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.

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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.

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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.  

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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.

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

Happy Thanksgiving!

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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.

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Penn State announced that it selected former federal judge and FBI Director Louise Freeh to lead an independent investigation of all aspects of the University’s actions related to the child sexual abuse allegations that have been reported.  While federal and state (two states) authorities are investigating the allegations, Penn State’s investigation is likely to be more widespread than the criminal investigations as it will also evaluate the University’s governance, controls, protocols and oversight and not just the actions or inactions of school officials.  Penn State’s actions are laudable in that criminal investigations will be designed to prosecute and punish those that have broken the law while the University’s investigation may lead to changes and reforms at the school that will prevent similar kinds of actions from being unreported, undiscovered or unpunished.

I’ve written before about the things an employer should consider in selecting an investigator to conduct an inquiry into employee misconduct.  In selecting an independent investigator in a matter that is of such high profile and subject to intense media scrutiny, it is important that the investigator be truly independent.  While some have already questioned Freeh’s independence, according to Penn State, the scope of Freeh’s inquiry “will be expansive, and he is free to take his work to whatever conclusions he deems appropriate. No one at Penn State will be exempt from this review, including the Board of Trustees itself.”

 

Penn State’s decision to appoint an independent investigator like Major League Baseball’s appointment of George Mitchell to investigate the use of steroids in baseball in 2006.  However, Penn State’s inquiry purports to be potentially unlimited in scope and goes further than in that no one will be exempt from Freeh’s review (although some current and former employee may refuse to cooperate for Fifth Amendment or other reasons and the University will have little control over those former employees that decline to participate).  Mitchell, during the time period he investigated baseball, had close ties to the Boston Red Sox; initially limited his inquiry to the time period after 2002 when baseball began testing for steroids; was limited to player’s voluntary cooperation in providing interviews and information; and he (and MLB) had no authority to discipline players (of course where were represented by a union).  That Penn State’s independent investigation appears to provide Freeh with unfettered access to university information and officials and the pronouncements that Freeh may take the investigation wherever it leads shows the University’s commitment to uncovering the truth.  

 

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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. 

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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.

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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)

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.

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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 .
 

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