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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Employment Practices Liability Insurance, or EPLI, is business insurance an employer can purchase that will provide protection from losses caused by certain employment disputes with current or former employees. EPLI is in addition to commercial general liability or umbrella policies that normally contain exclusions for most employment claims.

EPLI normally covers the employer, its employees and executives for losses (including defense costs) attributed to claims for discrimination, harassment and retaliation; wrongful discharge; defamation (i.e., libel and slander); invasion of privacy and false imprisonment.  It normally does not include coverage for wage and hour claims (FLSA); claims for breach of contact or claims by independent contractors; claims arising under WARN, NLRA, OSHA, ERISA, COBRA and some ADA claims. It will also not include coverage for attorney’s fees associated with claims brought by the employer against the former employee such as counter claims (e.g., breach of contract, theft of trade secrets). Depending on the state where the claim is made, punitive damages may also be excluded or uninsurable.

Defense costs, including attorney’s fees, are often the largest expense an employer faces in defending an employment claim brought by a former employee. Even a frivolous claim or a claim the employer eventually wins is expensive to defend. These fees and costs are usually covered by EPLI but have the effect of decreasing the amount of coverage available to pay a judgment or settlement. Another potential limitation of EPLI coverage is that the insurance company normally gets to select the defense counsel that will defend the employer for covered claims. If selection of or use of particular lawyer is important (i.e., your normal labor and employment counsel), the employer should have included in its policy a provision that gives it the right to select defense counsel. 

EPLI policies are normally claims made policies. A "claims made" policy means that it will only protect against losses that occurred during the policy period and that are reported within a short period following the end of the policy period. Because an employer may learn of a potential claim until months after the employee leaves employment (and potentially after the expiration of the policy period), the employer may want to consider purchasing additional coverage that will extend the protection the employer has for up to a year after the end of the policy period (aka tail coverage).  Failure to timely make a claim and put the insurance carrier on notice of the potential claim can be grounds for the carrier to deny the claim.

EPLI can also be expensive. Rates depend on a variety of factors including the location(s) where the employer has employees; the number of employees; the employer turnover rate; and prior history of employment litigation among others. However, EPLI can be an important part of many business’ overall risk avoidance or minimization strategy. If you have questions about whether EPLI is right for your business, contact your insurance broker or your labor and employment attorney.  

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Yesterday, the Congressional Education and the Workforce Subcommittee on Workforce Protections heard suggestions on how the FLSA can and should be modernized to better reflect the realities of the 21st Century Workforce.  The following summarizes the suggestions made by business and employer representatives on how the FLSA should be modernized:

  • Update the computer professional exemption by broadening the exempt computer-related duties such as securing, updating, maintaining and testing existing applications even if the duties do not include modifying the programming code.
  • Clarify the rule of what constitutes “de minimus” time that need not be compensated in the context of insignificant IT-related activities such as remotely checking e-mail, calendar and voice mails or checking a schedule change using PDA devices.
  • Expand the exemption for highly compensated commissioned inside sales people. Changes in technology and customer purchasing habits make a distinction between inside and outside sales representatives is artificial and outdated.
  • Remove disincentives for performance based bonuses by permitting employers to exclude performance-based bonuses from the regular rate of pay.
  • Allow for the preemption of state and local wage and hour laws or create a safe harbor for multistate employers operating in compliance with the FLSA.
  • Better define what constitutes “work” to account for the modern world where employees have 24 hour access to e-mail and their company’s computer systems through remote devices like PDA’s, laptops or remote computer access.
  • Provide more clarity, predictability and consistency in being able to determine whether a particular employee qualifies for the white collar exemption.

While these are all good, needed changes to the FLSA to update and modernize it, the proposed changes are unlikely to occur overnight and there are unlikely to be meaning changes proposed by the business community until there is a change in the administration. You can access a full webcast of yesterday’s hearing here and the printed remarks of the witnesses here.

Other Resources

Congressional Subcommittee to Examine the Effect of the FLSA and the Modern Workforce

Congressional Hearing Examines Problems with Fair Labor Standards Act

This morning the Education and the Workforce Committee Subcommittee on Workforce Protections will examine whether the FLSA is outdated in today’s modern workforce.  The hearing is entitled  “The Fair Labor Standards Act: Is It Meeting the Needs of the Twenty-First Century Workplace?”

According to the Subcommittee’s media advisory:

Despite the broad impact of the [FLSA] on the American workforce, it is largely outdated and does not accurately reflect the realities of modern technology or today’s economy. The law has also created an environment of uncertainty with employers facing a patchwork of conflicting interpretations of the law and employees facing difficulty understanding their rights under the law.

As the committee continues to review laws and regulations affecting American workers, Thursday’s hearing will give members an opportunity to examine the effects of the Fair Labor Standards Act on the American workforce.

Representatives from the business and legal communities as well as workers’ advocacy groups are expected to testify.  You can watch a webcast of the hearing beginning on July 14, 2011 at 9:00 a.m. CST here.