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

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.

Follow me on Twitter @RussellCawyer.

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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.

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.

Follow me on Twitter @RussellCawyer.

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The Supreme Court of Texas has agreed to hear the case of In re Frank Kent Motor Co. d/b/a Frank Kent Cadillac, No. 10-0687.  In that case, the Fort Worth Court of Appeals denied the employer's application for writ of mandamus and refused to overrule the trial court's decision not to enforce/honor an agreement between the employer and employee to resolve all disputes in with a trial sitting without a jury (i.e., a bench trial). 

I've advocated the use of jury waivers by Texas employers because I think they can provide many of the advantages of arbitration at less cost (see posts here and here).  However, the thing I found most interesting about this case is that it involved the same agreement that only six months after the Fort Worth Appellate Court order effectively denying enforcement, the Fort Worth Appeals Court enforced by way of mandamus.  See post here.  The only meaningful differences in the two cases are the identity of the plaintiff-employee and the members of the Court that decided the two cases.  Two of the three Fort Worth Justices participated in both cases.  Justice Meiers, however, wrote the opinion conditionally granting mandamus relief and thereby effectively enforcing the agreement.  He was not on the panel that denied the application for mandamus in the case accepted by the Supreme Court.  Oral argument at the Supreme Court will be scheduled in Austin later this year and an opinion expected in the next 12 months. 

If you are a Texas employer and want to learn more about effective use of jury waiver, feel free to drop me an e-mail.

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I have written some of the disadvantages of arbitration over other procedural methods of resolving cases such as waivers of jury trial.  (See post and post).  However, in an opinion from the Supreme Court of Texas, one disadvantage of arbitration (i.e., the limited appellate review of arbitration awards that is available) can be minimized where the parties draft their agreement to apply the Texas General Arbitration Act (TAA) rather than the Federal Arbitration Act (FAA).

In Nafta Traders, Inc. v. Quinn, an arbitrator found for the plaintiff in a sex discrimination case.  The arbitration agreement contained a provision limiting the arbitrator's authority such that he lacked "authority (i) to render a decision which contains a reversible error of state or federal law, or (ii) to apply a cause of action or remedy not expressly provided for under existing state or federal law."

The employer sought to vacate the arbitration award claiming that the arbitrator exceeded his authority by rendering a decision containing reversible error.  The issue tackled by the Supreme Court of Texas was whether the TAA precludes an agreement for judicial review of an arbitration award for reversible error, and if not, whether the FAA preempts enforcement of such an agreement.  The Court held that parties may, pursuant to the TAA agree (subject to limits) to expanded judicial review of arbitration awards and that the FAA did not preempt such a conclusion.

Consequently, parties in Texas are free to agree that arbitration awards made subject to state law may be reviewed on a more expanded basis than awards rendered under the FAA.  However, the scope of that expanded judicial review is not without limits.  As the Court stated:

arbitration parties cannot agree to a different standard of judicial review than the court would employ in a judicial proceeding involving the same subject matter.  '[A]n arbitration agreement providing that a 'judge would the award by flipping a coin or studying the entrails of a deal fowl' would be enforceable.'

Moreover, to have a meaning judicial review the Court cautioned parties that they will need to be able to submit "a sufficient record of the arbitral proceedings, and complaints must have been preserved, all as if the award were a court judgment on appeal."  Consequently, some of the perceived advantages of arbitration (i.e., reduced cost, less formal etc.) will have to give way to parties that want to preserve a right to expanded judicial review because proper objections will have to be preserved and a transcript of the proceeding made.  In any event, employers who use arbitration as a form of alternative dispute resolution made consider making those agreements subject to state law so that they can take advantage of opportunities for judicial review.  Employers should keep in mind that, unlike the FAA, the TGAA requires that agreements to arbitrate personal injury (and like tort claims) be made only after the cause of action has accrued thereby excluding some claims from arbitration that would be covered by the FAA. 

You can access a copy of the concurring opinion here.

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Don Cruse at The Supreme Court of Texas Blog reports that the Court has agreed to determine whether a plaintiff making a Sabine Pilot claim (i.e., alleging that he or she was terminated solely for refusing to perform an illegal act) can recover exemplary damages.

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The Supreme Court of Texas has agreed to hear argument in two employment cases. 

In Prairie View A&M University v. Diljit K. Chatha, (No. 10-353) the Court agreed to consider whether the 180-day statute of limitations for a government employee’s complaint about discriminatory pay begins from the date of the first paycheck reflecting the decision or the (earlier) date on which the employee was informed of the decision.

In El Apple I, Ltd. v. Myriam Olivas, (No. 10-0490), the Court will consider the appropriate manner of calculating attorney's fees of a prevailing party in a discrimination case.   

H/T to the Supreme Court of Texas Blog.

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Don Cruse at the Supreme Court of Texas Blog, wrote about the first case of the new term on which the Supreme Court of Texas requested full briefing --Hatton v. D.R. Horton, Inc.  that case involves an issue of significant importance to Texas employers.  According to Don, this case

concerns the enforceability of arbitration clauses in employee handbooks. In this case, the employer is alleged to have disclaimed any attempt to bind itself by the handbook, and stated that it reserved the right to change those terms unilaterally and without prior notice.

This is an issue that frequently comes up in Texas.  Employers occasionally include provisions in employee handbooks that purport to constitute binding agreements the employer may want to enforce.  Frequent examples include noncompetition and arbitration agreements.  The problem arises when the handbook also contains an express disclaimer provision stating that nothing the handbook constitutes a contract or other agreement and the employer reserves the right to amend the policies at any time.  Where the noncompetition or arbitration provisions of the handbook are not exempted from the disclaimer provisions, a party wanting to avoid the effect of those provisions, argues that no binding contract was created because the employer reserved the right to alter or amend the policy at any time.  Several Texas courts have refused to enforce arbitration agreements contained in employee handbooks because of the existence of broad disclaimer language.  The fact that the Court has requested full briefing does not mean that the Court will accept the case.   

In the meantime, employers and their counsel, should review their employee handbooks to ensure that broad disclaimers do not undermine important contractual agreements contained elsewhere in the employee handbooks that the employer intends to create and enforce.  You can follow the status of Hatton v. D.R. Horton, Inc. here.

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

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

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

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

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

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

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

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

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

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

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

You can download the majority opinion and dissent here. 

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

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

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

You can access the full opinion here.

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Last summer, I detailed the Dallas Court of Appeals' decision in Marsh USA, Inc. v. Cook where the court held a noncompetition agreement supported only by stock-options as consideration was unenforceable.  You can read that post here. Today, the Supreme Court of Texas announced that it would hear the appeal from the Dallas Court of Appeals.  You can view the order list here.  

Review of the Cook case gives the Court an opportunity to extend (or break) its streak of easing the standards for enforcement of restrictive covenants in Texas that I have previously detailed.  (Post here).

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The Texas Supreme Court held that unilateral contracts can be formed with at-will employees when employers make promises to employees and those employees perform based on that promise.  In Vanegas v. American Energy Services, Inc. the Supreme Court was asked to decide the enforceability of an employer's alleged promise to pay five percent of the proceeds of a sale or merger of the company to employees who were still employed at the time of the merger.  The alleged promise arose in the context of a period when the company was performing poorly and the employees were complaining about working long hours with antiquated equipment. 

According to the Court's opinion, a vice-president of the company, in an effort to encourage employees to stay with the company, promised those original employees (of whom there were eight) that if they stayed with the company, they would be paid five percent of the value of any sale or merger.  When the company was sold, the seven remaining employees demanded their share of the proceeds.  The company refused and the employees sued.

The company argued that because the employees were at-will, any promise to pay those proceeds to the employees was illusory and unenforceable because the employer could have avoided the promise by firing the employees at any time.  The employees argued that the promise represented a unilateral contract that, once performed, became a binding enforceable obligation on the part of the employer.

The Court agreed with the employees and held that where an employer makes a unilateral promise to an at-will employee and the employee performs, a binding contract is formed upon that performance.  

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Texas courts strongly favor the resolution of disputes through arbitration. When parties to a dispute have signed an agreement to arbitrate covered disputes, Texas courts will rarely disregard that agreement.   A recent per curiam opinion of the Supreme Court of Texas continues that trend by conditionally granting mandamus relief in a case alleging national origin discrimination and retaliation for reporting alleged sexual harassment. (Opinion available here).

In In re Polymerica, LLC, a plastics manufacturer hired Angelica Soltero in 1998. In 2002, Polymerica retained Dickason Staff Leasing Company to manage its human resources operations. Soltero signed a Dispute Resolution Plan with Dickason that required all disputes (including disputes over discrimination, wrongful termination and harassment) between Polymerica, Dickason and/or Soltero be submitted to a four-step dispute resolution process. The final stage in that process included mandatory, binding arbitration under the Federal Arbitration Act.

Thereafter, Polymerica distributed an employee handbook that purported to take “precedence over, supersede[], and revoke[] any previous memo, bulletin, policy or procedure issued prior to [the handbook effective date], by [the employer] on any subject discussed in the Handbook.” The handbook included a section on arbitration that discussed the existence of the Dickason Dispute Resolution Plan. At the end of 2005, Polymerica and Dickason terminated their relationship and Polymerica took the human resources functions in-house. Five days later Soltero’s employment was terminated.

Soltero challenged the arbitration agreement first by claiming that the 2003 handbook provisions nullified the Dispute Resolution Plan she signed with Dickason. The court rejected that argument stating that “the Handbook provision, however, does not cover contracts like the Plan’s arbitration agreement” and observing that if the handbook nullified the Plan, the Handbook’s discussion of the Plan’s arbitration procedures and other multiple references to the Plan would be rendered meaningless. The court also made quick work of Soltero’s second claim that the Plan was illusory because the Handbook reserved the right to be modified at any time. Because the Plan, according to its own termination procedures, could only be modified with notice to the employees, and even then, only modified prospectively, the Plan was not illusory.

And finally, the Court rejected Soltero’s argument that Polymerica could not avail itself of the arbitration procedures of the Plan because it was a nonsignatory to the Plan. The Court noted that it has never required that an employer be a signatory to an arbitration agreement before it may insist on arbitrating a dispute with its employee. Because the arbitration agreement was enforceable and the scope of Soltero’s claims fell within its scope, the Supreme Court conditionally granted the writ of mandamus and directed the trial court to stay the proceedings and compel arbitration of all of Soltero’s claims.

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

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

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

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

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

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

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