Texas Employment Law Update

Texas Employment Law Update

A Resource for Texas Employers

New Tax Law Limits Deductibility of Sexual Harassment and Abuse Settlements Containing Nondisclosure Provisions

Posted in Harassment, News & Commentary

The #Metoo movement and high profile sexual harassment allegations involving prominent Americans has influenced provisions of the new tax reform law.  The Tax Cuts and Jobs Act signed by President Trump on December 20, 2017, limits the deductibility settlements paid on sexual harassment claims where the settlement agreement contains nondisclosure provisions.  Section 13307 of the Act provides, in relevant part, that:

Payments Related to Sexual Harassment and Sexual Abuse.

No deduction shall be allowed under this chapter for

(1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or

(2) attorney’s fees related to such a settlement or payment.

Effective Date.  The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this Act.

The effect of this new tax law will discourage plaintiffs and companies from including confidentiality or nondisclosure provisions in sexual harassment settlements as those settlements, including the amount of attorneys’ fees received by the employees’ attorneys, will be included in the employees’ gross income and without a corresponding deduction for the employee.  Additionally, it may discourage employers from settling some sexual harassment claims or cause those claims to be valued less by employers who are unable to procure confidentiality or nondisclosure commitments from plaintiffs or are unable to deduction the amount of the settlement as a deduction.

Employers settling sexual harassment or sexual abuse claims should consult with their employment lawyer and tax professionals to evaluate the effect the tax law has on settlements paid or incurred after December 20, 2017.

New Lawsuit Claims Companies Discriminate Against Older Workers in Facebook Job Placement Advertising

Posted in Age, News & Commentary

Facebook ads allow advertisers to target their advertising towards a variety of metrics. For example, you can target an ad to users in a city, state or zip code. You can also target particular professions and users in various age bands. In a recently filed age discrimination lawsuit, several large employers are accused of committing age discrimination by limited their job openings on Facebook to individuals under age 40 (i.e., individuals over age 40 do not see the job openings).

According to the New York Times,

Verizon is among dozens of the nation’s leading employers — including Amazon, Goldman Sachs, Target and Facebook itself — that placed recruitment ads limited to particular age groups, an investigation by ProPublica and The New York Times has found.

The lawsuit was filed by three workers and the Communication Workers of America (a union) against T-Mobile, Amazon, Cox Communications and Cox Media Group alleging that the defendant employers used targeted advertising that systemically excluded older applicants.  The lawsuit intends to achieve class action status on behalf of all similarly situated individuals (i.e., those potential employees who were screened out by the alleged age-based targeted ads) and also intends to add a defendant class of employers to include other employers using targeted job placement advertising that screens out older workers.  You can read the full allegations here.

What sounds elementary, but should not be forgotten in light of the recently filed case, is the fact that employers should not place unlawful restrictions who can view job openings on social media sites like Facebook, LinkedIn and Indeed.

Employers Using Biometric Systems to Track Hours Must Dot Their I’s and Cross Their T’s

Posted in Human Resources, News & Commentary

Many employers have adopted various technologies for tracking employee worktime.  One type commonly used is the biometric timekeeping system (e.g. fingerprint or retina scanners) that employees use to clock-in and clock-out of work.  A recent putative class action filed in Illinois should act as a reminder that such biometric systems may be subject to state disclosure, consent and security laws.

In the Illinois lawsuit, a group of Chicago-area employees filed a class-action suit against their employer alleging that it violated Illinois’ biometric information privacy laws by using their fingerprints to track their work hours.  The employees complain that their employer: (1) failed to inform them in writing of the purpose for which their fingerprints were being collected and the length of time they would be stored; (2) did not provide them a publically available retention schedule and guidelines for destroying their fingerprints; and (3) did not obtain written consent to take their fingerprints.

Starting with Illinois in 2008, states began passing biometric information privacy laws. Violation of these laws can carry high penalties, especially for employers.  Employers that use biometric data should stay up to date on these rapidly changing laws to ensure compliance.

Texas has a biometric information privacy law similar to the one at issue in the Illinois class action.  Under Texas law, an employer may not capture a fingerprint, iris or retina scan or use facial geometry (i.e., using facial recognition software) of an individual for a commercial purpose unless the person: (1) informs the individual before capturing the biometric identifier;  and (2) receives the individual’s consent to capture the biometric identifier.  Additionally, employers that do inform their employees and receive their consent to use their biometric information must comply with regulations on selling or otherwise disclosing the information; how the information is stored and secured; and destroying the information within a reasonable time.  Employers that do no follow these rules could be subject to fines up to $25,000 for each violation.

Employers using biometric systems should ensure they comply with the state laws that may restrict the collection, use and retention of such information.


Fifth Circuit Holds That Telecommuting Not a Reasonable Accommodation Because Regular In-Office Work Was Essential Job Function of Litigation Attorney

Posted in Case Summaries, Disability, Reasonable Accommodation

In Credeur v. State of Louisiana, an attorney working as a litigator with the attorney general’s office experienced health issues related to a kidney transplant. The Office of the Attorney General allowed Credeur to work from home temporarily while she was recovering from her transplant surgery. After several months of telecommuting, the Office of the Attorney General denied Credeur’s continued request to work from home and required Credeur to begin spending at least 3-4 hours per day working in the office, as tolerated.

Credeur filed a lawsuit against the State of Louisiana claiming failure to accommodate, harassment and retaliation under the ADA based on the situation regarding her request to continue working from home. The Fifth Circuit upheld the district court’s grant of summary judgment because the record showed that regular in-office attendance was an essential function of Credeur’s job as a litigator, thus working from home long-term was not a reasonable accommodation. In making this determination, the Court noted that an employee’s opinions alone about what are and are not essential function of their job are not enough to create a fact issue to defeat summary judgment.

The Court also found that Credeur’s failed to present sufficient evidence of an ADA harassment or retaliation claim. Credeur’s issues all stemmed from the Office of the Attorney General’s denial of her request to continue working from home and its attempts to come up with a reasonable accommodation for her disability.

Important takeaways from Credeur for management-side employment lawyers include:

  • Providing an accommodation that is not reasonable or not legally required (e.g., work from home) does not obligate the employer to continue that accommodation forever;
  • Regular work-site attendance is an essential function of most jobs;
  • Jobs requiring day-to-day coordination with supervisors and staff; adequate supervision from supervisors
  • Employee’s unsupported testimony that she can perform her job functions from home does not create a genuine issue of material fact to preclude summary judgment;
  • Employee’s opinion about what functions are essential is entitled to little credit from court;
  • Chastisement by superiors does not rise to the level of material adversity that distinguishes an adverse employment action from petty slights, minor annoyances and simple lack of good manners that are not actionably retaliatory conduct;
  • Performance improvement device such as a Last Chance Agreement that do not result in disciplinary action are not materially adverse actions to support a retaliation claim.

You can download the full opinion here.

Employers Using Fluctuating Workweek Method of Overtime Compensation Should Memorialize Understandings in Writing

Posted in Case Summaries, Wage & Hour

In Texas, an employer can satisfy its overtime obligation to nonexempt employees whose hours fluctuate from week-to-week and are paid on a salary basis, by using the fluctuating workweek (FWW) method of overtime compensation.  Under the FWW, a nonexempt employee who has hours of work which fluctuate from week to week may be paid a fixed salary that is intended to compensate the employee for the straight time hours worked each workweek. On occasions where the employee works overtime, the employer is only required to pay one-half the employee’s regular rate of pay for the hours in excess of 40 in the workweek because the employee has already been paid the straight time regular rate under the salary arrangement.  To use the FWW method, there must be a 1) clear and mutual understanding that the FWW will be used and that the employee’s fixed salary is intended to compensate for all straight time hours no matter how many or how few; 2) the salary must be sufficiently high that the employee’s regular rate of pay never drops below the minimum wage; and 3) the hours must fluctuate week to week rather than following a fixed scheduled.

A recent case from the Fifth Circuit Court of Appeals teaches that where an employer wants to use the FWW method to calculate and satisfy its overtime obligation to employees, it is wise to do so in a written document explaining what the salary is intended and having employees accept the terms of the arrangement. In Hills v. Entergy Operations, Inc., the Fifth Circuit reversed a trial court judgment in favor of the employer holding that the trial court’s determination that the FWW method was the proper method for determining the potential overtime liability for arguably misclassified employees was premature and further holding that genuine issues of material fact existed as to whether the employer and employee had agreed to use the fluctuating work week method.  You can read the full opinion here.

The employer’s trial court win was reversed because there was disputed evidence in the record about whether the parties had a clear and mutual understanding that the fixed salary was intended to compensate the employees for all straight time hours and whether the employees’ alternating schedules of 36 and 48 hour shifts constituted fluctuating hours or a fixed schedule. This result might have been avoided had there been a written agreement between the parties clearly outlining the terms of the FWW arrangement or a notification the salary was intended to cover all of the employees’ straight time earnings in the original offer letter.  Employers using the FWW method should review their practices to determine whether sufficient evidence exists to convince a court or jury that the parties have a clear and mutual understanding of what hours the fixed salary is intended to cover.

Fifth Circuit Affirms Summary Judgment For Drilling Company in WARN Case

Posted in Case Summaries, Layoffs and WARN

With the drop oil prices several years ago, many energy companies conducted reductions in force. Some of those headcount reductions triggered litigation under the Worker Adjustment and Retraining Notification Act (WARN).  WARN requires employers with 100 or more full time employees conducting plant closings and mass layoffs to provide at least 60 days advance notice of the employment actions.  A plant closing occurs when an employer permanently or temporarily closes “a single site of employment, or one or more facilities or operating units within a single site of employment,” resulting in an employment loss for at least fifty employees over a thirty-day period. A mass layoff occurs when an employer cuts its work force at a “single site of employment” during a thirty-day period by at least fifty employees, an amount which must also constitute at least thirty-three percent of its workforce at that single site of employment. If two or more groups of employees (each less than fifty employees) at a single site of employment experience employment loss aggregating to fifty or more employees within any ninety-day period, then, subject to limited exception, a plant closing or mass layoff has occurred.  Litigation under WARN resulting from those reductions in force is now reaching the court of appeals.  The Fifth Circuit recently addressed whether a drilling operator’s layoffs of employees on its multiple drilling rigs could be aggregated for purposes of triggering WARN’s notification obligations.

In Meadows v. Latshaw Drilling Co., a former employee brought a putative class action against his employer following a sizeable layoff of employees.  Latshaw Drilling Co. provides crews for drilling companies drilling oil and gas wells.  Latshaw employees were typically assigned to a specific drilling rig.  Each drilling rig had 22 to 28 employees assigned to it.  Employees on the rig worked 12 hours shifts for 14 days followed by 14 days off.  Each shift consisted of a driller, derrick hand, motor hand and two floor hands.  At its peak, Latshaw operated 39 drilling rigs in project locations in Texas, New Mexico, Oklahoma, Arkansas and Kansas. When oil prices dropped, Latshaw saw a dramatic decrease in the need for its services and stacked (removed from service) 29 of its 39 drilling rigs and laid off 398 employees over a six month period.

Following his layoff, Johnny Meadows brought a putative class action alleging that he and other workers were laid off in violation of WARN without being provided sixty days’ written notice. The determinative issue in this case focused on whether the drilling rigs were collectively a single site of employment or whether each specific rig was a single site of employment.  If each rig were a single site of employment, the layoffs were insufficient to trigger WARN’s advance notice requirements.  The company moved for summary judgment arguing that each drilling rig, yard and the corporate office were separate sites of employment and could not be treated collectively as a single site of employment under WARN. Because no individual rig, yard or the corporate office had more than 50 employees, a plant closing or mass layoff could not have occurred as a matter of law. The trial court agreed and granted the motion for summary judgment.

The Fifth Circuit affirmed the trial court summary judgment holding that the operator’s separate drilling rigs each constituted a separate site of employment for WARN purposes. The Court noted that a general rule exists under WARN that “separate facilities are separate sites”.  The Court further explained that a narrow exception exists for “geographically separate sites” with “an inextricable operational connection’”—that is, separate sites that “are used for the same purpose and share the same staff and equipment”—can constitute a single site of employment.”  Relying a prior precedent, the Court explained that “two plants across town will rarely be considered a single site.”  Because the Court concluded that the summary judgment record lacked evidence of the geographic proximity of the various wells or the extent to which drilling rigs shared employees, the Court affirmed the trial court’s judgment that each drilling rig constitute a separate site of employment and that WARN’s notice requirements were not satisfied.

A copy of Meadows v. Latshaw Drilling Co. is here.

Fifth Circuit Holds Employer’s No Photography Rule Violated the NLRA but Other Standard Policies Were Lawful

Posted in Case Summaries, Human Resources

Last week the Court reviewed, and largely reversed, a National Labor Relations Board’s (NLRB or Board) order finding that four policies contained in a Company’s employee handbook violated the National Labor Relations Act (the Act). The case is important because the challenged policies are similar to policies contained in many employee handbooks.  Moreover, an employee who is terminated for violating a policy that the Board finds is unlawful can be reinstated with back pay.

In T-Mobile USA, Inc. v. National Labor Relations Board, the NLRB found that certain policies in an employee handbook violated the Act because they could be interpreted by a reasonable employee as discouraging unionizing or other concerted activity.  The challenged policies included policies: 1) encouraging a “positive work environment”; 2) prohibiting arguing or fighting and failing to treat others with respect; 3) prohibiting all photography or audio and video recordings in the workplace; and 4) prohibiting access to electronic information by non-approved individuals.

T-Mobile appealed the NLRB’s findings that its policies violated the law. In analyzing the four policies at issue, and giving deference to the Board’s conclusions supported by substantial evidence, the Fifth Circuit held that the positive work environment, the no arguing or fighting/treat others with respect and the prohibition against unapproved disclosure of electronic information policies were all valid, lawful policies that would not be interpreted by a reasonable employee as prohibiting protected concerted activity.  However, the Court found that the Board did not err in finding that the “no photography” policy violated the law because it was drafted so broadly that it would be interpreted by a reasonable employee as prohibiting activity that was legally protected activity.  The Court’s primary concern was that the language of the policy “encompasses any and all photography or recording on corporate premises at any time without permission from a supervisor”.  The Court’s opinion does not foreclose the possibility that another, more limited policy tied to legitimate business interests and less sweeping in scale, might pass its scrutiny.

The Court’s full opinion is here.


Texas Supreme Court Holds Defendant Attorney Fee Data Not Normally Discoverable

Posted in Case Summaries

In many employment disputes, the recovery of reasonable attorney’s fees is an element a prevailing plaintiff-employee can recover. Some plaintiffs attempt to show the reasonableness of their counsel’s rates and fees by comparing it to the rates and amounts billed by the employer’s counsel. In In re National Lloyds Ins. Co., et al., the Texas Supreme Court recently held that attorney-billing information of the defendant (including information about hourly rates and aggregate attorney fees) is not relevant or discoverable where the defendant is not using its own fees as a comparator (e.g., a case where the defense counsel’s rates are lower than the rates sought to plaintiff’s counsel) nor seeking to recover any portion of its attorney fees.

Counsel representing employers will want to keep a copy of this opinion handy for resolving discovery disputes over the production of their rates and invoices.

You can download a copy of the majority opinion here.

Texas Supreme Court Rejects Compelled Self-Publication Theory in Defamation Case

Posted in Case Summaries

An element of a defamation claim is that the defamatory statement was published to a third party. Plaintiff-employees sometimes attempt to satisfy this element by arguing that, while the former employer never published any defamatory statements about the employee to a third party, the employee is compelled to self-disclose the reasons for his or her termination when seeking employment with subsequent employers.  A few Texas courts of appeals have embraced the compelled self-publication theory.  Today, the Texas Supreme Court rejected the theory holding that an employee’s self-publication of defamatory statements cannot satisfy the publication element of a defamation claim.  The Court further confirmed that there is no independent cause of action for compelled self-publication defamation under Texas law.

In Exxon Mobil Corp., et al. v. Rincones, Rincones was terminated from employment after he failed a drug test.  Rincones contended that he did not use drugs and that there must have been some negligence in the way the test was handled.  He sued the defendants under a defamation theory claiming that his termination for a positive drug test constituted defamation because he would be compelled to publish the defamatory reasons for termination to prospective employers when asked why he left his former employment.  In rejecting the compelled self-publication theory, the Supreme Court of Texas analyzed other state courts that had considered the theory and concluded that the majority of those courts had rejected its application.  Additionally, the Court reasoned that adopting such theory could chill the honest evaluation and communication between employer and employee about the employee’s performance.  And finally, the Court believed that accepting the compelled self-publication theory would “unacceptably impinge on the at-will doctrine” and is therefore “incompatible with Texas’s at-will employment system.”  In the future, defamation plaintiffs will be required to show that the defendant actually published a defamatory statement to a third party to maintain a cause of action.

You can download the Court’s full opinion in Exxon Mobil Corp., et al. v. Rincones here.


Two Day Unpaid Suspension Not a Materially Adverse Action in Title VII Retaliation Case

Posted in Case Summaries, Retaliation

Retaliation cases can be more difficult for employers to defend because “revenge” is a motive easily understood and identified with.  From a purely legal standpoint, retaliation cases are also more problematic to defend because of the wider variety of employment actions that are actionable under a retaliation theory.  In discrimination claims, only ultimate employment actions (i.e., failure to hire, promote, terminate) are actionable.  In the retaliation context, any materially adverse action may lead to a retaliation claim.  A materially adverse action is one that might dissuade a reasonable worker from making or participating a discrimination complaint.

A recent case from the Fifth Circuit is one for employment lawyers defending employers in retaliation cases should keep close at hand when analyzing whether the act complained of by the plaintiff-employee constitutes a materially adverse action.  In Cabral v. Brennan, U.S. Postal Service employee Cabral brought a retaliation claim against his employer following a two day suspension.  Cabral have previously filed three charges of discrimination with his employer.  When Cabral returned from a suspension following an incident where he struck a supervisor with a postal vehicle, he claimed that his supervisor began harassing him with questions.  He was ultimately suspended for two days without pay after his supervisor asked him to produce a valid driver’s license and Cabral refused.  When he finally produced an occupational driver’s license (Cabral had a DWI conviction and a suspended driver’s license), he was reinstated.  Several weeks later, he was reimbursed for the two day suspension.

The Fifth Circuit considered whether Cabral’s two day suspension constituted a materially adverse action sufficient to state a claim for retaliation.  The Court contrasted Cabral’s two day suspension with that of the Plaintiff in Burlington N. & Santa Fe Ry. Co. v. White, where the U.S. Supreme Court found that a 37 day paid suspension (later reimbursed by the railroad) of a single mother during the holiday season and that caused her to fall into deep depression and the resulting physical, emotional, and economic burdens she sustained was sufficient to create a fact issue on whether a materially adverse action occurred.   Given that Cabral produced only conclusory evidence (and no documentation) that he suffered emotional and psychological harm because of the two-day suspension, the Court affirmed the trial court’s summary judgment that the two day suspension did not constitute a materially adverse action.

The takeaway for employers is that even in a retaliation case, not every adverse action the employee suffers will be sufficient to get the case to trial and careful consideration should be given to whether the challenged action is sufficient to constitute a materially adverse action.  For plaintiffs, Cabral teaches that strong, detailed evidence of the physical, emotional and economic impact to the plaintiff of the challenged action is the key to getting the case through summary judgment and on to trial.

A copy of the opinion can be downloaded here.