Beginning on September 1, 2023, the Texas Labor Code will prohibit race discrimination on the basis of an employee’s hair texture or a protective hairstyle commonly or historically associated with race.  Protected hairstyle includes braids, locks, and twists. Twenty states have pass similar laws commonly referred to as CROWN Acts.  CROWN is an acronym for Creating a Respectful and Open World for Natural Hair.

The Texas amendment makes it unlawful for an employer, labor union or employment agency to adopt or enforce a dress or grooming policy that discriminates against a hair texture or protective hairstyle commonly or historically associated with race.  Texas employers should review their dress, appearance and grooming codes to ensure they are in line with the new Texas prohibition.

A copy of the new law is accessible here.

A recent decision of the National Labor Relations Board (the “Board”) concluded that standard nondisparagement and confidentiality provisions found in many employee severance agreements violate federal labor law because they have a reasonable tendency to interfere with and restrain employees’ prospective rights to engage in protected concerted activity, bargain collectively and form unions for their mutual aid and protection.

McLaren MacComb (the “Hospital”) operates Methodist hospital; a 2,300 employee facility, located in Michigan.  Approximately 350 of the Hospital’s service employees are represented by a union.  In June 2020, after the start of the COVID-19 pandemic, the Hospital furloughed eleven employees who were members of the union.  The Hospital did not notify the union in advance of the furloughs nor did it bargain with the union over the effects of the layoffs.

Each of the furloughed employees was provided with a severance agreement providing a broad release of claims in return for severance payments.  The Hospital did not provide the union with advance notice of the severance terms nor bargain with the union prior to entering individual agreements with the represented workers.  The severance agreements contained confidentiality and nondisparagement provisions.  These provisions were challenged by the Board’s General Counsel as having a chilling effect on an employee’s Section 7 rights (i.e., the right to form and join unions, collectively bargain and engaged in protected concerted activity) and arguing that the mere proffer of the agreements with these overly broad provisions constituted an unfair labor practice.

The challenged provisions stated:

  1. Confidentiality Agreement. The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.
  2. Non-Disclosure. At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.

The severance agreement provided for monetary and injunctive sanctions in the event of breach of these provisions.

The General Counsel challenged these provisions of the agreement arguing that they unlawfully restrained and coerced the furloughed employees in the exercise of their Section 7 rights.  The Board agreed.

With respect to the nondisparagement provision, the Board observed that:

Public statements by employees about the workplace are central to the exercise of employee rights under the Act. Yet the broad provision at issue here prohibits the employee from making any “statements to [the] Employer’s employees or to the general public which could disparage or harm the image of [the] Employer”—including, it would seem, any statement asserting that the Respondent had violated the Act (as by, for example, proffering a settlement agreement with unlawful provisions). This far reaching proscription—which is not even limited to matters regarding past employment with the Respondent—provides no definition of disparagement  . . . .

Instead, the comprehensive ban would encompass employee conduct regarding any labor issue, dispute, or term and condition of employment of the Respondent. As we explained above, however, employee critique of employer policy pursuant to the clear right under the Act to publicize labor disputes is subject only to the requirement that employees’ communications not be so “disloyal, reckless or maliciously untrue as to lose the Act’s protection.” Further, the ban expansively applies to statements not only toward the Respondent but also to “its parents and affiliated entities and their officers, directors, employees, agents and representatives.” The provision further has no temporal limitation but applies “[a]t all times hereafter.”

The end result is a sweepingly broad bar that has a clear chilling tendency on the exercise of Section 7 rights by the subject employee. This chilling tendency extends to efforts to assist fellow employees, which would include future cooperation with the Board’s investigation and litigation of unfair labor practices with regard to any matter arising under the NLRA at any time in the future, for fear of violating the severance agreement’s general proscription against disparagement and incurring its very significant sanctions. The same chilling tendency would extend to efforts by furloughed employees to raise or assist complaints about the Respondent with their former. . .  coworkers, the Union, the Board, any other government agency, the media, or almost anyone else. In sum, it places a broad restriction on employee protected Section 7 conduct. We accordingly find that the proffer of the nondisparagement provision violates Section 8(a)(1) of the Act.

And regarding the confidentiality provision, the Board stated:

The [confidentiality] provision broadly prohibits the subject employee from disclosing the terms of the agreement “to any third person.” The employee is thus precluded from disclosing even the existence of an unlawful provision contained in the agreement. This proscription would reasonably tend to coerce the employee from filing an unfair labor practice charge or assisting a Board investigation into the Respondent’s use of the severance agreement, including the nondisparagement provision. Such a broad surrender of Section 7 rights contravenes established public policy that all persons with knowledge of unfair labor practices should be free from coercion in cooperating with the Board. The confidentiality provision has an impermissible chilling tendency on the Section 7 rights of all employees because it bars the subject employee from providing information to the Board concerning the Respondent’s unlawful interference with other employees’ statutory rights.

The confidentiality provision would also prohibit the subject employee from discussing the terms of the severance agreement with his former coworkers who could find themselves in a similar predicament facing the decision whether to accept a severance agreement. In this manner, the confidentiality provision impairs the rights of the subject employee’s former coworkers to call upon him for support in comparable circumstances. Additionally encompassed by the confidentiality provision is discussion with the Union concerning the terms of the agreement, or such discussion with a union representing employees where the subject employee may gain subsequent employment, or alternatively seek to participate in organizing, or discussion with future co-workers. A severance agreement is unlawful if it precludes an employee from assisting coworkers with workplace issues concerning their employer, and from communicating with others, including a union, and the Board, about his employment. Id. Conditioning the benefits under a severance agreement on the forfeiture of statutory rights plainly has a reasonable tendency to interfere with, restrain, or coerce the exercise of those rights. unless it is narrowly tailored to respect the range of those rights. Our review of the agreement here plainly shows that not to be the case. We accordingly find that the proffer of the confidentiality provision violates Section 8(a)(1) of the Act.

That the Board found the mere proffer of an agreement with these provisions in it to be unlawful should be concerning to employers.  These provisions are routine and standard in many severance agreements offered to employees being laid off by companies.  Employers should consult their labor and employment counsel and review their standard severance forms to determine whether their provision might inadvertently commit an unfair labor practice and whether these provisions add value to the severance arrangements.

The NLRB’s McLaren decision can be accessed here.

 

Employees bringing claims under Title VII of the Civil Rights Act, the Age Discrimination in Employment Act and the Americans with Disabilities Act must exhaust their administrative remedies with the EEOC prior to filing suit against an employer.  These administrative remedies include timely filing charge of discrimination, obtaining a right to sue letter and timely filing the lawsuit within 90 days after the receipt of the right to sue letter.  There are two general exceptions to the rule that suits after to be filed within 90 days of receipt of the right to sue letter –equitable estoppel and equitable tolling.  Equitable estoppel addresses misconduct of the employer/respondent that results in the employee missing his procedural deadlines.  Equitable tolling involves tolling caused by the EEOC misleading the employee on the nature of his rights.  This case involved equitable tolling where the plaintiff files an untimely lawsuit because the plaintiff is misled by the EEOC about this filing deadlines.

In Berstein v. Maximus Federal Services, Inc., Kevin Berstein was fired after he was accused of sexual harassment.  Berstein filed a charge of discrimination with the EEOC alleging that he was sexually harassed by two female co-workers and then terminated in retaliation after he reported the harassment to management.  The EEOC closed its investigation and sent its and notice of right to sue letter to the employee’s attorney. Because the Commission did not have the employee’s correct address, the employee did not receive the initial right to sue letter.  Thereafter, and within the 90 days to initiate a lawsuit, the EEOC sent a second right to sue letter to the employee and his attorney.  The second right to sue letter inaccurately stated that the employee had 90 days from the second letter to initiate a lawsuit.  The employee filed his lawsuit within 90 days of the second notice.

The employer moved to dismiss the case arguing that since the plaintiff had not filed suit within 90 days of the initial right to sue notice, the claim was barred.  The district court agreed stating that this was not an exceptional case where equitable tolling was appropriate and that Berstein’s counsel’s receipt of the initial right to sue letter was sufficient to commence the filing deadline for the lawsuit.

On appeal, the court of appeals agreed that there was no dispute that the employee’s attorney’s presumptive receipt of the initial right to sue letter commenced the 90-day limitations period for filing suit even though it was never received by the employee.  Berstein argued, however, that the deadline for filing suit should be equitable tolled because the EEOC’s second right to sue letter mislead him about the nature of his rights as to when he had to file his lawsuit.  Noting its past precedent in a two-letter filing case, the Fifth Circuit stated that where the EEOC makes an affirmatively incorrect statement about the nature of plaintiff’s, equitable tolling might be available.  Because the district court failed to address or distinguish this past precedent or explain why equitable tolling did not apply in this case, the Fifth Circuit reversed and remanded the case for further consideration as to whether the EEOC’s second notice of right to sue that said the employee had to file suit within 90 days of that letter mislead the plaintiff about his filing deadlines.

You can download the case here.

A recent United States Supreme Court decision provided two reminders for employers utilizing a day-rate compensation scheme. First, employers must pay their day-rate employees overtime or risk potential liability under the FLSA. Second, employers cannot shield themselves from FLSA overtime liability by directing the Court to only their annualized compensation of employees or their job duties. If a highly compensated supervisory employee’s salary is computed solely by multiplying the number of days worked and the employee’s daily rate, that supervisory employee is nonexempt and subject to the FLSA’s protections. So, how did we get here and what does that
mean for employers who pay their employees on a purely day rate basis?

In Helix Energy Solutions Group, Inc. v. Hewitt, Michael Hewitt, a former supervisory employee of Helix, brought a lawsuit against Helix in the Southern District of Texas seeking overtime pay under the FLSA. Helix denied that Hewitt was entitled to overtime pay, relying on Hewitt’s supervisory duties and annualized compensation exceeding $200,000 as proof that Hewitt qualified as a “highly compensated employee” and was therefore exempted from the FLSA overtime requirements as a bona fide executive.

The Court rejected Helix’s argument, however, and looked squarely at the method of compensation Helix used to pay Hewitt to determine that he was, in fact, entitled to overtime pay. An employee is considered a bona fide exempt executive if the employee: (1) received a predetermined and fixed salary that does not vary based upon the hours the employee actually worked; (2) receives a weekly salary that exceeds a set amount, presently $684 a week; and (3) performs certain job duties consistent with that of an executive. If only two of these three factors are met, but the third is not (for example, if an employee is paid a day rate that equals at least $684 a week and the employee performs supervisory duties but the amount paid is not predetermined and fixed), the employee is still entitled to overtime pay.

The Supreme Court’s holding means that even those employees who are “highly compensated” may still be entitled to overtime pay if the employee’s paycheck is based solely on a daily pay rate. Employers should therefore: (1) pay overtime to day rate employees for any hours worked over 40 in a week; or (2) have a weekly minimum salary guarantee for day rate employees that is above the minimum salary threshold (to then pay on a day-rate basis with a minimum salary guarantee, a reasonable relationship must exist between the guaranteed amount and the amount actually earned).

Helix Energy Solutions Group v. Hewitt

In a significant case involving an employer’s obligation to transfer a disabled employee, who cannot perform the essential functions of the employee’s current position, to an open, vacant position, the Fifth Circuit Court of Appeals held that an employer’s policy of hiring the most qualified candidate to fill vacant positions need not be ignored by placing a less qualified, disabled employee meeting the minimum qualifications for that position in that position absent special circumstances.  Stated another way, an employer is not ordinarily required to provide a competition-free transfer to a vacant position as a reasonable accommodation to a qualified individual with disability.

The court remanded the case to the district court for further consideration to determine if the EEOC can raise a genuine issue of material fact that there are special circumstances in this particular case, justifying an exception to the most-qualified applicant policy such that the exception constitutes a reasonable accommodation. Thus, while a claim that a failure to provide a competition-free transfer or reassignment to an open position as a reasonable accommodation is not foreclosed as a matter of law, this case puts the employee to the burden of showing that hers is an extraordinary case and that special circumstances exist that warrant making an exception to the most-qualified applicant hiring policy.

You can download EEOC v. Methodist Hospitals of Dallas here.

 

 

The results of three pending cases could greatly increase the amount of employment-related litigation Texas employers may face in 2023 and beyond.  In Groff v. DeJoy, Postmaster General of the United States Postal Service, the U.S. Supreme Court is considering what the lengths to which an employer must go to accommodate an employee’s sincerely held religious beliefs.  The Court has long applied a lower accommodation obligation for religious beliefs than it requires for disability accommodations.  Under existing law, the Hardison test, any religious accommodation that requires more than de minimis cost is considered an undue hardship.  And, accommodations that burden co-workers but not the business itself, are also considered an undue hardship that need not be provided by the employer.  If Groff prevails in the appeal, employers will be burdened with substantially more requests for religious accommodation and may have to engage in similar interactive processes and accommodation obligations as is required under the Americans with Disabilities Act.

In Hamilton v. Dallas County, No. 21-10133 (5th Cir. Aug. 3, 2022), the Fifth Circuit Court of Appeals, sitting en banc, is considering whether the ultimate adverse employment action is required to have an actionable Title VII discrimination claim.  In that case, the Court is reviewing the Dallas County jail’s gender-based scheduling policy that limits the days on which female detention officers could have off based on purported safety concerns but that did not otherwise effect pay, benefits or other terms and conditions of employment of the officers constitutes an adverse employment action that could be remedied under Title VII’s anti-discrimination provisions.  A win for Hamilton would greatly expand the types of employment actions that employers could be sued for and increase the number of employment claims against which employers would have to defend –including even minor or trivial employment actions.

Finally, in Texas Tech University Health Sciences Center – El Paso vs. Niehay, the Texas Supreme Court will consider whether discrimination based on obesity that is not caused by some other underlying medical condition can constitute disability discrimination under the state’s employment discrimination laws.  With 41.9 percent of American considered obese, according to the Centers for Disease Control, the number of Texan that could use the state anti-discrimination laws to challenge an adverse employment action would increase dramatically.

Subscribe to the Texas Employment Law Update to follow the results of these decisions.

 

 

On January 5, 2023, the Federal Trade Commission (FTC) issued Notice of Proposed Rulemaking announcing that it was proposing an administrative rule that would end the use of all noncompetition agreements in employment relationships outside the context of the sale of a business. The proposed rule, among other things, labels the following as unfair methods of competition: “an employer to enter[ing] into or attempt[ing] to enter into a non-compete clause with a worker; maintain[ing] with a worker a non-compete clause; or represent[ing] to a worker that the worker is subject to a non-compete clause where the employer has no good faith basis to believe that the worker is subject to an enforceable non-compete clause.”

In addition to preventing noncompetition agreements from being entered into in the future, all noncompetition agreements in effect at the time of promulgation of the proposed rule would have to be rescinded following a notice period and prior to the compliance date¬—180 days after publishing of a Final Rule. The only instance where a noncompetition agreement would remain effective and enforceable is in the sale of a business. It is noteworthy that the proposed rule states that the rule will supersede all state laws that encompass noncompetition agreements, so regardless of where you conduct business, this rule will impact you. The proposed rule, if passed, would effectively eliminate the enforceability of covenants not to compete nationwide.

Apparently unaffected by the proposed rule are restrictive covenants that prevent post-employment solicitation of customers, employees or vendors as well as confidentiality and nondisclosure provisions so long as they are not so broad as to effectively act as a noncompete precluding an employee from working in a particular industry.

What should employers do now?  First, don’t panic.  It is unlikely that any final rule published by the FTC will be in the same form as the proposed rule.  Any final rule actually published by the FTC will likely be different than the proposed rule and may have carveouts and exceptions (e.g., high level executives, employees of tech or financial services firms  and highly compensated employees)

Moreover, it is unlikely that a final rule will be published for months, years or if at all and whether a final rule will survive inevitable court challenges.  There is substantial question about whether the FTC has the authority to impose such a marketplace-wide rule.

Second, employers should review their existing noncompetes to ensure that they contain post-employment customer and employee nonsolicitation provisions where appropriate (e.g., sales employees, managers and supervisors of sales employees and executives).

Third, make sure the agreements with employees adequately protect against the disclosure of confidential, proprietary and/or trade secret information.  Most well-drafted noncompetition agreements will already contain these protections but its a good exercise to check and confirm.

Finally, if an employer is not currently using noncompetition agreements but believes it has legitimate business reasons for doing so, the employer should consult with its employment counsel to determine if it is prudent to implement the noncompetition obligations prior to publication of any FTC final rule.  There is a possibility that any final rule could be limited to noncompetition agreements entered after the effective date of a Final Rule and that existing noncompetes could be grandfathered or exempt from the rule.

A copy of the Proposed Rule published on the FTC’s website is accessible here.

Despite the modern trend and convenience of using online onboarding of employees with click-through or e-signed acknowledgments and agreements with employees, I still think it is a better practice to have important agreements that an employer may try to enforce in court (e.g., arbitration and noncompetion agreements) physically signed by employees and the originals documents retained. But even where an employer obtains “wet signatures” from employees and maintains those originals, what happens when the employer fails to countersign the arbitration agreements; is the arbitration agreement still enforceable?

In a case from the Fourteenth Court of Appeals in Houston, the Court held that where the employer can show that is accepted the arbitration agreement by its conduct and the agreement does not foreclose acceptance of its terms by conduct, the arbitration agreement can still be binding even where the employer never countersigned the arbitration agreement. In GSC Wholesale, LLC v. Young, the employer had an Occupational Injury Benefit Plan and a Mutual Agreement to Arbitrate Occupational Injury and Disease claims. The employee, Young, signed the Mutual Agreement to Arbitrate Occupational Injury and Disease claims, but the employer never countersigned the agreement when it was returned to it.

Young later suffered a work-related injury arising from a forklift accident. The Occupational Injury Benefit Plan paid substantial medical and disability benefits related to the injury. Young later sued in court over his injuries and the employer moved to compel the case to arbitration pursuant to the arbitration agreement. The trial court denied the motion to compel arbitration finding that the employer’s countersignature on the agreement was a condition precedent to its enforceability and therefore the arbitration agreement was unenforceable.

On appeal, a majority of the court held that while the employer never showed its assent to the arbitration agreement by signing it, there were other ways in which the employer showed it intended to be bound by the terms of the arbitration agreement through its conduct including: hiring and continuing to employ the employee after the employee agreed to the terms of agreement (which stated that agreeing to arbitration was a condition of employment). Because the employer agreed to the terms of the arbitration agreement through its conduct, the majority held that a valid arbitration agreement existed and reversed the trial court with instructions to compel the case the arbitration. Thus, while it is better to have the employer countersign the mutual arbitration agreement signed by employees, the failure to do so will not be fatal to the agreement’s enforcement in all case.

You can access the majority and dissenting opinions here.  A petition for review was filed with the Texas Supreme Court on December 20, 2022.

Also included in the omnibus spending bill are expanded accommodations for women that need to express breast milk in the workplace.  The Providing Urgent Maternal Protections for Nursing Mothers Act or the PUMP for Nursing Mothers Act expands the federal workplace protections for women with a need to express breast milk passed in 2010.  The new law expands the requirement that employers provide certain accommodations to cover salaried employees and other types of workers not covered under existing law.

The law also requires time spent expressing breast milk must be considered hours worked if the employee is also working.  It also extends the requirement to provide reasonable break time from one year to two years after birth.

Additionally, the new law requires employee notice to the employer that it is not in compliance and a ten-calendar day cure period before the employee can make a claim.

The new law also provides certain limitations and exemptions from these requirements for air carriers.

Several provisions of the $1.7 trillion, 4,400-page Omnibus spending bill passed by Congress and expected to be signed by the President, are additional employment protections for pregnant women.  Today we cover the Pregnant Workers Fairness Act (“PWFA” or “Act”) that requires covered employers to provide reasonable accommodations to women with limitations caused by pregnancy, childbirth, or related medical conditions.  Next week we will cover a second change provided for in the bill, the PUMP for Nursing Mother’s Act.

PREGNANT WORKERS FAIRNESS ACT

The PWFA requires employers with 15 or more employees to provide reasonable accommodation to qualified employees for the known limitations related to pregnancy, childbirth or related medical conditions.  The Act also creates five new unlawful employment practices.

Unlawful Employment Practices

The Act identifies five new unlawful employment practices including:

  1. Failing to make reasonable accommodation to the known limitations related to pregnancy, childbirth and related medical conditions of a qualified employee, unless the employer can demonstrate that the accommodation would impose an undue hardship on the operation of the business;
  2. Requiring a qualified employee affected by pregnancy, childbirth, or related medical conditions to accept an accommodation other than any reasonable accommodation arrived at through an interactive process;
  3. Denying employment opportunities to a qualified employee if the denial is based on the need to make reasonable accommodations to the known limitations related to pregnancy, childbirth, or related medical conditions of the employee;
  4. Requiring a qualified employee to take leave, whether paid or unpaid, if another reasonable accommodation can be provided to the known limitations related to pregnancy, childbirth, or related medical conditions of the qualified employee; and
  5. Taking adverse action in terms, conditions, or privileges of employment against a qualified employee on account of the employee requesting or using a reasonable accommodation to the known limitations related to pregnancy, childbirth, or related medical conditions.

Definitions

The law defines several terms new to Title VII.  For example, a “qualified employee” is an employee or applicant who, with or without reasonable accommodation, can perform the essential functions of the position.  An individual is considered qualified even if the inability to perform the essential functions is for a temporary period, can be performed in the near future and the inability to perform the essential function can be reasonably accommodated.  The terms “reasonable accommodation” and “undue hardship” have the same meaning as used in the Americans with Disabilities Act (ADA).

“Known limitations” mean the physical or mental conditions related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions that the employee, or her representative, has communicated to the employer and the condition need not meet the definition of a disability under the ADA.

Employer’s Defense

Like the ADA, the Act affords a defense to a claim of unlawful discrimination where the employer demonstrates good faith efforts, in consultation with the employee with known pregnancy related limitations, to identify and make reasonable accommodation that provides the employee with an equally effective opportunity and does not cause undue hardship on the operation of the employer.

Remedies

The remedies of the Act are the same available to a plaintiff under Title VII which include recovery of damages, attorney’s fees and costs and injunctive relief.

The Takeaway

The PWFA will require employers to treat temporary restrictions caused by pregnancy, childbirth and related medical conditions like disabilities under the ADA.  This will require employers to engage in an interactive process that designed to identify and provide reasonable accommodation to those restrictions and only treat involuntary leave of absence as an accommodation of last resort.  Documenting those efforts, just like with the ADA, will be key in the employer being able to establish its defense that it engaged in good faith efforts to identify and make reasonable accommodations.

You can access the Act here.