Texas does not require employers to provide a prospective employee with a formal offer letter.  Many employers choose to do so to avoid misunderstandings and clarify some of the important aspects of the proposed employment.  For employers that use offer letters, here are a few items that an employer should consider including in every offer letter.      

  • Identify the job title, work location and start date for the proposed employment.
  • Add an at-will disclaimer.  If the employment is intended to be at-will, advise employees in writing of that fact and specifically disclaim any intent to create any actual or implied contract.  
  • Set forth the manner in which the employee will be compensated.  For example, if the arrangement is an hourly arrangement it may be sufficient to say that the employee will be paid $20.00 per hour. If the compensation arrangement is a salary; state the salary in a weekly or monthly amount rather than on an annualized basis.  If the employee will be paid commissions consistent with a commission plan, make sure that you say so.  Tell the employee that he or she will be paid consistent with the terms and conditions of the employer’s commission plan and state when that plan will be provided to the employee.  There is a significant amount of litigation over commission payments when there is no written commission arrangement or the commission plan is vague, ambiguous, or otherwise poorly drafted.
  • If the employee is being hired from a competitor,  confirm that the employee is not subject to any restrictive covenants or noncompetition agreements that would prohibit the anticipated employment.  If the prospective employee has no such agreements, have the employee represent, in writing in the offer letter, that he or she is not bound by any covenants not to compete or restrictive covenants.
  • Expressly advise the employee not to bring any information from his or her former employer.  Tell the employee that your company doesn’t need that information and doesn’t want such information.  Furthermore, specifically instruct the employee that he or she is not to use or disclose any confidential, proprietary or trade secret information from the old employer in furtherance of the new employment.
  • Have the employee sign, date and return the offer letter.  Under Texas law, a signed acceptance is not necessary to show acceptance (only knowledge of the terms and then the beginning of employment).  However, a signed acceptance is very persuasive evidence that the employee knew and accepted the terms.

These drafting tips may help employers and prospective employees avoid disputes over offer letters and the resulting employment.

 

 

In a recent opinion of the Dallas Court of Appeals, the Court held that an insurance brokerage and consulting service firm’s noncompetition and nonsolicitation agreement obtained in return for an award of stock options to an employee was unenforceable under Texas law. (See opinion here).

Rex Cook was a long-term employee of Marsh USA, Inc. Prior to leaving his employment, Cook was a managing director. Cook was granted stock options in 1996 under Marsh’s Employee Incentive and Stock Option Award Plan. Before he exercised his options, Cook was required to sign a non-solicitation agreement that included a two-year covenant not to compete. In 2005 Cook exercised his options and in 2007 he left the company. Thereafter, he began employment with a competitor. Marsh sued the competitor and Cook. Cook asked the court to render judgment in his favor on the enforceability of the noncompete and the trial court held the agreement was unenforceable under Texas law. Marsh appealed that finding. 

On appeal, the Court explained that:

a covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made and it contains reasonable limitations that do not impose a greater restraint than necessary to protect the goodwill or other business interest of the promisee. [citations omitted]. To be ancillary to or part of an otherwise enforceable agreement, a covenant not to compete must meet the following two conditions: (1) the consideration given by the employer in the otherwise enforceable agreement must give rise to the employer’s interest in restraining the employee from competing; and (2) the covenant must be designed to enforce the employee’s consideration or return promise in the otherwise enforceable agreement.

The Court then turned to whether the award of stock options to an employee “gives rise” to any interest worthy of protection for the employer. The employer argued that it uses stock option awards with its employees as a way to retain valuable employees; thereby protecting its goodwill (i.e., the relationship between the customer, employee and brokerage firm). The Court accepted the proposition that retaining valuable employees benefits a company’s good will but rejected the conclusion that such benefit gave rise to any interest in preventing the employee from competing. Furthermore, the Court reiterated that “financial benefits . . . do not give rise to an interest worthy of protection.”

 

As a result, the Court of Appeals affirmed the trial court’s grant of summary judgment to the employee that held that the noncompetition and nonsolicitation agreements obtained in return for an award of stock options was unenforceable. Marsh filed a petition for review with the Texas Supreme Court.

 

The take away from this case is that while covenants not to compete have become easier to enforce in Texas, the consideration that is given to the employee in return for the promise not to compete must give rise to some interest worthy of protection.  Money or other financial remuneration alone is unlikely to be sufficient.  Most frequently, valuable consideration to support a covenant not to compete will be in the form of a company’s promise to provide its confidential information and trade secrets to the employee and the employee’s return promise not to use or disclose that information.  In that scenario, the promise to disclose the confidential or trade secret information (and the actual disclosure of that information) to the employee necessarily gives rise to an employer’s interest in the noncompetition provisions.  

 

UPDATE:  On June 24, 2011, the Texas Supreme Court reversed the Dallas Court of Appeals and held that a covenant not to compete based on stock options given to a key employee to increase the company’s goodwill were not per se unenforcable.  You can read more about the reversal and Supreme Court’s new opinion here and here.

The U.S. Supreme Court completed its 2008-09 term. On the docket were five cases of interest dealing with employment law.  Here is a summary of the holdings in those cases.

  • Crawford v. Metropolitan Gov’t of Nashville and Davidson County, Tenn., (2009) An employee’s participation in an employer’s internal harassment investigation by responding to the employer’s questions may constitute protected oppositional activity under Title VII that would support a retaliation claim. 
  • 14 Penn Plaza LLC v. Pyett, (2009) Provisions in collective bargaining agreements that clearly and unmistakably require union members to submit statutory discrimination claims to the grievance and dispute resolution provisions of the agreement are binding and enforceable on the bargaining unit members.  More detail here.
  • AT&T Corp. v. Hulteen, (2009) An employer does not necessarily violate the Pregnancy Discrimination Act when it calculates and pays pension benefits based on an accrual rule that applied only pre-PDA, and gives less retirement credit for pregnancy leave than for other medical leave.
  • Gross v. FBL Financial Services, Inc., (2009)  A plaintiff asserting an age discrimination claim under a disparate (i.e., intentional) treatment theory must prove that age was the “but for” cause of the challenged employment action and the burden of proof never shifts to the employer to show that it would have taken the same action regardless of the age of the plaintiff.  More detail here.
  • Ricci v. DeStefano, (2009)  An employer can avoid Title VII disparate-impact liability related to a promotional exam having a disparate impact on minorities if the employer can show a strong basis in evidence that, had it not certified the results, if would have been subject to disparate-treatment liability.  More detail here.

In this post I want to outline a series of steps an employer can implement that may decrease its unemployment tax rate and taxes.  The state unemployment tax rate is the only tax rate that an employer can effectively control.  Because the tax rate is calculated over a three year rolling average, it may take a year or two to start realizing these savings.  Here are the steps. 

  • Document employee problems and rule violations at the time those issues occur.  Keep thorough, accurate records of these issues in the employee’s personal file.  An even better record is one where the employee signs, at the time the performance is documented, that he has had an opportunity to review the documentation.
  • Make solid hires and don’t over hire.  Turnover can dramatically increase your unemployment tax rate.  Consequently, make sure that you take all reasonable steps to ensure you are hiring good, qualified candidates for employment.  Do background checks (but comply with the Fair Credit Reporting Act) and check references.  Don’t hire more employees than you think you will need for the foreseeable future. 
  • Designate a specific person to receive and review unemployment claims.  Ensure all employees responsible for receiving and distributing company mail know where to route correspondence from the Texas Workforce Commission.  Ensure that when the designated person is away from work for vacation or leave of absence that another person is responsible for timely receiving and reviewing claims.
  • Review every claim immediately.  Ensure that all information on the claim form is correct.  Errors in the employee’s stated compensation or termination date can result in the Texas Workforce Commission paying at incorrect rates or for improper periods.  
  • Timely respond to the TWC’s requests for information.  This seems obvious, but the deadline for opposing unemployment benefit claims is jurisdictional and it is difficult to convince the Commission that good cause exists for a late response.  Moreover, keep in mind that the deadline for the response runs from the date of mailing; not the date you receive the claim or determination.
  • Timely appeal determinations that incorrectly award benefits.  Some reasons for benefit ineligibility include: 1) misconduct connected with the work (this includes policy violations and intentional acts –not general poor performance); 2) voluntarily leaving work (i.e., a resignation that is not a constructive discharge or due to injury, illness or pregnancy); 3) aliens not authorized to work in the United States; 4) failure to apply for, accept or return to work; 5) leaving work pursuant to a labor dispute (i.e., union strike); 6) any periods where the employee is receiving wages in lieu of notice or is receiving workers’ compensation benefits for temporary or permanent disability.
  • Attach evidence to support the reasons for benefit disqualification.  For example, in a resignation case, attach the letter of resignation.  In misconduct cases, attach copies of the policies the employee violated; evidence that the employee received notice of and/or training on those policies (e.g., handbook acknowledgments signed by the employee); and any copies of written warnings the employee received related to the ultimate reasons for termination.
  • Appear at the telephone appeal hearing.  Provide supporting evidence to the hearing officer several days prior to the hearing and bring witnesses that can testify and support the reasons that the employee should be disqualified from the receipt of benefits.

One final word of caution.  If you think the former employee is likely to file a lawsuit or charge of discrimination against the company and the employee shows up at the appeal hearing with a lawyer (Remember: appeal hearings are recorded testimony under oath), the employer should seriously consider whether it might be prejudiced by moving forward with the hearing in the absence of counsel.  Stated another way, consider whether it is worth winning an unemployment benefit hearing only to give the employee’s lawyer a preview of the company’s defenses that might be used in later litigation.  Some plaintiff’s lawyers use unemployment benefit hearings as opportunities to conduct early free discovery and they know that most employers use nonlawyers to appear and attend these hearings.

In one of the most anticipated employment discrimination cases in years, the U.S. Supreme Court held that the City of New Haven discriminated against non-minority firefighters when it chose to ignore the test results of a racially-neutral promotional exam because too few minorities scored high enough on the test to be considered for promotion.  I previously wrote about this case and outlined its facts.  (See here for post).

In Ricci v. DeStafano, a majority of the Supreme Court began with the premise that the City’s decision to ignore the results of its promotional testing because too few minority fire fighters scored well on the test, constituted intentional discrimination against the firefighters that scored well on the test.  There was no dispute that the City disregarded the test results because of the race of the test takers and the fact that no minorities scored high enough to qualify for promotion.  Concluding that this conduct constituted intentional discrimination, the Court examined whether the City had a legitimate justification for ignoring the test results. 

The City’s sole justification for the ignoring the test results was that if it recognized the results it would face litigation from the minority firefighters who took, and scored poorly, on the test.  The minority firefighters, the City predicted, would sue the City claiming that the racially-neutral test had a disparate impact on minority firefighters and therefore discriminated against them.  The City argued that it was faced with a Hobson’s choice where no matter what it elected to do it would be faced with a discrimination lawsuit (i.e., either being sued by the white firefighters who scored well and were denied promotional opportunities because the test results were ignored or by the minority firefighters who claimed the test unintentionally discriminated against them by recognizing a test that had a disparate impact on minorities).

The Court explained that if the City had a "strong basis in evidence" that its recognition of the test results would subject it to disparate-impact liability in the absence of it taking the race-conscious, discriminatory action –not necessarily that it would lose an disparate impact case.  To make this showing, there would need to be a showing of a significant statistical disparity; and the tests were no job related and consistent with business necessity; or there existed an equally valid, less-discriminatory alternative that served the City’s needs that it refused to adopt.  Applying this standard to the Ricci case, the Court concluded that City lacked a strong basis in evidence that it would be subjected to disparate-impact liability if it recognized the test results.  Therefore, it found that City discriminated against the non-minority firefighters when it threw out the test results.    

The lesson from Ricci is that when an employer is faced with qualification or promotional exam that may have a disparate impact on a protected class, the employer must build a strong record and attempt to ferret out the reasons for the disparity before deciding whether to ignore the results.  A strong case would begin with a test that was designed in such a way as to avoid a disparate impact as was the case in Ricci.  The Court’s opinion makes clear that it is not intended to prohibit an employer from considering (before test administration) a way to design a test that provides a fair opportunity for all individuals, regardless of their race.  Instead, the legal analysis encourages employers (and gives them broad latitude) at the test-design phase to invite comments to ensure the test is fair.  This would tend to help to identify aspects of the prospective test that might not be job-related and consistent with business necessity or other equally effective, less discriminatory alternatives.  

With a strong record in this regard, an employer assert and prevail with the new defense announced by the Ricci court when it faced with the prospect of being sued for disparate treatment (i.e., intentional) or disparate impact (i.e., unintentional) discrimination.   

In Gross v. FBL Financial Services, Inc., the U.S. Supreme Court was asked to decide whether a plaintiff must present direct evidence of discrimination in order to obtain a mixed-motive instruction in a non-Title VII discrimination case.

In the case, Plaintiff Gross was employed by FBL Financial Group since 1971. In 2001 he held the title of claims administration director. Gross was reassigned in 2003 to the position of claims project coordinator. He was 54 years old.  Many of the job duties Gross previously performed were transferred to a newly created position and that position was given to a female former subordinate of Gross who was in her early 40’s. While Gross and the co-worker received the same compensation, Gross considered his reassignment and reallocation of job responsibilities a demotion. Consequently he filed suit alleging age discrimination under the Age Discrimination in Employment Act. At trial, the jury was asked to decide whether age was “a motivating factor” in the decision to reassign and reallocate Gross’s job responsibilities. This permitted the jury to find in Gross’ favor if even one of many reasons for the job changes was Gross’ age. FBL requested a jury instruction that would have only permitted the jury to find for Gross if he showed that the challenged job actions would not have occurred “but for” Gross’ age. The jury found for Gross.

On appeal, the U.S. Supreme Court found that it was improper to charge the jury under “a motivating factor” standard of causation. The U.S. Supreme Court held that a plaintiff asserting an age discrimination claim under a disparate (i.e., intentional) treatment theory must prove that age was the “but for” cause of the challenged employment action and the burden of proof never shifts to the employer to show that it would have taken the same action regardless of the age of the plaintiff. 

This is a significant, but perhaps short-lived, win for employers at the Supreme Court. Like other decisions of the Supreme Court that the Democratically-controlled Congress dislikes, expect quick legislation to be proposed to amend the ADEA to reinstate the “motivating factor” standard of causation.

A federal appellate court with jurisdiction over Texas held that chronic fatigue syndrome (CFS) may qualify as a disability under the Americans with Disabilities Act. According to the Centers for Disease Control, CFS is characterized by symptoms including weakness, muscle pain, impaired memory and/or mental concentration, insomnia, and post-exertional fatigue lasting more than 24 hours.  There is no known diagnostic test for CFS and physicians are left to rely on forensically unreliable self-reports of the patient to make this diagnosis.   Notwithstanding this inability to test for or confirm the existence of this "syndrome," the federal court of appeals covering Texas held that CFS might qualify as a disability that an employer must reasonably accommodate. 

In EEOC v. Chevron Phillips Chemical Co., L.P., the Fifth Circuit Court of Appeals reversed a summary judgment in favor of Chevron on an employee’s claim that she was discriminated against and denied reasonable accommodation for her chronic fatigue syndrome.

The employee, Lorin Netterville, was first diagnosed with CFS in 1987 while attending school and caring for her children at home.  She received a six-week course of treatment and her symptoms disappeared.  In late-2000 Netterville applied for employment with Chevron and was eventually hired.  As part of the employment process Netterville completed a medical history questionnaire, where she failed to disclose a history of excessive fatigue with work or exercise.

Several years later Netterville was required to work long hours of overtime that included manually packing boxes and moving supplies as part of Chevron’s office relocation. Netterville claims she begin to suffer sleep disruptions that included getting no more than 1-2 hours of sleep per night for 6-7 days at a time.  Once a month she claimed she would sleep 17 hours straight.  She also claims she "began to run low-grade fevers and to suffer from headaches, disorientation, pain in her temples, stiff joints, pain in her arms and legs, and numbness in her legs, as well as aphasia and problems with memory, concentration and decision-making at times she was unable to remember even her own son’s name."  She became unable to sit or walk for more than thirty minutes at a time, was hypersensitive to light and sound, and experienced episodic crying spells and feelings of social isolation.  Approximately 1 year after her symptoms reoccurred Netterville was living with her sister who assisted her with daily living tasks like shopping, cooking, washing, showering, drying, dressing, and using the bathroom.  This assistance was primarily needed because of excruciating pain in Netterville’s arms and morning nausea she experienced.

Netterville’s physician suggested that she take a month off from work.  Because Netterville could not afford a month off without pay, she got her doctor to write a note advising for a two week break from work.  When Netterville presented her request to Chevron for the 2 weeks of time off, she inaccurately reported that her symptoms had reappeared 2 years earlier.  Because Netterville was hired by Chevron less than 2 years earlier, the company also began investigating whether Netterville had falsified her medical history questionnaire in addition to considering her leave request.  Ultimately Netterville was given her two weeks of leave.

Netterville’s physician conditioned her release to return to work on additional accommodations.  He recommended that she be relocated to an office closer to her home.  Additionally, due to her alleged hand pain and concentration difficulties, the doctor also advised that Netterville needed to be in a job that allowed for alternate typing and reading rather than reading and typing for extended periods of time.  She also needed to be able to take a short nap during her lunch break.  When Netterville made these requests to her supervisor, he remained silent.  She was allowed, however, to return to work, and she was provided the accommodations she requested during her final 4 days at work.  Ultimately, Netterville was terminated for falsifying information on her medical questionnaire.

The EEOC filed a lawsuit on Netterville’s behalf.  Relying heavily on EEOC-promulgated regulations and its compliance manual (the EEOC is one of the governmental agency litigants that gets to write the authority it then asks a court to rely on to find in its favor –something no private employer is allowed to do), the court of appeals held that Netterville was entitled to a jury trial on her claims because there were fact issues as to whether Netterville had a disability; whether she was terminated for a disability; and whether Chevron provided reasonable accommodation.

This case is an important reminder that any physical or mental impairment may qualify as a disability if it substantially limits a major life activity. Moreover, the major life activity substantially limited need have no bearing on an employee’s employment or performance of his or her job duties. With the passage of the ADA Amendments Act that substantially broadens the coverage of individuals with disabilities, expect more denials of and reversals of employer summary judgments in ADA cases.

Continue Reading Being Chronically Tired May Qualify as a Disability in Texas

A recent Wall Street Journal article described the controversy that e-cigarettes are creating.  As Lauren Etter writes,

[E]lectronic cigarettes, [are] the smokeless nicotine products embraced by a growing number of people trying to kick the habit or avoid bans on smoking in public.  Electronic cigarettes typically consist of a metal tube containing an atomizer, a battery and a cartridge filled with liquid nicotine. When a user sucks on an e-cigarette, a light-emitting diode causes the tip to glow and the atomizer turns the liquid nicotine into a vapor — thus it is called vaping instead of smoking. The vapor can be inhaled and then exhaled, creating a cloud that resembles cigarette smoke but dissipates more quickly and doesn’t have the lingering odor.

Etters’ article started me thinking about whether employers can or should prohibit electronic cigarettes in the workplace.   I’m not a proponent of anything as addictive as nicotine.  However, could employers realize some increase in productivity by permitting smokers to use electronic cigarettes at work?  Presumably, smokers use their regular breaks as their smoke breaks.  Some employees complain, however, that employers tolerate more frequent and longer breaks for smokers than for non-smokers.   Could employers benefit by allowing employees to satisfy their nicotine fix at their desk or break room rather than taking 20 minutes every hour or two?  Indeed, how is the use of an electronic cigarette meaningfully different from the use of nicotine gum or the morning caffeine fix that employees consume at work?  Are there health benefit savings that employers might enjoy by allowing or even encouraging employees to use e-cigarettes instead of smoking regular cigarettes?

Do existing employer policies prohibiting smoking in the workplace (as well as building codes and local ordinances) prohibit the use of vaping at work?  While courts have historically rejected the argument that nicotine addiction is a disability, the Americans with Disabilities Amendments Act and its more expansive definition of disability could call the courts to revisit and closely scrutinize those holdings.  If nicotine addition was recognized as a disability, could employers be required to allows the use of electric cigarettes as a reasonable accommodation?  Would it be difficult for an employer to show the use of an electric cigarette in the workplace is an undue hardship when the employer allows the use of nicotine infused gum or other prescription medicines at work? 

When I started writing this post I was inclined to recommend prohibiting the use of this new technology in the workplace.  After thinking about the answers to the questions I proposed above, I’m not certain I would recommend an employer prohibit the use of electric cigarettes in the workplace.  In the end employers should carefully consider and be able to articulate their legitimate business interest before electing to prohibit the use of electric cigarettes in the workplace.  As of the writing of this post, there are no reported employment court opinions discussing the use of e-cigarettes in the workplace.   With the widening use of this new technology, reported cases are sure to be on the horizon.

Hurricane season begins June 1 for the Texas coast.  The Tropical Meteorology Project from Colorado State University predicts in its 2009 Atlantic Seasonal Hurricane Forecast that there will be 12 named storms; 6 hurricanes; and 2 intense hurricanes this year.

Texas law protects most employees who evacuate their homes and work areas in compliance with a government evacuation order.  The law prohibits employers from terminating the employment of or otherwise discriminating against employees (other than emergency services personnel with adequate emergency shelter and employees needed to restore vital services) who leave their employment to to comply with an emergency evacuation order.  While evacuation orders are most frequently issued in Texas in connection with a  hurricane evacuation order, the law applies to any evacuation order.  Evacuation orders may be issued for emergencies such as wild fires, natural disasters, explosions or water contamination, chemical escapes or spills, terrorism activity, military action and other emergency actions.  Evacuation orders providing employees protection can be issued by local, county, state or federal authorities.

Not only are employees protected from discharge or discrimination from complying with such orders, they may also be eligible for unemployment benefits.  The employer’s unemployment benefit account will not be charged for the benefits paid under this circumstance.

(Photo courtesy of NOAA Aug. 29, 2005 at 11:15 a.m.)