the American League Championship to advance to the World Series and a number of key depositions I've been preparing for and taking, time dedicated to the blog is in short supply.  I hope to return to more regular activity once the World Series concludes.

And when regular blogging resumes, look for updates from the ABA's National Labor and Employment Law Conference from Seattle that I will be attending from November 2-5.

Go Rangers!

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Last week the Supreme Court of Texas granted a Petition for Review to hear the case of Mission Independent School District v. Garcia.  While the petition for review has three issues (issue four was not challenged by the respondent), only one is relevant to private employers.  The school district argues for a bright line rule that if the plaintiff-employee is replaced by someone older than he is, there can be no state age discrimination claim as a matter of law.  As worded by the School District, whether a plaintiff can establish a prima facie case of age discrimination when plaintiff-employee's replacement is older than the plaintiff.

In Garcia, Ms. Garcia worked for the School District for 27 years.  She sued her former employer (and the individual supervisor) for a variety of alleged discrimination (i.e., the kitchen sink approach) including age discrimination.  The School District challenged Garcia's claim through a plea to the jurisdiction which entitles a governmental employer to an interlocutory appeal (i.e., during the pendency of the case rather than after final judgment).  It is in this procedural posture that the case reached the Supreme Court of Texas.  The substance of the School District's argument is that because Garcia's replacement was three years older than she was, she cannot make out a prima facie case of age discrimination as a matter of law. The School District's argument seems logical, but Courts rarely like to adopt bright-line rules in employment discrimination cases.  The case is scheduled for oral argument on January 10, 2012 and a decision is expected before the end of September.

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I suggested that employers should wait until November 14, 2011 (the implementation deadline) to post the new regulatory-requirement posting on employees' NLRB rights because of several lawsuits seeking to enjoin the requirement.

The Board has now postponed the initial posting deadline until January 31, 2012 "to allow for further education and outreach."  I'm not sure who else they feel they need to educate and reach out to, but the deadline is changed nonetheless.  Because there is still some uncertainty as to when, and even if, employers will have to make this new posting available to employees, don't post it until you have to.  If you already posted it, take it down.

Hat tip to Jon Hyman at the Ohio Employer's Law Blog for first alerting me to the news.

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While the FMLA normally requires an eligible employee be reinstated to an equivalent position at the end of his FMLA leave, the employee has no greater right to reinstatement than if the employee had been continually employed.  Thus, there are several situations where an employee is not entitled to reinstatement.

First, where an employer conducts a layoff or reduction in force while the employee is on FMLA and would have been laid off had the employee not been on leave, the employer's obligation to reinstatement and continuation of benefits ends on the date of termination.

Second, employees hired for specific project or for a specified term, have no right to reinstatement after the termination of the project or specified term.

Third, employees who have obtained leave fraudulently have no right to reinstatement.

Fourth, employees who are unable to perform the essential functions of the position of employment at the end of leave are not entitled to reinstatement.  To avoid an ADA claim, the employee must only be denied employment if he or she cannot perform the essential functions of the position with or without reasonable accommodation.

Finally, employer's may deny reinstatement to salaried, eligible key employees when the denial of reinstatement (not leave itself) is necessary to prevent substantial and grievous economic injury to the operations of the employer.  Key employees are those salaried employees who are among the highest paid 10 percent of all employees employed by the employer within 75 miles of the employee's worksite.  Substantial and grievous economic injury sufficient to warrant denial of reinstatement to a key employee includes those situations where reinstatement would jeopardize the viability of the company itself.  Minor inconveniences and costs the employer would otherwise experience in the normal course of business, however, would not qualify.  Keep in mind that the employer must provide "key employees" with certain disclosures at the time the employee gives notice of the need for leave to be able to deny reinstatement.

While an employee's use of FMLA leave will normally entitled the employee to reinstatement to an equivalent position, keep these exceptions to the general rule in mind when managing leave programs.

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Employers should provide (and pay for) the cell phones and other PDA's used by their sales force.  Why?  So that the company is entitled to, and can insist on, the return of the telephone, the assigned telephone number and the contacts and other wealth of information contained on those devices when the employment relationship ends.  If a company allows an employee to use his or her own cell phone or telephone number (even if the company reimburses the employee for the service) , the company may not have a right to insist the telephone be turned over to it to clear the customer information from the phone.  Even worse, when your customers use the normal telephone number to place an order with their sales contact, who has since left your employment, they will be connected with your former employer who is now working for your competitor --and the employee didn't even have to do anything to solicit the customer's business for the new employer. 

Consequently, a comprehensive effort to protect confidential information, trade secrets and company goodwill may well include providing company-owned cell phones for the sales staff.

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Prompt and thorough investigations of complaints of harassment and discrimination can provide solid legal defenses to employee lawsuits.  Even where there may not be a technical, legal defense (e.g., supervisory harassment resulting in an adverse employment action), investigating employee complaints of inappropriate behavior can paint the employer in a favorable light and is just a good business practice for employers concerned about providing a professional workplace. 

One of the first choices an employer receiving an employee complaint of discrimination, harassment or even misconduct, has to make is who will investigate the complaint on behalf of the company.  Complaints do not necessarily have to be investigated by lawyers or even those external to the company.  However, there are certain qualities an employer should consider in selecting the investigator (not all qualities are necessarily required for a prompt and thorough investigation).

• Experienced --someone with prior human resources experience and that has conduct prior investigations of discrimination, harassment, retaliation or workplace misconduct;
• Unbiased and objective --someone that is neither accused of misconduct or who reports to or is the direct organizational chain of the the person being complained about;
• Articulate --an individual who is well-spoken and makes both good verbal and physical appearance.  This will be the company's spokesperson at any trial where the company has to describe and defend its investigation and any remedial measures taken as a result of the investigation;
• Knowledgeable --person should be knowledgeable of the subject matters being investigated as well as the company policies that apply to the investigation and the misconduct alleged;
• Approachable --someone that the complaining party, witnesses and the person being complained about will open up  to.  For example, in the investigation of a sensitive sexual harassment investigation, it may be (but is not required to be) that a person who is the same gender as the person making the complaint may be the proper choice.
• Available --the individuals selected needs to have the time devoted the conduct and conclude the investigation promptly.

As prompt and thorough investigation can be an effective defense to a discrimination, harassment or retaliation lawsuits.  The best defense starts with selecting the right quarterback to run the investigation.

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One of the most popular posts (i.e., most read) I've written is one I published two years ago on whether employer can or should ban the use of e-cigarettes in the workplace.  Some employers have gone so far as to implement the complete ban on the use of all products containing nicotine --both during and after work.  I thought that now would be a good time to update my thoughts on the subject.

Recently, the U.S. Department of Transportation issued a press release announcing its proposal to explicitly ban electronic cigarettes on U.S. flights.  According to the DOT's release:

Electronic cigarettes cause potential concern because there is a lack of scientific data and knowledge of the ingredients in electronic cigarettes.  The Department views its current regulatory ban on smoking of tobacco products to be sufficiently broad to include the use of electronic cigarettes.  The Department is taking this action to eliminate any confusion over whether the Department’s ban includes electronic cigarettes.  The proposal would apply to all scheduled flights of U.S. and foreign carriers involving transportation to and from the U.S.

Amtrak has banned the use of electronic smoking devices on trains and in any area where smoking is prohibited. The Air Force Surgeon General issued a memorandum highlighting the safety concerns regarding electronic cigarettes and placed them in the same category as tobacco products. The U.S Navy has banned electronic cigarettes below decks in submarines.  Further, several states have taken steps to ban either the sale or use of electronic cigarettes.

This is a fairly contentious issue.  On the one hand, smokers and supporters of e-cigarettes claim that they are odorless devices that emit nothing more than water vapor and are no more harmful to coworkers than allowing a nearby employee to chew nicotine gum or wear a nicotine patch.  On the other hand, some employers have expressed concern over the lack of scientific evidence over what is emitted into the air from the electronic cigarettes; over the perception that the employer is condoning or sponsoring any kind of addiction or dependence; and whether some of the types of employment (i.e., retail or customer service) are inconsistent with image the company wants to foster.

In the end, and assuming that nicotine dependence is a disability that must be reasonably accommodated under the ADA, an employer can reasonably accommodate the disability without allowing the use of e-cigarettes in the workplace or at work stations.  It is the long-standing rule that the employer gets to select the accommodation provided among various effective accommodations.  For example, the employer could allow the use of e-cigarettes in the same manner as it allows employees to use other tobacco products (e.g., outdoors during break times).  Similarly, the employer could allow the the employee to use nicotine gum during working time.  If the employer allowed the use of e-cigarettes during working time or in working locations (and assuming it is not prohibited by state law), the employer could require that the employee refrain from using scented e-cigarette flavors to further reduce the potential effect on nearby co-workers.

Follow me on Twitter @RussellCawyer.

DOT Notice of Proposed Rulemaking here.

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One of North Texas' largest employers announced that it will not longer hire or consider for hire any individual who uses any nicotine product (i.e., cigarettes, nicotine gum or patches, chewing tobacco or electronic cigarettes).  Baylor Health Care Systems announced its new policy on the careers page of its website stating:

As a health care system committed to improving the health of those we serve, we are asking our employees to model the same behaviors we promote to our patients. Beginning January 1, 2012, Baylor will no longer hire individuals who use nicotine products. Applicants who profess to use nicotine will not have their applications processed. Anyone who is offered and accepts a position with BHCS will be tested for nicotine during our regular post-offer pre-employment testing. Applicants who test positive for nicotine will be eliminated from consideration and pending job offers will be rescinded.  We encourage candidates who do not pass the nicotine testing to consider taking steps to stop the use of nicotine and reapply for consideration after a period of 90 days. 

The policy appears to screen out any applicants, regardless of the type of product used containing nicotine and whether the product is use on non-working time off the employer's premises.  Smoking or nicotine dependence has not historically had success in the courts as being a recognized ADA disaiblity.  However, it will be interesting to see if in a post-ADAAA world, where the definition of disability has been greatly relaxed, this policy comes under scrutiny by the EEOC or applicants rejected for employment based on their use of products containing nicotine. 

Baylor is not the first hospital to implement such a policy.  However, similar policies are not without their critics.  The National Workrights Institute, a nonprofit human rights organization focused on workplace issues, has been quoted that "such policies are a slippery slope — that if they prove successful in driving down health care costs, employers might be emboldened to crack down on other behavior by their workers, like drinking alcohol, eating fast food and participating in risky hobbies like motorcycle riding." 

Presumably Baylor had its policy fully vetted by its legal experts and believes it can defend the policy.  However, a quick, admittedly nonexhaustive research search, failed to find any cases holding that nicotine addiction is not a disability under the ADAAA.  Only time will tell whether these kinds of policies will be upheld by the courts.

Follow me on Twitter @RussellCawyer.

Other Articles on Failure to Hire Tobacco Users:

Refusing to Hire Tobacco Users --Valid Argument or Just Blowing Smoke?

Hospital Hiring Goes Up in Smoke.

Hospitals Shift Smoking Bans to Smoker Ban

ADA Amendments May Open the Door for Nicotine Addiction Claims

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I am always skeptical when I hear a deal that sounds too good to be true.  Because of my healthy skepticism, I hope that I am unlikely to be scammed by the phishing e-mail advising me a foreign distant relative has left me a lot of money and I only need to send a few thousand dollars to an off-shore bank to release the funds (however I also probably won't return the phone call when I really win a legitimate lottery).  This was my thought when I read about the new IRS Voluntary Classification Settlement Program that lets companies that have misclassified employees as independent contractors to prospectively reclassify the workers as employees and only pay ten percent of the prior year's payroll taxes --with no penalties or interest.

This sounds like a pretty good deal.  Come clean and fix prior mistakes all while paying a fraction of the back taxes and no interest and penalties and a promise that the IRS won't audit prior financial years on this topic.  Some of you are probably saying "where do I sign up?"  (Of course, none of you have misclassified any employees as independent contractors.)

One downside to the IRS's program is while the government is showing some leniency by providing companies with a limited safe harbor to remedy prior mistakes, wage and hour plaintiff' lawyers are unlikely to be so forgiving.  Participation in the IRS program will be tantamount to admitting that the workers were misclassified as independent contractors and all the baggage that goes along with such a misclassification. 

Since companies rarely keep records of the hours worked by independent contractors, the newly classified employees can seek several years of unpaid overtime and the employer is unlikely to have any records to rebut the employees' claims of hours worked.  Moreover, to the extent companies have benefit or incentive plans in which employees participate (but independent contractors do not), companies may face claims for benefits or other incentives (bonuses, options, stock etc.) that were not provided to the misclassified contractors.

The IRS program is an interesting opportunity for companies with misclassified independent contractors to reclassify their workers with less downside to the company.  However, the program could have been more palatable (thereby likely getting better participation) had the IRS included such protections for companies from the other negative consequences that come along from a misclassification of employees as independent contractors such as providing immunity from overtime, benefit or incentive claims for the period of misclassification or providing that agreements with the IRS shall not be admissible in any proceeding involving the company.  Companies will need to weigh all of the benefits and consequences in deciding whether to participate in the Voluntary Classification Settlement Program.

Follow me on Twitter @RussellCawyer.

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Next week is the deadline for all covered employers (i.e., those subject to Title VII and with 100 or more employees; or first tier or prime federal contractors with 50 or more employees or more than $50,000 in federal contracts) to file their federal EEO-1 surveys.  The EEOC has a FAQ page if you are new to or unfamiliar with the annual filing requirement.

Follow me on Twitter @RussellCawyer.

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If you are are regular reader of this blog, you know that by November 14, 2011, most private employers (union and non-union) have to post notice of employees' federal labor rights to form and join a union.  Some of you may have even already posted the NLRB-sanctioned poster.  

However, several lawsuits have been filed seeking to have the new NLRB rule declared invalid.  The U.S. Chamber of Commerce and the South Carolina Chamber of Commerce sued in federal district court to have the new posting rule declared invalid.   The U.S. Chamber's lawsuit follows on the heels of last week's suits seeking similar relief by the National Federation of Independent Business and the National Association of Manufacturers.

Given the uncertainty about whether the posting requirement will actually take effect, it may be prudent to wait and see whether one or more federal courts will enjoin the NLRB from enforcing its new rule.  And while an injunction may or may not be binding on the NLRB in Texas (because neither lawsuit seeking an injunction was filed in Texas) an injunction could prohibit the NLRB from enforcing it nationwide.  In the meantime, employers should hold off on posting the new poster until November 14, 2011 so that the courts have an opportunity to address this issue.

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In jury selection of an employment discrimination case, the employer addresses the potential jury pool after it has already heard from the employee's lawyer. When the employee's lawyer has done an effective voir dire (i.e., jury selection), the employer might start to see the panel members begin to express verbal and nonverbal cues that the jurors are beginning to form opinions about the case that would tend to favor the employee.  The plaintiff employee, as the party bearing the burden of proof, always has a real advantage in getting to talk first and last at every stage of a trial. 

While the trial judge will undoubtedly advise the jury that nothing the lawyers say is evidence, it is important to remind the jury to refrain from from forming their opinions until all of the evidence is in (read:  the employer has a chance to put its case on).  I've even some some defense lawyers go so far as to ask potential jurors at the beginning of jury selection if, having heard the plaintiff employee's voir dire, was anyone leaning just a little toward thinking the plaintiff might have a case.  That is usually following by some example to show that every story has two sides and the jury can't really decide what happened until they have heard all of the evidence. 

The importance of ensuring that jurors are reminded to keep an open mind until they have heard all of the evidence is exemplified in two posts written by two of my colleagues about the same case.  On September 8, 2011, the EEOC announced that it filed a lawsuit against Walgreens for allegedly violating the Americans with Disabilities Act when it fired an employee for eating chips to stop a hypoglycemic attack.    The EEOC summarized the facts as follows:

Josefina Hernandez, a cashier at Walgreens’ South San Francisco store, was on duty when  she opened a $1.39 bag of chips because she was suffering from an attack of  hypoglycemia (low blood sugar). Hernandez  had worked for Walgreens for almost 18 years with no disciplinary record, and Walgreens  knew of her diabetes. Nevertheless, Walgreens  fired her after being informed that Hernandez had eaten the chips because her  blood sugar was low, even though she paid for the chips when she came off  cashier duty.

Jon Hyman, who represents employers, defended Walgreen's actions on his blog the Ohio Employer Law Blog.  He wrote that:

You might think that a $1.39 bag of chips, for which the employee later paid, is not a fireable offense. Yet, no rule is more important to a retailer than its no-shoplifting rule. Most stores have zero tolerance policies, both for customers and employees. It may seem unreasonable to fire a diabetic employee over one bag of chips. Consider, however, that the employer might not want to set a precedent that it is acceptable to eat food off the shelf without paying for it first. If customers see an employee consuming merchandise without paying first, they might think it’s allowed by the store, which makes shoplifting and loss prevention that much more difficult for the employer to control.

After reading Jon's post, you might be inclined to side with the employer and believe that the EEOC overstepped its bounds by suggesting that Walgreens had to, as a reasonable accommodation, excuse one of its personal conduct rules.

Shortly after Jon's post was published, Chris McKinney (a fellow Texas lawyer) who represents employees, suggested that Jon's defense of Walgreens was as good as could be done if not a little over the top in accusing Ms. Hernandez of stealing the chips and further suggesting the company's defense was factually false.  Chris had the following closing argument on Walgreen's actions:

At trial, Walgreens will presumably say that Ms. Hernandez had any number of alternative actions available to her, including: 1) leaving her station to get some food from her purse or locker (for which she would undoubtedly be fired; or 2) risk going into diabetic shock.  From the company's point of view, choice 2 is obviously the preferable solution.

No one can accurately predict how this case will ultimately conclude (although I'd bet a large sum of money that like most civil cases --and most brought by the EEOC --it will end with a settlement) but it a good reminder that every case has at least two sides and the jury must be reminded not to forms its opinions until it has heard all of the evidence.

Follow me on Twitter @RussellCawyer.

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Yesterday, the Supreme Court of Texas heard oral argument in two employment cases.

In El Apple I, Ltd. v. Olivas, (No. 10-0490), the Court is considering whether detailed lodestar attorney fee calculation is required with breakdowns for each specific task.  Also under consideration is whether appellate fees should be calculated in advance or only upon remand from appeal.  You can access a video of the oral argument here.

I've written before about the Prairie View A&M University v. Chatha case, which I believe was wrongly decided by the court of appeal.  (post here).  In Chatha (No. 10-0353), the Court is considering whether the statute of limitations on an employee's complaint of discriminatory pay commences on the date the decision is communicated to the employee or on the date the paycheck reflecting the allegedly discriminatory pay decision is issued to the employee. You can watch the video in Chatha here.

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I've previously written about the new NLRB requirement that most employers post notice of employee's NLRB rights (post here).  The posting requirement is effective November 14, 2011, for both union and non-union employers.  Yesterday, the NLRB made available an appropriate posting for download.   The NLRB's site also has answers to some commonly asked questions about the posting requirement that you can access here.

Follow me on Twitter @RussellCawyer.

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This week the Fifth Circuit held that a cause of action exists for hostile work environment under the ADEA –the first such express holding in the Circuit.  In Dediol v. Best Chevrolet, the plaintiff filed a hostile work environment and constructive discharge claim against the employer.

During the brief two months of employment, Dediol claimed that his direct supervisor repeated referred to him by profane, derogatory names invoking his age; made offensive remarks about his religious beliefs; threatened him both economically with the loss of his job and with physical threats of violence and intimidation. When Dediol’s requested transfer to another department was denied by his supervisor, he told the company’s management that he could no longer take the abuse and ceased reporting for work. The employer terminated his employment for job abandonment. He filed a charge of discrimination; received a right to sue letter and file a hostile work environment suit based on age, religion, harassment and constructive discharge.

In the first holding of its kind in the Fifth Circuit, the panel held that a plaintiff’s hostile work environment claim based on age discrimination under the ADEA could be advanced in court. In setting out the parameters for such claim, the Court borrowed liberally from Title VII hostile work environment jurisprudence.   The court held that the plaintiff must show that 1) he is over age 40; 2) the employee was subject to harassment, either through works or actions, based on age; 3) the nature of the harassment was such that it created an objectively intimidating, hostile, or offensive work environment; and 4) there is some basis for liability on the part of the employer. In determining whether the harassment is intimidating, hostile or offensive, the conduct must be both objectively and subjectively offensive.

Having concluded that an ADEA hostile work environment based on age exists in this Circuit, the Court examined the record and concluded that genuine factual disputes existed as to each of Dediol’s causes of action. The court reversed the trial court and sent the case back for further consideration –including, potentially, a full trial on the merits.

You can download the complete opinion here.

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Pre-game preparations are underway for the first Monday in October when the U.S. Supreme Court will commence its 2011-12 Term.  Here are the employment-related cases that are expected to be decided this Term.

Hosanna-Tabor Church v. EEOC (10-553)  To decide whether the ministerial exception, which prohibits most employment-related lawsuits against religious organizations by employees performing religious functions, applies to a teacher at a religious elementary school who teaches the full secular curriculum, but also teaches daily religion classes, is a commissioned minister, and regularly leads students in prayer and worship.— (to be argued Oct. 5, 2011)

Coleman v. Maryland Court of Appeals (No.10-1016) To decide whether Congress constitutionally abrogated states’ Eleventh Amendment immunity when it passed the self-care leave provision of the Family and Medical Leave Act. 

Knox v. SEIU (No. 10-1121) To decide whether (1) a State, consistent with the First and Fourteenth Amendments, condition employment on the payment of a special union assessment intended solely for political and ideological expenditures without first providing a notice that includes information about that assessment and provides an opportunity to object to its exaction and (2) a State, consistent with the First and Fourteenth Amendments, condition continued public employment on the payment of union agency fees for purposes of financing political expenditures for ballot measures?

Follow me on Twitter @RussellCawyer. 

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Texas employers have the option of purchasing workers’ compensation insurance or going as a nonsubscriber.  Deciding whether to be a nonsubscriber or purchase workers’ compensation insurance requires an idea of what your anticipated workers’ compensation premium will be (usually obtained through your insurance broker) as well as understanding what legal protection a Texas employer gets by becoming a workers’ compensation insurance subscriber. Here is a quick summary of the differences between being a subscriber versus a nonsubscriber.  

Workers' compensation is a form of insurance purchased by employer to provide coverage for medical expenses, partial income and disability benefits for an employee suffering an injury or illness arising in the course and scope of his or her employment. In Texas, employers are permitted to opt-out of the state worker’s compensation. These employers are called nonsubscribers. There are advantages and disadvantages

The primary advantage of worker’s compensation coverage is that workers compensation subscribers (i.e., employers having workers compensation insurance coverage) cannot be held liable in court for employee injuries or illnesses that occurred in the course and scope of the employee’s employment. This protection does not apply to individuals who are independent contractors of an employer. The primary disadvantage to worker’s compensation coverage is its cost. Another disadvantage is that worker’s compensation subscribers cannot discriminate or retaliate against employees who report or have workplace injuries, and employees can sue employers if they experience an adverse employment action shortly after reporting or having a worker’s compensation claim.

Nonsubscribers, on the other hand, cannot be sued for discrimination or retaliation for taking adverse action against an employee that has been injured on the job.  They can, however, be sued by the employees for negligence and gross negligence when they are injured at work. The law is written to encourage employers to purchase workers compensation insurance. Consequently, nonsubscribers have few defenses to these claims such as claims for contributory or comparative negligence (aka “proportionate liability”) where liability is apportioned between the employer and employee based on percentages of relative fault. The only legal defenses a nonsubscriber has to a claim that an employee was injured in the course and scope of employment are that the employee was the sole cause of the injury or was intoxicated at the time the injury occurred. 

Understand that your general liability, homeowners or umbrella insurance policies alone do not provide coverage employee injuries or illnesses. Most such policies have exclusions that do not cover claims made by employees or those otherwise providing services for the employer (i.e., independent contractors). Whether to purchase worker’s compensation insurance is an important business decisions and the pros and cons of that decision should be weighed carefully.

Follow me on Twitter @RussellCawyer.

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When I started the Texas Employment Law Update almost three years ago, there were only three employment law blogs I was familiar with written by Texas attorneys:  Work Matters -Texas Employers Blog, Jottings by an Employer's Lawyer and the Texas Employment Law Blog. Today there are a number of other good blogs focused primarily on developments in Texas law.  Some has an employer's focus and some focus on issues of importance to employees and individuals.

As you consider which votes to cast the the ABA Journal Blawg 100 (i.e., the list of the top 100 legal blogs), and after you've voted for the Texas Employment Law Update for the Blawg 100 (nomination form here), check out the following employment blogs authored by Texas attorneys to see if one or more of them should be nominated too (voting ends September 9, 2011). 

San Antonio Employment Law Blog (employee)

Houston Employment Law Blog (employee)

Employment Law Blog by Strasburger & Price (employer)

Smooth Transitions (noncompete law employee and employer)

Dallas Noncompete Lawyer (noncompete law employee and employer)

Texas Employer Handbook (employer)

If you're in a voting mood, you can also cast your ballet for the LexisNexis Top 25 Employment Law Blogs.  I'd appreciate your vote for that honor as well.  Voting ends September 12, 2011.   You can find out how to vote for the LexisNexis Top 25 here and see other blogs outside of Texas that are worthy of following.

Follow me on Twitter @RussellCawyer.

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Next week we celebrate Labor Day; the first Monday in September (although my Labor Day celebration starts a little later today).  Labor Day is and has been one of my favorite holidays.  As a child, we didn't start school until after Labor Day and it marked the end of summer vacation.  Now, my children start school much earlier; but they still get an extra day off.  In most years when a trial or other proceeding hasn't been unfortunately scheduled the week after the Labor Day, I also get to spend an extra day with the family. 

But Labor Day wasn't started so school children (and their lawyer fathers) could get an extra day off.  Labor Day was originally celebrated to honor workers and as a force for changes in the workplace.  In particular to encourage reforms in employee safety, working conditions and pay.  On Monday, celebrate America's workers and the sacrifice they make (albeit not unrewarded) for their employers and their families.

Have a safe and happy Labor Day holiday weekend.

Now for a little Texas Labor Day employment law (or as evidenced below, the lack of Texas employment law).

Texas Holiday or Premium Pay for Labor Day

Unlike some states, there is no requirement that employees be paid premium pay or overtime merely because they work on an official holiday like Labor Day.  Of course, if the employee is non-exempt and the work on Labor Day pushes him over the 40 hour per week threshold, the FLSA would require overtime be paid for those hours worked over 40 per week.

Follow me on Twitter @RussellCawyer.

More Labor Day resources:

U.S. Department of Labor's 2011 page.

A History of Labor Day and More Labor Day History.

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In 2010 Congress passed the Telework Enhancement Act of 2010.  The law requires federal agencies to assess and implement telework (aka telecommuting or work-from-home) arrangments for its workforce to the maximum extent practicable without sacrificing operations of the agency or employee performance.  The US Office of Personnel Managment recently published a Guide to Telework in the Federal Government.  The Guide is intended to provide practical information to assist federal agencies and employees in implementing telework arrangements.  

Some private employers have long used telecommuting as an option for certain types of employment.  Telecommuting (or telework) can reduce an employer's real estate and energy costs, promote management efficiencies, allow for work to get done during periods of inclement weather or other emergencies and allow greater employee flexibility for work-life balance.   The Guide published by OPM may provide useful guidance for employers considering allowing certain types of employees to telework.  Considerations include:

• Telework arrangements should have the expectations and understandings between the employer and employee set forth in a written agreement or document;
• Employee need to understand that telework is a privilege, not a right;
• Telework is only satisfactory so long as it does not reduce employee performance or the operations of the employer;
• Determine the location of the telework work site; 
• If the teleworking employee is nonexempt, outline how worktime will be recorded and reported;
• Ascertain what equipment will be needed for the telework assignment and who will be responsibile for maintaining it;
• Consider how injuries incurred during course and scope of telework will be reported and handled;
• Specify frequecy of telework anticipated (e.g., days of week or hours of day that are to be worked during telework);
• Communication expectations during telework (e.g., frequency of contact and whether the contact will be by telephone, e-mail, instant messages and the expected time frame for responses to inquiries made during telework);
• How illness or absences will be reported and handled on telework days.

Other Resources:

OPM's Telework Website

Manager Handbook for Measuring Employee Performance

Guidelines for Alternative Work Arrangements

Follow me on Twitter @RussellCawyer.

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I almost never read the letters to the editor in my local newspaper because, well . . . opinion are like . . . noses; everyone has one. However, last week I “stumbled” on a letter that was thought provoking in this period of high unemployment and borderline recession.

Jack Durham of Fort Worth, Texas proposes that the elimination of overtime would create job growth. He writes:

End overtime

I have a plan to help create jobs. The government should eliminate or drastically reduce the amount of overtime an employee could work. Employers would then seek other full-time employees to cover the gap. Smarter people than me would have to draft the provisions, but we have lawyers for that.

Instead of trying to create jobs over the next two to six years, these new employees could be hired by Labor Day. The job increase should be significant. This would discourage employers from paying 20 hours of overtime to avoid paying benefits to a full-time worker. Just a thought.

Maybe Jack is on to something; although, I think the French tried something similar with the 35-hour workweek.  A prohibition against overtime might create jobs.  It might add to some employee's desire to have better work-life balance (i.e., less work time and more time to spend on the employee's personal endeavors).  It would also negatively impact those employees who are willing to work longer hours for more money and could have a adverse effect on business productivity thereby hurting job growth.

Are there other reforms to the FLSA that might also create job growth?  How about elimination of the "white collar" exemptions?  Rather than paying an employee a salary for all hours worked, employers could be required to pay employees covered by the white collar exemption overtime for hours in excess of forty per week.  Would that lead employers to hire more "white collar" workers to spread the work around and reduce overtime payroll costs?  Employers that wanted to do more with fewer workers would see increased overtime expenses but those employers that wanted to avoid overtime would increase the number of workers to spread the work around so that it would be paid at straight time rates. 

Are there other reforms in the employment law context that create job growth without unduly hampering the operations of employers?  Let me know and I'll post them in the comments section.

Follow me on Twitter @RussellCawyer.

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Yesterday, the NLRB issued its final rule requiring all employer subject to the National Labor Relations Act to post notices to employees of their NLRA rights such as the right to form and join a union, bargain collectively over wages and to file unfair labor practice charges with the Board as well as instructing employees on how to file those charges. 

Highlights of the Final Rule posting requirement include:  

• Posting required not later than November 14, 2011;
• Posting must be at least 11 x 7 inches;
• Posted in conspicuous places where will be readily seen by employees and in all places where notices to employees concerning personnel rules or policies are customarily posted;
• Must also be posted electronically on employer's intranet or Internet site if the employer regularly communicates with its employees about personnel rules or policies in such manner;
• Must be posted in language spoken primarily by 20 percent or more of workplace; 
• Federal contractors are also covered;
• Excluded from posting requirements are U.S. (and its wholly owned Governmental corporations), Federal Reserve Banks, States or political subdivisions, persons subject to the RLA, labor organizations and a few others. 

You can access the full Final Rule here (skip to page 174 to see the text of the Rule).  The content of the required posting is found in Appendix A (beginning on p. 185).  The NLRB also published a Fact Sheet on the new posting requirement you can read here.

Follow me on Twitter @RussellCawyer.

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The Texas Employment Law Update has been nominated for LexisNexis's Top 25 Labor & Employment Law Blogs and needs your help.  To be included in the Top 25, LexisNexis counts your comments as votes.

To vote for this blog, click here; register (sorry, voting for President and the Top 25 requires FREE registration) and vote for the Texas Employment Law Update in the comments.

If you enjoy reading this blog and want it to continue, vote early and often because voting ends September 12, 2011.  This is separate and apart from the ABA Journal's Top 100 Blawgs.  You can see how to vote (Free) for the ABA Journal Blawg 100 here.  I appreciate your support.

Follow me on Twitter @RussellCawyer.

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Walter Olson at Overlawyered started they debate by asking “If I could press a button and instantly vaporize one sector of employment law…”  He answered age discrimination.  I'll let him defend his selection and you can read his explanation here. 

Jon Hyman and Daniel Schwartz weighed in that they would reform the depression-era outdated Fair Labor Standards Act and leave laws generally.  Both areas are ready for reform and simplification.  I asked my partners what area of employment law they thought most needed vaporizing (or at least reform).  One identified the varying mosaic of state immigration laws that are being passed across the country and that carry substantial (perhaps catastrophic) financial penalties for employing individuals not authorized to work in the U.S.  Another colleague identified the new health care law that requires employers to provide health plans or pay a penalty for each uninsured employee as an area of law that is stifling job growth --at least for small to mid-sized employers. 

My choice for vaporization is a little more specific.  I would target the FMLA regulations that limit how much information an employer can require from an employee on intermittent FMLA leave --particularly when the leave results from unexpected, anticipated and unscheduled flare-ups of serious health conditions.  These limitations place unreasonable restrictions on an employer's ability to manage and identify intermittent FMLA abuse.  Employers face regulatory barriers in determining whether the employee's absence on Friday was a result of his migraine headache (for which he was approved to take intermittent leave) or because he stayed out too late with friends carousing.  Verifying, in a meaningful way, that employees are using intermittent FMLA leave for approved purposes should not be prohibited or even discouraged.

If you think a particular area of employment law needs vaporizing (or at least reform), post it in the comments below and I'll publish them to continue the debate.

Follow me on Twitter @RussellCawyer.

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The EEOC is reviewing whether the use of arrest and criminal conviction information acts as a hiring barrier and whether employers should be precluded from asking about criminal convictions.  The EEOC publicized the meeting in a press release titled  Striking a Balance Between Workplace Fairness and Workplace Safety.  Particularly troubling about this hearing is the fact that the EEOC appears to be looking at the issue as one of workplace fairness rather than discrimination.  Workplace fairness is admirable, however, the EEOC's mission and mandate is not to try and achieve workplace fairness.  The EEOC's mission is educate, investigate and enforce the protections put in place by Title VII and related laws.  Stated differently, the EEOC is charged with ensuring that individuals are not treated differently because of their race, sex, color, religion, national original, age, and disability; not to ensure that the workplace is fair.

In my experience, few (if any) employers ask for or rely on arrest information in making hiring decision.  I've never seen an employment application that stated that a criminal conviction would be an outright bar to employment.  Most employers that seek criminal conviction information consider the nature and severity of the offense, the length of time since the offense occurred and the position for which the applicant is applying.  Banning the box (i.e., prohibiting employers from asking about criminal convictions on applications) will result in employers needlessly interviewing applicants who, by the nature or severity of their crime, will not ultimately be hired.  This is a waste of employer time and resources.  Moreover, given the EEOC's limited resources, its time, effort and money would be better spent on core mission rather than trying to administratively expand the scope of Title VII to effectively make convicted felons a protected class.

Follow me on Twitter @RussellCawyer.

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In Part 1, I covered some thoughts on enforcing noncompetition agreements in Texas following the Texas Supreme Court's new decision in Marsh USA.  Today I'm addressing some tips that employees (and their representatives) who are asked to sign or are attempting to bust a noncompetition agreement might consider.

Prior to signing the agreement, negotiate everything you can.  For example:

• Carve out customers or clients the employee serviced before becoming employed by the employer requesting the noncompete.
• Seek very specific scope of activity restraint rather than a very generalized restraint (e.g., employee shall not engaged in any business that competes with any of the products or services of the company).
• Negotiate a garden leave provision (i.e., the employee will receive some amount of money during the term of the noncompete period)
• Ask for a buy-out clause where the employee (or his new employer) can buy out of the noncompetition agreement.
• Ask that the noncompete be automatically waived if the employers ends the relationship through no fault of the employee (e.g., the employee is laid off).

When joining a new employer, the employee should seek an agreement the new employer will indemnify, defend and/or advance defense costs if the employee is sued over an alleged violation of the noncompete.  The employee should also try and ensure that his employment will not be terminated by the new employer in the event he is enjoined over a restrictive covenant with a former employer (Don't laugh, I've seen an new employer provide this protection in an offer letter when it expected the former employer would sue the new hire).

When litigating over the terms of a noncompetition agreement:

• Emphasize to the Court how limited the holding in Marsh USA is.  Marsh USA just ruled out a per se rule that noncompetes tied to stocks are unenforceable.
• Emphasize the lack of imminent, irreparable harm.
• Determine the primary purpose of the agreement and emphasize to the Court that the real purpose is to stifle competition rather than protecting goodwill or confidential information.
• Identify lesser restrictions that will protect the employer's interest.
• Distinguish your client from the long-term, highly valued Managing Director in Marsh USA.

Follow me on Twitter @RussellCawyer.

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Yesterday, Ryan Miller and I were invited to speak at the Tarrant County Bar Association's Labor and Employment Section luncheon.  Our topic was the recent changes to Texas noncompete jurisprudence.  A copy of the Power Point presentation we jointly presented can be accessed here.

For my contribution, I presented some thoughts on the practical effect the Marsh USA decision will have for employers and employees that dealing with noncompetes.  Here is a summary of thoughts:

REPRESENTING THE EMPLOYER USING NONCOMPETES

• Employers should continue to tie noncompetes to promises to provide confidential information and trade secrets to the employees and the employees' return promises not to disclose that information to third parties.  Trial courts are familiar with this concept and will expect it Marsh USA notwithstanding;
• Consider linking the noncompete to some financial benefit provided to the employee that is reasonably related (Marsh USA eliminates the "gives rise to" requirement of Light) to encouraging the employee to generate goodwill for the company.  Who knows how far courts will take Marsh USA, but bonuses, salary, for cause termination provisions, favorable parking spaces, fancy job titles, business expense accounts to entertain clients are a few examples of financial benefits that might be reasonably related to encourage employees to create goodwill that come to mind.
• Resist the urge to make the restrictions broader than necessary.  Courts have a statutory obligation to reform overly broad covenants, but any damages that accrue prior to reformation aren't recoverable.  Remember, reformation kills damages.
• Marsh USA isn't a magic bullet.  Marsh USA doesn't change the standard to obtain a temporary injunction (and there is where the battle often lies).  Employers still have to show probable right of success on the merits (arguably easier post-Marsh USA) and imminent irreparable harm.

In the next post, I'll cover my thoughts on what employees who may be subject to a noncompete might consider.

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In a recent case out of the U.S. District Court for the Northern District of Texas, a federal judge entered summary judgment for the City of Fort Worth in an FLSA overtime case filed by four former police officers.   

In Clark v. City of Fort Worth, Texas, four retired City of Fort Worth police officers filed a FLSA putative collective action seeking to represent a class of current and former officers for unpaid overtime they claimed they worked when they provided security services for third-parties leasing City properties (e.g., events at the City owned convention center).  According to the plaintiffs, these off-duty hours providing security for sporting events and concerts on City property (but for non-City events) should have been added to their regular official law enforcement hours with any work over forty hours per week being paid at overtime rates.  The City moved for summary judgment arguing that the special detail exemption excluded those hours worked for the separate employers and that no overtime was due and owing.  There are only six reported cases involving the special detail exemption so this opinion is important if for no other reason than to add to the scant case law on the issue.

The special detail exemption applies to law enforcement and fire fighter employees who voluntarily perform work for separate and independent employers.  Under the exemption, the hours voluntarily worked for the separate and independent employer are excluded from the officer's hours worked on behalf of the the primary employer for FLSA overtime purposes.  In a well-reasoned opinion, the federal judge presiding over the case, concluded that the City has established its affirmative defense that the hours sued on were exempt under the special detail exemption and entered a judgment in favor of the City. 

You can download a copy of the Court's opinion here.

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Imagine this, its Friday and you are sitting in your office as Director of Verizon’s newly created Office of Reasonable Accommodation.  An employee, I’ll call him Joe, walks into your office.  Joe tells you he's recently converted to the Church of the Flying Spaghetti Monster (i.e., he is now a Pastafarian); that Friday’s are his religion’s holiday; and that his religion requires him to wear a spaghetti strainer on his head at all times. He requests, as a reasonable accommodation of his religious beliefs, all Friday’s off from work and to have the photograph on his employee identification badge retaken so that he be shown wearing a colander on his head. What do you do?

Most employment civil rights laws require that employers treat all employees equally without regard to age, sex, color, race, national origin etc.  The ADA and Title VII's protection of employee's religious beliefs, however, may require employers to treat employees differently (i.e., reasonable accommodation).  Here, Joe's request to accommodate his beliefs (which appear sincerely held) can only be denied if accommodating the belief would cause undue hardship to the employer.  Undue hardship under Title VII is different than under the ADA.  Under Title VII, a proposed religious accommodation is often an undue hardship where it requires the employer to incur more than de minimus expense; violates a CBA, law or valid seniority system; ignores safety risks or requires other employees to work longer or harder. 

Applying these rules to Joe's request, unless you can establish that for security reasons employee photographs on access badges must be taken without headwear, you should probably tell Joe to get his colander while you get out the Kodak.  With respect to the request for all Fridays off, unless Joe's request would violate a CBA provision regarding bidding for schedules or would otherwise make Joe's co-workers work longer or harder, Joe should probably be allowed to take his Fridays off.

Follow me on Twitter @RussellCawyer.

Church of Flying Spaghetti Monster Resources Facebook and Wikipedia.

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The ABA Journal is compiling its annual list of the 100 best legal blogs and is seeking nominations on the blogs to include.  Inclusion on this list (which is not limited to labor and employment law blogs but includes all legal blogs) is prestigious and is something that I, and others that blog regularly, aspire to achieve.

This post is a shameless request (read "beg") that, if you like the Texas Employment Law Update, you nominate this blog for the Blawg 100 list.  Nominating a blog is easy.  You can access the on-line ABA Journal nomination form to nominate the Texas Employment Law Update (or other worthy blogs) here.

Nominations must be submitted by September 9, 2011.  Thank you for reading the Texas Employment Law Update.

Follow me on Twitter @RussellCawyer.

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Yesterday Rob Radcliff over at the Smooth Transitions Law Blog wrote a post about a lawsuit filed by an attorney against the recruiter that placed him at his new law firm.  In essence, the attorney alleged that the recruiter made representations that she was independent (and not tied to any particular law firm) and fraudulently convinced the attorney to join a Washington D.C.-based firm with whom the recruiter had a retainer relationship.  Radcliff warned recruiters about being explicit in representations made to potential candidates and disclosing who has retained the recruiter to avoid claims of misrepresentation and breach of fiduciary duty.

There is another area where recruiters need to be careful when conducting their search activities.  Recruiters need to be careful about where they place a candidate when they know the candidate has a noncompetition agreement that restricts the candidate's post-employment activities.  Recruiters can be sued for tortious interference with contract and/or conspiracy when the recruiter knowingly assists a candidate in violating his or her noncompetition agreement by putting the candidate in touch with a client company or for a position that would violate the terms of the candidate's post-employment obligations. 

On a few occasions, I'm aware of recruiters (and their search firms) who have been sued along with the former employee and the new employer over violations of a noncompetition agreement.  In those cases, the recruiters expressed shock and surprise that he/she could be held liable for assisting the candidate in violating the noncompetition agreement.  In one particular case, when the recruiter was asked whether she was concerned about putting a candidate with a noncompete in touch with a direct competitor (that was prohibited by the noncompete), she proclaimed, under oath, "That is just not something that I worry about!"   

As recruiters increasingly become entangled in disputes among competitors over enforcement of noncompetition agreements, the existence of a candidate's noncompetition agreement is probably something that recruiters should be concerned about.

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In Texas, employees and employers are entitled to a telephone hearing before a hearing officer if either party disagrees with an initial determination issued by the Commission in unemployment benefit and Texas Pay Day Act claims.  There are some occasions, however, where an employer may consider foregoing these telephone conferences --even if it means losing the unemployment benefit claim.

Telephone hearings before hearing officers are conducted under oath and are recorded.  This constitute sworn testimony that will be binding on the parties in subequent proceedings.  Some attorneys representing employees use these telephone hearings to conduct discovery on potential discrimination, retaliation, harassment or wage and hour claims they may be thinking about filing.  If you appear for an administrative telephonic appeals hearing without your labor and employment counsel and the employee on the other side has a lawyer; think long and hard about whether you want to participate further in the proceeding without advice of counsel.  You might win the battle (i.e., the telephone hearing) but lose the war by having the testimony offered at the hearing used against the employer in a more significant lawsuit with more exposure.  Sometimes it may be better to just hang up and not oppose the unemployment benefit claim.

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In Part 1 of this two-part series, I examined the temporal, geographic and scope of activity restrictions for Texas physician noncompetition provisions.  Texas law provides another unique feature required only in agreements with doctors.  Noncompetes with physicians must include a provision that permits the doctor to buy-out of the noncompete for a reasonable amount. The buy-out can be determined at inception of the relationship by including an agreed liquidated buy-out amount or the parties can defer a determination of the buy-out amount and have an arbitrator determine the amount post-employment. What is a “reasonable amount” depends on the facts and circumstances but is normally an approximate value of lost profit the practice group would realize if the noncompete was not honored. Lost profits are determined by calculating the net income expected or actually made for the practice by the physician with appropriate adjustments for costs that would be incurred in earning that income. 

For liquidated (or agreed) buy-out amounts, an analysis should be done in arriving at the reasonable agreed amount. However, in practice, most employer groups and physicians merely choose arbitrary amount normally tied to a multiple of the physician’s annual income (e.g., a year or two of the physician's base salary).  This has little bearing on the actual value of the noncompete to the practice group. Moreover, the failure to conduct a buy-out valuation analysis prior to setting the liquidated buy-out amount may open the practice group up to allegations that it knew or should have known the buy-out amount was not reasonable and increases the likelihood the parties will have the arbitrate the amount of the buy-out. Moreover, this can also have an adverse effect on the practice group's ability to recover certain damages prior to a determination of a reasonable buy-out amount and may even allow the darting physician to recover his or her attorney’s fees.  Deferring a determination of the buy-out amount through arbitration at the end of the relationship can also result in the parties arbitrating the buy-out at a time when the relationship is most acrimonious (i.e., the end of employment).  For this reason, it is ideal to negotiate this amount at the beginning of the employment relationship.

The manner in which the buy-out amount is ascertained are all capable subjects to bargaining at the pre-agreement stage. For example, whether a  patient attrition rate will be used to lower the buy-out or will the lost profits be reduced by the amounts the practice group makes in mitigating its profits through the hiring or a replacement physician are a few examples of ways physicians can lower the buy-out amount. Minimizing the buy-out amount through negotiation increases the likelihood and feasibility that the physician can purchase his or her way out of the noncompete at the end of employment. Furthermore, decreasing the buy-out amount makes it more likely that a subsequent employer may pay some or all of the buy-out in order to be able to employ the physician from a competing practice group.

There is no end to the subjects of bargaining; however, the bargaining positions of the parties may not be comparable. Before entering into a noncompetition agreement that will restrict the right to practice medicine, the physician should retain experienced labor and employment counsel to advise and assist in minimizing the effects of the noncompete and buy-out clause.

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I’ve written before about the unique requirements that must be included in a noncompetition agreement with a Texas physician. The increasing likelihood that a Texas court will enforce a noncompetition agreement against any departing employee increases the importance that physicians and practice groups take great care in negotiating and drafting agreements with proper limitations as to time, geographic, scope limitations that are reasonable.  While no blog post is an adequate substitute for capable legal representation, this two part series is intended to outline some of the relevant issues that Texas practice groups and the physicians employ should consider before they sign an agreement restricting the doctor’s post-employment practice. 

The Texas statute requires that physician noncompetition provisions be reasonably limited in time, geographic scope and scope of activity to be restrained that are legitimate and necessary to protect the employer’s legitimate business interests and goodwill. Interests typically worthy of protection in medical practices usually include the employer’s confidential information, goodwill and referral sources. 

Determining the proper geographic scope of the restrictions can be done by looking as historical data from where the patients reside or the location where the referral sources are located (i.e., the doctors referring the patients to the practice group) that represent a significant amount of the practice group's revenue. Other options include whether the geographic scope is measured from the referring doctor’s office or the practice group where the physician signing the noncompetition agreement will practice. The importance of this designation will likely depend on whether the employer’s legitimate interests are in protecting its existing patient population or the referral sources from which it derives its new patients.

The proper temporal scope should be that amount of time it takes to recruit, hire and introduce to the referral community to the replacement physician. Some practice groups choose a year or two limitation while others choose the amount of time it took to recruit and hire the physician that is being hired and asked to sign a noncompete with some additional time added to account for the time it takes to introduce the new doctor to the medical community and referral sources. The more highly specialized practice (and conversely fewer number of qualified physician replacements) may justify a longer temporal scope of restriction. Conversely, practice areas that are less specialized or where there are an abundant number of replacement physicians eligible for hire, may only support a shorter noncompetition period.  

In the next post, I'll discuss the buy-out feature that Texas law requires to be included in every physician noncompete and that allows the physician to buy his or her way out of the noncompetition agreement.

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There has been significant coverage of the unfair labor practice charges that have been filed by employees who were terminated over their postings made on Facebook, Twitter and other social media applications.  (Examples here, here and here).  The NLRB actions in some of these cases have lead to the belief by some union agents and employee representatives that comments made by employees (whether working at union or nonunion shops) through social media have greater protection than comments made in person. 

Recently, the NLRB Office of General Counsel issued three advice memoranda clarifying what does and does not constitute protected concerted activity in the social media context.  This advice dispells the argument that comments made through social media gain any greater protection under labor law than comments made in person.  This guidance is important in that it makes clear that employers may discipline employees for their personal comments made in the social media world when:

• the comments are merely expressions of an individual's gripe or frustration with an individual in management rather than an attempt to initiate or induce coworkers to engage in group action.
• the comments are made to those who are not co-workers of the employee (and the employee wasn't Facebook friends with any co-workers).
• merely communicating with friends about happenings at work.

Whether an employee's comments, whether made through social media or in person, constitutes protected concerted activity is an incredibly fact-intensive analysis.  It may depend on whether the employee has any co-worker Facebook friends, Twitter followers or included in Google+ circles; what comments or feedback co-workers provide to the posts; whether posts are discussed with or seen by co-workers; and of course, the content of the communications themselves.  The General Counsel guidance provide useful parameters for determining whether the conduct is protected under federal labor law.

You can download a copy of the Advice Memorandum here, here and here.

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Verizon agreed to pay $20 million dollars and ceasing using its no-fault attendance policy for  absences caused by impairments qualifying as disabilities under the ADAAA.  Whatever the size of Verizon's Human Resources Department, it looks like its going to need to be a lot larger.

As part of the settlement with the EEOC, Verizon agreed that before it would charge ANY absence against an employee under its no-fault attendance policy, it would determine whether:

• the employee has a mental or physical impairment that substantially limits one or more major life activities of such individual as defined by the ADA;
• the employee's absence was caused by a disability;
• the employee, or someone else on the employee's behalf, requested a period of time off from work due to a disability;
• the employee's absence have been unreasonably unpredictable, repeated, frequent or chronic;
• the employee's absences are expected to be unreasonably unpredictable, repeated, frequent or chronic;
• Verizon could determine, from the request by or on behalf of the employee or through an interactive reasonable accommodation process, a definite or reasonably certain period of time off that the employee would need because of a disability; and
• the employee's need for time off from work poses a significant difficulty or expense for the business.

Let me say this again; Verizon agreed that it would investigate every single absence before it applies that absence against the employee under its attendance policy.  Don't believe me, here is the link to the consent decree entered in the case.  (Consent Decree).

So, if you are a Human Resources professional in transition or looking for a transition, consider applying at Verizon; its going to need the additional help.

Follow me on Twitter @RussellCawyer

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There's an old saying in rural America that "pigs get fat and hogs get slaughtered."  We used the phrase to describe someone who, instead of being satisfied with what he has, gets greedy.  In the litigation context it can be used to describe a party that takes overly aggressive, unreasonable and untenable positions.  My fellow bloggers, Work Blawg and Employment and Labor Insider posts last week about the EEOC's apparent position that attendance is not an essential job function (or not working as Work Blawg refers to it) makes me think the EEOC might be getting a little Hog-like in its attack on employer leave of absence and attendance policies.  The issues comes up in discussions of Verizon's record-setting $20 million settlement with the EEOC over its no-fault attendance policy.  As Robin Shea points describes the dispute that was settled:

The case was about charging absences under a no-fault attendance policy to employees who missed work because of medial conditions that were 'disabilities' within the meaning of the ADA.  It does not appear that medical leaves were at issue.  Exempting ADA conditions from no-fault attendance policies is a huge deal.

With the Verizon settlement, the EEOC is apparently signaling that it believes an employer commits a violation of the ADA when it charges an employee absence against a no-fault attendance policy when the absence results from a medical condition that qualifies as a disability.  Because the ADAAA now renders everyone disabled, the EEOC's position is troubling.  It suggests that the EEOC believes that attendance is not an essential function of most jobs. 

The problem with the EEOC's position (and where it crosses the line from being piggish to hoggish) is that the ADAAA made no changes to what is considered an essential job function or the well-settled standard that an employer need not eliminate essential job functions in providing reasonable accommodation.   Certainly, the ADAAA has given the EEOC ample reason to be aggressive in litigating issues on what constitutes a disability or is a substantial limitation on a major life activity.  However, the ADAAA made no changes to the statute regarding what constitutes reasonable accommodation or essential job functions.  Most courts have held that attendance is an implicit, essential job function of most employment.  Consequently, the EEOC's position that attendance is not an essential job function and employees cannot consider absences caused by "disabilities" under no fault attendance policies is puzzling.  If accepted by the Courts, the EEOC's position would require employer's to investigate each and every absence to determine whether the employee is disabled and whether absence was caused by a disability. 

Follow me on Twitter @RussellCawyer.

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Once the employer makes the decision to terminate the employment relationship with an employee, there is often (or should be) a discussion about when to have the meeting with employee to communicate the decision.  There are two primary schools of thought.  One thought is to communicate the decision at the end of the business day at the end of the workweek.  The rationale for communicating the decision at the end of the workweek is that it will have less of a disruption on the workforce by having an intervening weekend between the termination and the next time employees gather together for work.

Another school believes that the decision should be communicated to the employee at the beginning or middle of the workweek.  The thinking here is that the employee can use his or her time during the business week productively to file for unemployment benefits; begin looking for and applying for work;  contacting recruiters; and attempting to schedule interviews.  It may be in the employer's interest to have the employee use the time productively looking for work rather than sitting around obsessing over the termination decision over a weekend when they cannot apply for benefits or make progress in obtaining another job and instead may spend the time searching the yellow pages or Internet for a lawyer.  

I believe that, with few exceptions, the termination decision should be communicated as soon after the decision is made as is possible regardless of the time of the week.  Once the employer has gathered all of the information it believes is necessary to make its informed decision to terminate, advising the employee as soon as possible reduces the likelihood that intervening acts occur that might give the employee grounds to challenge the decision.  For example, some employees who are under investigation for workplace misconduct may a charge of discrimination under the belief that the employee will not terminate the relationship shortly after the filing of a  "blocking" charge.  Similarly, employees that believe their job is on the line may have a suspicious workplace injury. 

As I said above, there are exceptions to any rule regarding when to communicate a termination decision.  Employers should avoid communicating termination decision on significant dates like birthdays, anniversaries or immediately before holidays.  A termination decision is difficult enough for the affected employee and if additional anguish can be avoided by waiting a day or two before communicating the decision, the employer should try and do so.

Follow me on Twitter @RussellCawyer.

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The U.S. Supreme Court will decide next term whether it is law enforcement's warrantless placement of GPS devices on a suspect's vehicle amounts to an unlawful search or seizure in violation of the Fourth Amendment.  The Fifth Circuit has already authorized law enforcement's use of this warrantless tactic.  Similarly, a New Jersey court has blessed a spouse's use of GPS tracking technology to gather evidence of her partner's infidelity in preparations for a divorce proceeding. 

One of the most frustrating human resources issues to manage is proving the case against an employee who is suspected of abusing intermittent FMLA. I'm not referring to the intermittent use of FMLA that is scheduled or reasonably anticipated.  I'm talking about the unscheduled, unanticipated use of intermittent FMLA where the employee calls in shortly before the start of his scheduled shift (normally right before or after a weekend) to report an absence that is due to a serious health condition.  This can occur frequently with certain respiratory conditions or migraine headaches.  How can an employer confirm that the employee is really absent on these occasions for the serious health condition and not because the employee stayed up too late the night before?

The recent cases highlighting law enforcement's use of GPS tracking technology (without a warrant) to track persons of interest made me start wondering about the legality of an employer's use surrepticious use of GPS tracking technology on an employee who is suspected of intermittent FMLA abuse.  A search of the reported cases did not uncover any cases where an employer use GPS technology to prove an employee fraudulent use of FMLA leave.  However, there are several reported cases where employers have used private investigators to follow employees to prove a case of FMLA abuse.   Is the placement of tracking technology much different than that so long as the potential tracking is disclosed to the employee in either handbooks or other notices?  Would it make a difference if the GPS device is first placed on the employee's vehicle when it is on public streets or even the employer's parking lot?  Would an employer have more latitude to track the employee if the employee is using an company-owned vehicle?  Could an employer subpoena the GPS data file, in the defense of an FMLA case, from the employee's Onstar system installed in the employee's car?  All of these questions are interesting and I confess I don't readily know how a court would rule on these issues.

The legality of this conduct likely depends on the state where the tracking occurs (different states have different levels of privacy protection and some states --not Texas --have private causes of action for constitutional violations).  The circumstances under which the GPS tracker was placed (i.e., was the employer able to place the device on a vehicle when it was on public or employer-owned property or on the employee's property) and ownership of the vehicle (i.e,. company or employee owned) are also likely key questions.  Employer disclosure of the practice, in either handbooks, policies or elsewhere, could also be important and perhaps determinative.  Certainly, this practice is fraught with interesting potential legal issues.  

If you have had any experiences where an employer used Onstar or GPS tracking technology to prove an employee's abuse of FMLA leave, I'd like to hear about it in the comments.

Follow me on Twitter @RussellCawyer.

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Texas employees are ineligible for unemployment benefits if the are terminated from employment for "misconduct connected with the work."  Misconduct connected with the work includes "mismanagement of a position of employment by action or inaction, neglect that jeopardizes the life or property of another, intentional wrongdoing or malfeasance, intentional violation of a law, or violation of a policy or rule adopted to ensure the orderly work and the safety of employees."  

A frequently litigated issues is whether termination due to excessive absences or tardiness constitutes misconduct connected with the work.  In the recent opinion of Murray v. Texas Workforce Commission, the Dallas Court of Appeals confirms that termination due to violations of employer's written attendance or tardiness policy constitutes misconduct connected with the work rendering the employee ineligible for unemployment benefits.

This is a useful case for employers to cite to hearing officers and examiners in unemployment compensation hearings when the employee has been terminated pursuant to a written time and attendance policy.  Timely and successful challengers to claims for unemployment compensation is one way an employer can keep its unemployment tax in check.  (See post, post).

 You can download the full opinion of Murray v. Texas Workforce Commission here.

Follow me on Twitter @RussellCawyer. 

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The Fifth Circuit issued an important opinion on an issue (i.e., judicial estoppel) that arises frequently when litigating employment disputes.  The issue is whether an innocent bankruptcy trustee is judicially estopped from collecting assets, on behalf of the creditors, that were not disclosed by the debtor in his bankruptcy filings.  The court of appeals held that, like the debtor, the innocent trustee and creditors were also judicially estopped from recovery by the debtor's misconduct. 

The appeal arose from a $1 million-plus judgment an Arlington firefighter obtained against the City  on a claim arising under the Family Medical Leave Act (FMLA).  The Fifth Circuit Court of Appeals affirmed the jury's verdict but remanded the case for a recalculation of damages.  You can read the opinion from the original appeal here.  During the appeal of the judgment, the firefighter filed a Chapter 7 bankruptcy petition seeking a discharge of $300,000 in debt.  Importantly, the firefighter failed to disclose million dollar judgment from his bankruptcy filings and schedules leading the creditors, the trustee and the bankruptcy court to believe it was "no asset" case.  The firefighter obtained a discharge of the debt.

When the City learned of the bankruptcy filing, it requested the court of appeals apply the doctrine of judicial estoppel to prevent the debtor-firefighter from collecting on the judgment.  The Fifth Circuit remanded the case to the trial court for a determination of whether judicial estoppel applied.  After several evidential hearings, the trial court concluded that the elements of judicial estoppel had been met.  However, because the doctrine of judicial estoppel is an equitable doctrine, the court concluded that it would be inequitable to penalize the trustee and the innocent creditors because of the firefighter's misconduct.  The trial court then fashioned a remedy that permitted the creditors to recover the amounts owed to them, but denied any recovery to the firefighter and ordered that any sums due pursuant to the judgment against the City over and above the debts owed the creditors reverted to the City --not the firefighter. 

The City appealed arguing that the trustee should also be judicially estopped recovering on the undisclosed judgment. The question raised by the appeal is whether the doctrine of judicial estoppel prevents not only the debtor who fails to disclose assets on his bankruptcy schedules, but also the innocent trustee and creditors.  The court held that, to protect the integrity of the judicial process, judicial estoppel bars both the debtor and the trustee from recovering on the assets that were not disclosed.  

You can access a full copy of Reed v. City of Arlington here.  Congratulations to my partner, Mike McConnell, who represented the City of Arlington.

UPDATE:  On August 11, 2011, an en banc panel of the Fifth Circuit reversed the panel's decision and held that judicial estoppel does not bar a blameless bankruptcy for pursuing a judgment that the debtor concealed during the bankruptcy and that the debtor is barred from pursuing.  You can read a copy of the opinion here.

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Let the Festivities Begin.

It’s that time again. The leaves are changing; there is crispness in the air and it’s time to start planning the company’s annual end of year or holiday party. While these events are wonderful opportunities for employees and their families to get together to celebrate the season, they can have unanticipated legal implications and bring with them the potential opportunity to create employer legal liability. 

Not only can the fun and festivities of a company Christmas party lead to employer liability resulting from alcohol related accidents or injuries, but the relaxed environment and the introduction of alcohol can also lead to allegations of sexual harassment. The following ideas are a few suggestions an employer should consider in planning and carrying out a company-sponsored event.

Don’t Require Attendance And Don’t Take Roll.

There are several reasons why an employer does not want to mandate that its employees attend the company party as a condition of employment. For example, if the company sponsors an annual Christmas party, there may be some employees who subscribe to religious faiths that do not celebrate or recognize Christmas. Mandating employees attend these parties, or disciplining employees because they do not attend, could result in charges of religious discrimination. For this reason, many companies have elected to use secular names for their seasonal parties such as “Holiday” or “Winter” party.

Another reason to avoid mandating attendance at the company party is to minimize the possibility of accidents or injuries to employee-guests occurring at the event being compensable injuries and covered by workers’ compensation.

Discourage Overindulgence of Alcohol.

One of the most effective ways of avoiding many of the adverse issues that arise from company sponsored events is to avoid serving alcohol. However, if a company is going to supply or permit the use of alcohol at a company event, it should plan effectively so that alcohol is used responsibly. 

Through pre-party meetings or memos, employees can and should be subtly reminded that, while occurring outside of working hours, the party is still a company-sponsored event and to avoid excessive alcohol consumption (i.e., drink in moderation). Employees should also be reminded that while certain workplace conduct policies may be relaxed during this nonworking time, the policies directed at prohibiting harassment (sexual and otherwise) continue to apply at all company-sponsored events. 

Unfortunately, some employees incorrectly believe that the company party is the time and the place to let it all hang out and that there will be no consequences for their conduct occurring outside of regular working hours. Unlike Las Vegas, things that are said and done at the company party don’t necessarily stay there and may have to be investigated by Human Resources after the event. Employees must understand that there can be consequences for their behavior –even at the company holiday party.

Pay To Play Or Distribute Drink Tickets.

Two ways to reduce the alcohol consumption at the company party include offering a cash bar or distributing a limited number of drink tickets to each guest. Many companies have elected to use cash rather than open bars at company-sponsored events. Frequently, when guests have to purchase their own drinks, they tend to consume fewer drinks. If an employer is going to have an open bar at its expense, another alternative is to distribute drink tickets that can be redeemed for a beverage of choice. While there is always the possibility of a guest collecting unused drink tickets from teetotaling guests, drink tickets can help limit or reduce the amount of alcohol consumed by guest employees.

Invite Spouses.

It is important when determining who will be invited to attend the company's annual holiday party to consider including spouses.  Many sexual harassment claims arising out of the company's sponsored events would likely be avoided if employee-spouses were invited and attended.  I analogize inviting spouses to annual holiday party in a similar way to this, "Would you jay walk if a policeman were standing on the corner to observe you?"  Probably not, and for the same reasons, spouses served as the policeman on the corner for some bad behavior that might occur in their absence.  Conversely, including spouses can sometimes create conflict such as when an employee perceives that his or her spouse's honor has been disrespected.  This typically involves an overindulgence of alcohol making use of drink ticket or other limitations on alcohol important.

Location, Location, Location/Hire A Caterer To Operate The Bar.

Another consideration should be the location of the event. It is often appropriate to schedule the event away from the office at an offsite location. This helps protect the employer’s property and assets. It can also be particularly important in preventing unauthorized access to confidential or trade secret information in the workplace or access to hazardous or dangerous equipment that may be used in the employer’s business. 

Employers can also employ the use of a coat check system where guests can check their coats and other personal articles. Guests should also be encouraged to leave their automobile keys with the coat check. Prior to leaving, guests can be individually observed to ascertain their ability to drive home when retrieving their coats and keys. Another alternative is to use a complementary valet system. Most guests will use the valet service. The employer (or its third party valet service) will then have possession of the guests’ keys and can evaluate each guest at the end of the party before returning the car keys. In either situation, it is important to have a responsible person that is trained in identifying the signs of intoxication. Off duty, plain-clothed law enforcement officers can usually be employed for this task.

Finally, hire a caterer or other third party to operate the bar. Ensure that the caterer is instructed verbally (and even better yet in writing) that they are not to serve any guest that appears to be intoxicated and the employer should designate a representative whom the caterer should notify in the event a guest may have overindulged.

Offer Plenty of Food and Non-Alcoholic Beverages.

Be sure that as a part of the event the company offers a variety of food and that it stays well-stocked so that employees can eat plenty with their cocktails. While everyone loves salty, greasy and sweet foods, those kinds of foods make guests feel thirsty and can have the effect of increasing alcohol consumption. Try to include foods that are high in starch and protein which stay in the stomach longer and slow the absorption of alcohol into the bloodstream.

Last Call and No Roadies.

Close the bar long before the party is expected to conclude. After the bar has closed, continue to serve food and other non-alcoholic beverages. This will give guests an opportunity to let some of the effects of any alcohol they may have consumed subside and may give the employer additional time to identify guests who need additional assistance getting home.

Arrange alternative transportation.

Despite your best efforts, there may be an employee who needs assistance in getting home. Anticipate this need and make arrangements for some alternative means of transportation such as a taxi or car service. Encourage all employees to make use of this service if they consume any alcohol.

If the event is being held at a hotel, negotiate discounted room rates when booking the event. Some employees might prefer to stay the night after the party rather than travel home. If this is negotiated in advance, it can be advertised to employees with the holiday invitations and they can better plan their evening activities.

Investigate Complaints.

Occasionally, a company sponsored event like a holiday party may spawn an employee complaint such as an unwelcome sexual advance. Some employers incorrectly believe that because the conduct complained of occurred during non-working hours or away from work that such conduct need not be investigated. This can be an expensive mistake. Prudent employers investigate all complaints that they receive from their employees having any nexus to the workplace. Complaints about conduct occurring at the annual party should be investigated like any other complaints as the conduct may affect an employee’s working relationship with co-workers.

Company parties are intended to be fun, rewarding occasions for co-workers and their families to share time away from the stresses of the workplace. With careful planning an employer can maximize the opportunity for fun and celebration and minimize the chances that the event becomes something the company might prefer to forget.

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In a recent opinion of the Dallas Court of Appeals, the Court held that an insurance brokerage and consulting service firm’s noncompetition and nonsolicitation agreement obtained in return for an award of stock options to an employee was unenforceable under Texas law. (See opinion here).

Rex Cook was a long-term employee of Marsh USA, Inc. Prior to leaving his employment, Cook was a managing director. Cook was granted stock options in 1996 under Marsh’s Employee Incentive and Stock Option Award Plan. Before he exercised his options, Cook was required to sign a non-solicitation agreement that included a two-year covenant not to compete. In 2005 Cook exercised his options and in 2007 he left the company. Thereafter, he began employment with a competitor. Marsh sued the competitor and Cook. Cook asked the court to render judgment in his favor on the enforceability of the noncompete and the trial court held the agreement was unenforceable under Texas law. Marsh appealed that finding. 

On appeal, the Court explained that:

a covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made and it contains reasonable limitations that do not impose a greater restraint than necessary to protect the goodwill or other business interest of the promisee. [citations omitted]. To be ancillary to or part of an otherwise enforceable agreement, a covenant not to compete must meet the following two conditions: (1) the consideration given by the employer in the otherwise enforceable agreement must give rise to the employer's interest in restraining the employee from competing; and (2) the covenant must be designed to enforce the employee's consideration or return promise in the otherwise enforceable agreement.

The Court then turned to whether the award of stock options to an employee “gives rise” to any interest worthy of protection for the employer. The employer argued that it uses stock option awards with its employees as a way to retain valuable employees; thereby protecting its goodwill (i.e., the relationship between the customer, employee and brokerage firm). The Court accepted the proposition that retaining valuable employees benefits a company’s good will but rejected the conclusion that such benefit gave rise to any interest in preventing the employee from competing. Furthermore, the Court reiterated that “financial benefits . . . do not give rise to an interest worthy of protection.”

As a result, the Court of Appeals affirmed the trial court’s grant of summary judgment to the employee that held that the noncompetition and nonsolicitation agreements obtained in return for an award of stock options was unenforceable. Marsh filed a petition for review with the Texas Supreme Court.

The take away from this case is that while covenants not to compete have become easier to enforce in Texas, the consideration that is given to the employee in return for the promise not to compete must give rise to some interest worthy of protection.  Money or other financial remuneration alone is unlikely to be sufficient.  Most frequently, valuable consideration to support a covenant not to compete will be in the form of a company's promise to provide its confidential information and trade secrets to the employee and the employee’s return promise not to use or disclose that information.  In that scenario, the promise to disclose the confidential or trade secret information (and the actual disclosure of that information) to the employee necessarily gives rise to an employer's interest in the noncompetition provisions.  

UPDATE:  On June 24, 2011, the Texas Supreme Court reversed the Dallas Court of Appeals and held that a covenant not to compete based on stock options given to a key employee to increase the company's goodwill were not per se unenforcable.  You can read more about the reversal and Supreme Court's new opinion here and here.

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