President Obama signed the 2010 National Defense Authorization Act setting the budget for the Department of Defense for fiscal year 2010.  The NDAA amends the Family & Medical Leave Act and is effective immediately.  In relevant part, the NDAA amends the FMLA to extend its military leave entitlements.  The FMLA is amended, in relevant part, as follows:

  • Expands the exigency leave provisions (which had been limited to family members of reservists) to make clear that employees make take up to twelve (12) weeks of unpaid leave for qualifying exigencies to family members of any member of the armed services on active duty.
  • Provides up to twenty-six (26) weeks of unpaid caregiver leave to care for any veteran family member (i.e., child, spouse, parent or next of kin) who is undergoing medical treatment, recuperation or therapy for a serious illness or injury that was sustained or aggravated in the line of duty  and was a member of the Armed Services during the five (5) period preceding the date on which the veteran undergoes the treatment, recuperation or therapy.   

Employers should amend the FMLA policies in their handbooks and procedures to incorporate these changes and train those responsible for administrating leaves of absences on these important changes.

 

Recently I wrote about the risks posed by misclassifying employees as independent contractors.   In an unpublished opinion, the U.S. Court of Appeals for the Fifth Circuit (the federal appellate court that hears appeals from Texas) reversed a summary judgment awarded in favor of a company that had classified two cable splicers who performed post-Katrina telecommunications repair work for an AT&T contractor as independent contractors.  In reversing the judgment for the company, the Court remanded the case to the trial court for a determination of the damages the "employees" are entitled to recover.  A copy of the opinion can be accessed here.

Two cable splicers brought an action under the Fair Labor Standards Act seeking unpaid overtime that they were not paid due to their classification as independent contractors rather than employees.  The individuals worked for the Driftwood Electrical Contractors for 11 months following Huricane Katrina.  Theyworked twelve days on and one day off.  Twelve-hour days were the norm.  They were paid a fixed hourly wage for their work.  Each day they reported to the BellSouth location to receive their assignments unless they had not completed their jobs from the prior work day. They were given prints describing the type of work needed and were instructed by BellSouth supervisors to follow certain general specifications.  Neither cable splicer was trained by BellSouth or Driftwood and the splicers controlled the details of how they performed their assignment.  During this 11 month period, the splicers worked exclusively for the Driftwood Electrical.

To emphasize how fact intensive the independent contractor/employee analysis is, consider the following:  the cable splicers provided their own trucks, testing equipment, connection equipment, insulation equipment and hand tools totaling $16,000 and $50,000 in value.  They were also responsible for their own vehicle liability insurance and employment taxes.  The company, on the other hand, provided workers’ compensation insurance and liability insurance for the cable splicers’ work.

It appears that the most significant aspect in the Court’s determination that the individuals were employees rather than individual contractors was the fact that they worked exclusively for the company for 11 months rather than in a temporary, project-by-project, on-again-off-again relationship.  Consequently, the Court concluded that as a matter of economic reality, the cable splicers were economically dependent on the company they worked for and were not in business for themselves.  Therefore, they were employees rather than independent contractors and were entitled to be paid overtime for their work.   

The EEOC recently brought suit against the country’s largest home builder on behalf of a pregnant employee who was denied a period of unpaid leave in addition to the maximum permitted under the employer’s policies.  What is unique about this suit is that the EEOC brought the suit under the Americans with Disabilities Act rather than the Pregnancy Discrimination Act.

According to the Commission’s press release, D.R. Horton, 

denied [the plaintiff] additional unpaid leave time after her doctor placed her on bed rest for over seven months as a result of pregnancy-related complications. Although the company initially provided some leave time, it finally stated it was against company policy to provide the employee any more leave time, even if it was unpaid, and then fired her.

Prior to the passage of the ADA Amendments Act, it is unlikely that the EEOC would have brought this case under the ADA because most courts were reluctant to conclude that pregnancy was a disability.  Instead, the Commission would have had to show under the Pregnancy Discrimination Act that the pregnant employee was treated differently than other nonpregnant employees who were similar in their ability and inability to work (i.e., similar work restrictions).  However, the EEOC is targeting employer leave policies that are perceived by the Commission as rigid.  An example of such policy is one that provides a maximum leave duration of six or twelve months.

One aspect of this tactic that should be troubling to Texas employers is the fact that Texas law uses the enforcement of a neutral absence control policy as a defense to a workers’ compensation claim.  Where an employer uniformly and consistently applies a leave of absence policy with a maximum duration, an employee who is separated from employment for exhausting the available leave of absence, even if the absence is caused by an on-the-job injury, will have no workers’ compensation retaliation claim.  Suits like the EEOC’s suit against D.R. Horton may have the effect of requiring employers to make more frequent exceptions to these neutral absence control policies that might weaken their effectiveness as a defense in Texas workers’ compensation retaliation cases.

 

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

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

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

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

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

The EEOC issued a new poster that incorporates provisions of the Genetic Information Nondiscrimination Act (GINA).  The new poster also includes updates from the Department of Labor.  A copy of the poster can be printed here.  Covered entities are required to post GINA notices not later than November 21, 2009.   Covered entities include, among others, employers with 15 or more employees.  

According to the EEOC, there are several ways to comply with the new posting requirement by November 21, 2009.

  • Print the supplement (download here) and post it alongside EEOC’s September 2002 “EEO is the Law” poster or OFCCP’s August 2008 “EEO is the Law” poster.
  • Print and post the EEOC’s November 2009 version of the “EEO is the Law” poster.  (here)
  • Order a new poster through the EEOC Clearinghouse.  The new posters is currently on backorder and will be shipped when available. 

Of course, employers can also order new posters from their vendor that provides multiple required employer posters in a single poster. 

 

The EEOC recently published proposed regulations designed to implement provisions of the ADA Amendments Act (ADAAA). The proposed regulations incorporate significant changes to the law and provide numerous illustrative examples. A full copy of the proposed regulations can be accessed here.  The following sections summarize some of the significant points.

Presumptively Disabling Impairments

The proposed regulations provide a list of impairments that the EEOC believes will consistently qualify as disabilities. These include: deafness, blindness, intellectual disability (formerly termed mental retardation), partially or completely missing limbs, mobility impairments requiring the use of a wheelchair, autism, cancer, cerebral palsy, diabetes, epilepsy HIV or AIDS, multiple sclerosis, muscular dystrophy, major depression, bipolar disorder, post-traumatic stress disorder, obsessive compulsive disorder, or schizophrenia. 

Conversely, the proposed regulations also identify several impairments that, when temporary or of short duration and having little residual effects, will not normally constitute disabilities. These include: common cold, seasonal or common influenza, a sprained joint, minor and non-chronic gastrointestinal disorders, or a broken bone that is expected to heal completely).

Substantially Limiting Impairments

The regulations suggest that whether an individual has a disability should not demand extensive analysis. In determining whether a physical or mental impairment substantially limits a major life activity, the proposed regulations direct that ameliorative or other mitigating measures (e.g., medication, medical supplies, learned behaviors, assistive technologies, surgical interventions or reasonable accommodations) should not be considered in determining whether the impairment is substantially limiting. Furthermore, for episodic or impairments in remission, the inquiry is whether the impairment would limit a major life activity when active.

Major Life Activities

The proposed regulations expand the definition of “major life activities” through two non-exclusive lists. The first list includes activities such as caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, sitting, reaching, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, interacting with others, and working.

The second list focuses on the body systems and functions and includes functions of the immune system, special sense organs, and skin; normal cell growth; and digestive, genitourinary, bowel, bladder, neurological, brain, respiratory, circulatory, cardiovascular, endocrine, hemic, lymphatic, musculoskeletal, and reproductive functions.

With respect to working as a major life activity, the proposed regulations jettison the concept that an individual must be substantially limited in the ability to perform a broad range and class of jobs for working to constitute a major life activity. Instead, the proposed regulations direct that the ability of the individual to meet the qualifications for the type of work at issue is the proper inquiry.

Regarded As Disabled and Reasonable Accommodations

The proposed regulation eliminate the requirement that an individual demonstrate the employer regarded the individual as disabled. Rather, if the individual is subjected to an action prohibited by the ADA because of an actual or perceived impairment, that alone will be sufficient to establish the individual is regarded as disabled. 

The proposed regulations also clarify that individuals who are solely disabled under the “regarded as” prong are not entitled to reasonable accommodations.

Employers have long been challenged by a variety of wage and hour litigation such as misclassification cases and off-the-clock overtime cases.  One of the latest trends in wage and hour litigation is attacking a company’s classification of its workers as independent contractors instead of employees.  Because independent contractors are not entitled to certain aspects of benefits provided to employees, misclassification can result in liability in several forms., including:

  • Potential tax exposure from federal and state taxing authorities (i.e., unemployment tax, FICA, FUTA);
  • Claims that misclassified contractors should be entitled to participate in employer benefit plans covering employees (e.g., stock option plans, health and benefit plans);
  • Claims that misclassified contractors are entitled to overtime compensation.

In Texas, the test for determining independent contractor status is a multifactor analysis that centers around the economic realty of the relationship.  The focus is on whether the worker is, as a matter of economic reality, dependent on the alleged employer in business for himself.   This inquiry includes whether the employer has the right to control the progress, details, and methods of operations of the work.  A nonexclusive list of factors that are usually considered in this analysis include: 

  • the degree of control exercised by the alleged employer;
  • the extent of the relative investments of the work and the alleged employer;
  • the degree to which the worker’s opportunity for profit or loss is determined by the alleged employer;
  • the skill and initiative required in performing the job;
  • the permanency of the relationship.

No one factor is determinative. If a court or taxing authority determines that the independent contractor was misclassified, the employer may be responsible for failing to provide the benefits the employee would have otherwise enjoyed had he been properly classified as an employee (e.g., participation in certain employee benefit plans and unpaid overtime).  Depending on the size of the workforce and the work it engages in, these sums can be significant.  Consequently, companies making extensive use of independent contractors should review these relationships carefully to ensure that the workers are properly classified and incorporate changes in the relationships that enhance the ability to defend that classification.

Since the Texas Supreme Court’s Sheshunoff and Mann Frankfort opinions, Texas appellate courts have, with increasing frequency, enforced covenants not to compete in the employment context.  Gone are the days when noncompetition agreements were difficult to draft and enforce in Texas.

In Gallagher Healthcare Insurance Services v. Vogelsang, the First District Court of Appeals in Houston reversed a summary judgment to a former employee and rendered judgment in favor of the former employer on a breach of contract claim involving noncompetition obligations.  In Gallagher Healthcare, the former employee was employed as an insurance broker.  Her primary job was to renew existing business and secure new business.  After working for Gallagher Healthcare (or its predecessor) for twelve years, Vogelsang resigned and began working for a competitor.  Gallagher Healthcare sued to enforce its noncompetition agreement with Vogelsang that prohibited her from soliciting the clients she worked with during her last two years of employment with Gallagher Healthcare for two years.  The trial court found for Vogelsang and held that the covenant not to compete was not enforceable.  In reversing the trial court and rendering judgment in favor of Gallagher Healthcare, the court of appeals made the following significant conclusions.

  • Two year prohibition from doing business with the 80 customers the employee dealt with during last two years of employment was a reasonable limitation.
  • A customer limitation prohibiting contact with customers the employee did business during employment is an adequate substitute for a geographic limitation.
  • Information given to the employee during employment was sufficient to give rise to interest worthy of protection and included:  financial information, customer information, employee salary information, client specific insurance information (e.g., insurance proposals, coverages, loss histories, exposures, limits, renewal dates, premiums, commissions and fee revenue), team related income and budgets, account retention strategies, at-risk accounts, strategic prospecting and selling, niche strategies, 2004 financial results, 2005 quarterly financial results, new and lost business summaries, professional standards audit results and related analysis, multiple types of prospect lists, premium volume comparisons, budget reviews, production reviews, internal committee lists and 2006 compensation plan.

The take away from Gallagher Healthcare, and other recent opinions, is that Texas courts are increasingly willing to enforce noncompetition agreements that are reasonably limited. 

I recently wrote about the importance of documenting employee performance deficiencies.  I also tried to outline several items to consider including in that performance documentation.  You can read my post here.

This week, two fellow blawggers posted additional examples about why documenting employee performance problems is essential.  Jay Shepherd at Gruntled Employees provides a humorous post on why "writing it down" is essential to winning a suit against a disgruntled employee.

Next, Michael Fox at Jotting by an Employer’s Lawyer summarizes a real world example where the employer’s failure to document the alleged performance problems caused it, in part, to lose a case against a former employee.

Keep these examples in mind when considering whether to document instances of employee misconduct or performance deficiencies.

Employees frequently stay connected with work through company issued smart phones.  Smart phones, like the iPhone, Blackberry, and Treo, allow employees to have access to their work e-mails, calenders and contacts –in addition to making and receiving calls.  In my practice, a smart phone is incredibly useful in staying in touch with my client’s needs when I’m in court or out  of the office.  However, with every advance in technology, come employment law challenges.

As recently reported in the WSJ.com, several lawsuits have been filed seeking damages for unpaid work time spent reading and responding to e-mails and customer complaints outside of regular business hours.  For example,T-Mobile USA Inc. was sued in July 2009 by three current and former employees for unpaid working time claiming they were required to use their T-Mobile issued phones to read and respond to message outside of working hours. (View the Complaint here).  In March 2009, CB Richard Ellis Group, Inc. was sued by a maintenance worker for unpaid work time after hours that included reading and responding to e-mails on his company-issued smart phone.  (View the Complaint here). 

Jon Hyman at the Ohio Employer’s Law Blog argues that even if employees use smart phones for isolated and sporadic short-term reading and responding to business e-mails, that time is not necessarily compensable time.   Hyman argues that:

Most messages can be read in a matter of seconds or, at most, a few short minutes.  The Fair Labor Standards Act calls such time de minimus, and does not required compensation for it.  "Insubstantial or insignificant periods of time beyond the scheduled working hours, which cannot as a practical administrative matter be precisely recorded for payroll purposes, may be disregarded."

Hyman’s point is a good one; however, can this time be precisely recorded for payroll purposes?  Redwood Technologies, for example, has a smart phone application (Momentum) that allows the user to capture time spent reading and responding to e-mails and time spent on the telephone.  It allows the user to allocate that time to different client accounts.  Although this same technology could be used by employers to capture the time nonexempt, hourly employees spend reading and responding to e-mails.  This may not resolve the administrative impracticality of determining which e-mails are personal or business related, I suppose that there are applications out there which would allow an employer to capture this time if it was so inclined. 

While is remains to be seen whether the time spent reviewing and responding to e-mails outside of normal business hours will be recoverable in an FLSA lawsuit, some commentators have suggested implementing polices to either pay employees for this time or to prohibit (by policy) employees from using company issued smart phones outside of working hours.  The following is a menu of options employers may consider in deciding how to deal with the issue of providing company issued smart phones to nonexempt, hourly employees. 

  • Do not provide nonexempt, hourly employees with company issued phones capable of reading or responding to e-mail (i.e., smart phones). 
  • Purchase a technology solution that captures the amount of time the user spends reading and responding to e-mail and pay nonexempt employees for that time.
  • If the employer does not intend to pay for this off-hours review of e-mails, it should clearly set out its expectations that employees should not read and review those messages outside regular work hours.  For example, implement policies that prohibit employees from reading and responding to e-mails outside of regular working hours; require employees to leave company issued smart-phones at work; require employees to program the smart phones to turn themselves off during non-working hours. 
  • Limit the employees that are provided with company issued cellphones to those who have a legitimate business need to be routinely contacted outside of business hours and limit that outside contact for matters where it is necessary.
  • Pay employees who submit time for the nonbusiness hours review of e-mail and then discipline the employee for violating the employer’s policy prohibiting business use of company cellphones outside working hours (if the employer has implemented such a policy).

If the lawsuits referenced above conclude with successful results for the employees (or in class certification), employers can expect to see many more of these kinds of cases filed.