Texas Employment Law Update

Police Sergeant Sues for Overtime Based on Time Spent Reading and Responding to E-mails

Russell Cawyer — Mon, 16 Aug 2010 07:06:34 -0600

Last year I wrote about the risks associated with providing company issued cell-phones or PDA's to nonexempt employees. Since that post, there continues to be lawsuits filed seeking unpaid overtime for the off-the-clock time nonexempt employees spend reading and responding to work-related e-mails. The most recent example is that of a police sergeant for the City of Chicago who filed a collective action on behalf of all similarly-situated police officers who were provided PDA's by the City and who were required to review and respond to work-related e-mails after hours. A copy of the complaint can be downloaded here.

Company's providing their non-exempt employees with PDA's should carefully review their policies and procedures to ensure that they have defensible positions in the event they are confronted with an overtime suit based on the time spent reading and responding to e-mails after hours. Some considerations that I proposed last summer include:

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 non-business 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).

Employers need to be proactive to ensure that the efficiencies provided by technology are not swallowed by the inconvenience and costs associated in the defense of overtime lawsuits

Facts Make the Difference in Misclassification Cases

Russell Cawyer — Wed, 11 Aug 2010 01:08:10 -0600

Lawyers prosecuting and defending wage and hour misclassification cases (i.e., exempt/nonexempt and employee/contractor) will emphasize how fact intensive these inquiries can be. The importance of factual distinctions in litigating misclassification cases is demonstrated by two cases recently decided by the Fifth Circuit. In Cromwell v. Driftwood Electrical Contractors, a panel of the court of appeals held that workers performing cable splicing work in New Orleans were not independent contractors and were employees entitled to overtime. Contrast Cromwell with Thibault v. BellSouth, where a different panel of the court concluded that a cable splicer performing the same work in the same geographic area under similar circumstances, was an independent contractor not entitled to overtime. This table summarizes some of the relevant facts in Cromwell and Thibault.

	Cromwell	Thibault
Length of engagement	11 Months	3 Months
Schedule	Two week shifts (84 hours per week) with 1 day off	Two week shifts (84 hours per week) with 1 day off
Pay	Fixed hourly rate (straight time)	Fixed hourly rate (straight time)
Assignments	Received daily assignments from BellSouth Contractor	Received daily assignments from BellSouth Contractor
Tools and Materials	Supplied by worker	Supplied by worker
Insurance	Workers provided vehicle insurance but Company provided workers compensation	BellSouth Contractor provided the workers compensation
Side Income	Splicing was primary business	Owned a business in another state
Court Conclusion	Employee entitled to overtime	Contractor not entitled to overtime.

Despite the similarities of the work, subtle differences in the facts resulted in different outcomes. In misclassification cases over overtime exemptions or employee/contractor status, facts matter.

Full copies of Cromwell and Thibault can be accessed here and here.

Fifth Circuit Holds Cable Splicer was Independent Contractor, Not an Employee

Russell Cawyer — Tue, 10 Aug 2010 01:00:39 -0600

In another cable splicer misclassification case arising in the aftermath of hurricane Katrina, the Fifth Circuit affirmed a trial court decision that Louis Thibault was an independent contractor rather than an employee. Therefore, he was not entitled to overtime under the FLSA.

Thibault owned a business in his home state of Delaware selling picnic tables, storage tables and golf carts. He also owned several rental properties and realized a small income from racing automobiles. When hurricane Katrina seriously damaged the telephone infrastructure of BellSouth’s grid, Thibault and his friend Bill Peek, drove their RV to Louisiana to perform splicing work on behalf of BellSouth to rebuild the grid. Peek was an experienced cable splicer but Thibault had never worked as a splicer. He did have prior experience as a naval aircraft mechanic and according to him easily learned mechanical tasks if shown how to do the task. Peek taught Thibault the basics of splicing in one evening and Thibault was able to learn the remainder of what he needed to know on the job.

Once in New Orleans, Thibault and Peek worked 14 days shifts (13 days on with 1 day off) 84 hours per week; received a fixed hourly wage ($68 per hour) and were required to provide their own trucks and tools. BellSouth decided what jobs would be done daily and assigned BellSouth contractors to distribute the assignments. Thibault received his daily assignments from the BellSouth contractor.

Thibault had intended to work 6-7 months and then return to his home in Delaware. After only three months; however, he was laid off. He earned $51,628 during the three month period. After he was released he sued BellSouth and its contractors for unpaid overtime claiming he was an employee rather than an independent contractor. The trial court concluded that Thibault was an independent contractor and granted summary judgment for the defendants.

A panel of the Fifth Circuit Court of Appeals affirmed the trial court decision. Applying the economic realities test, the panel found Thibault was not an employee. Significant to its decision was the fact that:

Thibault owned his own business and therefore did not work exclusively for BellSouth and its contractors;
Thibault intended to work on 7-8 months and then return to Delaware;
Defendants considered him an independent contract and many other splicers also considered themselves contractors;
Splicing required little skill and initiative as evidenced by the fact Thibault learned it in one evening;
Thibault continued to oversee his primary business during the three months he performed splicing work.

In the panel’s opinion, there was insufficient evidence in the summary judgment record to create a genuine issue of material fact that Thibault was an employee.

Austin Enacts Mandatory Rest Breaks for Construction Industry

Russell Cawyer — Sat, 07 Aug 2010 07:39:41 -0600

Effective July 29, 2010, the City of Austin requires employers in the construction industry to provide at least ten minute rest breaks to their employees for every four hours worked. The ordinance applies to all employers engaged in work associated with construction projects including alteration, demolition, building excavation, maintenance and renovation of structures or sites.

Employees working less than 3.5 hours or who spend more than half of the work time engaged in indoor administrative or secretarial activities are not required to be provided rest breaks. Rest breaks required under this ordinance must be completely free from all working activities and cannot be combined with an employee's regular meal period. Employers are also required to display postings describing the rest break requirements at every construction site in English and Spanish. The City will prescribe the size, content and locations of signs required by the ordinance under separate rule.

The ordinance provides for a civil penalty of up to $500 for each violation (but only after the employer continues to violate the ordinance after being notified of the offense, in writing, by a City representative). The ordinance also carries Class C misdemeanor criminal penalties for persons failing to provide required rest breaks and for failing to post required signage. Strict liability applies to violations and each day that a violation occurs is a separate offense. Enforcement will be handled on a complaint basis. The law provides a City enforcement mechanism but does not expressly provide for a private right of action.

A draft of the ordinance can be accessed here.

Court Rules Employee Does Not Necessarily Need to Comply with Employer's Heightened FMLA Notice Procedure

Russell Cawyer — Thu, 05 Aug 2010 09:21:02 -0600

The exercise of sound judgment and the uniform, mechanical application of employment policies are not always synonymous. Every FMLA-covered employer in Texas, Mississippi and Louisiana should be interested in the Fifth Circuit’s most recent FMLA case resulting from an employer’s uniform application of its internal FMLA reporting policy. In Saenz v. Harlington Medical Center, the Court decided, what it characterized as a “close question,” that an employee does not necessarily have to comply with an employer’s internally created, heighted notice provision to maintain FMLA protection and that in some cases the employee need only comply with the FMLA’s more relaxed notice requirements.

The plaintiff in Saenz, suffered from partial complex epileptic seizures that caused her to lose consciousness and become unable to perform her job. This normally incapacitated her for two days at time. Saenz requested and was granted intermittent FMLA leave for this seizure condition. Her employer, Harlingen Medical Center (“Harlingen”) had a policy that required employees to contact its FMLA administrator not later than two days after each leave period pursuant to the intermittent leave request. Under Harlingen’s policy, failure to provide the required notice could lead to a loss of FMLA protection. In the following six months, Saenz used intermittent FMLA leave eleven times and provided the required notice each time.

Thereafter, Saenz began suffering from depression and bipolar disorder that caused hallucination and disorientation. She was admitted the hospital and later committed to a behavioral center for three days of evaluation. Saenz’s mother contacted her daughter’s supervisor to advise of the symptoms and that Saenz would not be reporting to work. While at the emergency room (in the same hospital where she normally worked), another Harlingen supervisor personally visited Saenz and observed some of her treatment. In the nine days during which she was incapacitated, Saenz was hospitalized, placed under a judicially created guardianship and eventually released into her mother’s care.

Ten days after first becoming incapacitated, Saenz called Harlingen’s FMLA administrator to advise of her depression/bipolar diagnoses and to discuss the five work absences she suffered as a result of her condition. She also requested approval for intermittent FMLA for these new conditions. Eight days later, Saenz received two letters. The first was from the FMLA administrator advising her that her intermittent FMLA leave request was being processed. The second letter was from Harlingen advising her that her employment was being terminated for excessive absenteeism. The termination letter expressly referenced her failure to comply with the two-day call-in policy.

Saenz sued Harlingen for violations of the FMLA. The trial court dismissed the case holding that that factual issues existed as to whether the employer could rely on its heightened notice provision, namely, the employer’s actual notice of the severity of Saenz’s condition and the lack of evidence that Saenz affirmatively refused to comply with the company’s heightened noticed provisions. The court of appeals also found that fact issues existed as to whether Saenz gave sufficient notice of her need for leave as soon as practicable as required by the FMLA because the evidence showed that her mother told two supervisors of her hallucinations; at least one supervisor visited her in the hospital emergency room and observed Saenz’s treatment; and her mother stayed in constant contact with the employer as to the status of Saenz’s treatment. Based on these facts and this evidentiary record, the court of appeals remanded the case to the trial court for further proceedings.

Dallas Court Strikes Physician Noncompete that Lacked Buy-Out Provision

Russell Cawyer — Mon, 12 Jul 2010 08:48:09 -0600

I've previously written about the specific requirements that must be included in a covenant not to compete with a licensed physician to make the restrictive covenant enforceable. The Dallas Court of Appeals recently affirmed a trial court's decision that a noncompetition agreement between a surgical practice and several limited-partner physicians was unenforceable because the agreement lacked one of the statutorily required provisions. You can access the Court's opinion in Greenville Surgery Center Ltd. v. Beebe here. In short, the noncompete lacked the buy-out clause required by the statute. That defect alone was sufficient to render the noncompetition obligation unenforceable.

Beebe should remind Texas employers that when drafting noncompetition agreements, it is important to have a knowledgeable, Texas attorney review the agreement before having employees or partners sign it.

Texas Supreme Court Holds State Agencies Immune from FMLA Self-Care Lawsuits

Russell Cawyer — Sat, 03 Jul 2010 05:27:57 -0600

In its first FMLA opinion, the Texas Supreme Court held that agencies of the State of Texas cannot be sued for FMLA violations arising out of an employee's FMLA leave taken for his own serious health condition. In University of Texas at El Paso v. Herrera, the Supreme Court of Texas held that, unlike the family care provisions of the FMLA, Congress did not abrogate Texas' sovereign immunity for violations of the FMLA self-care provision and therefore the State of Texas cannot be sued for such violations.

The underlying facts are as follows. Alfredo Herrera was an HVAC technician for the University of Texas at El Paso. Herrera sustained a work-related injury to his elbow requiring a nine month leave of absence. One month after he returned to work, his employment was terminated. He sued alleging that he was terminated for taking personal medical leave under the self-care provision of the FMLA and exercising his First Amendment rights by complaining about unsafe work conditions. UTEP challenged the court's jurisdiction over the claim asserting that it was barred by sovereign immunity. The trial court and court of appeals found that jurisdiction existed.

Acknowledging that the U.S. Supreme Court held that Congress effectively abrogated state sovereign immunity for the FMLA family-care provisions, the Texas Supreme Court found that there was no evidence in the FMLA legislative history or Congressional findings that women took more personal medical leave (or were thought to do so) than men. Because, according to the Court, the self-care provisions of the FMLA were not targeted at an identified pattern of gender discrimination on the part of the States, Congress overreached when it attempted to apply the self-care leave provisions to the states.

While the opinion analyzes complex issues of state sovereignty and Congressional findings, the simple take away from Herrera is that the State of Texas cannot be sued for FMLA violations arising out of an employee's need for leave for self care.

DOL Clarifies Definition of "Son or Daughter" under FMLA

Russell Cawyer — Tue, 22 Jun 2010 14:38:15 -0600

The U.S. Department of Labor has "clarified" the reach of the FMLA by offering an interpretation of the meaning of "son or daughter" under the FMLA. Under the FMLA regulations, a "son or daughter" is defined as:

a biological, adopted, or foster child, a stephchild, a legal ward, or a child of a person standing in loco parentis, who is either under age 18, or age 18 or older and 'incapable of self care because of a mental or physical disability' at the time that FMLA leave is to commence.

The new Administrator's interpretation (and first issued under the FMLA) provides some examples where the the Department would find a parental relationship despite the absence of of a biological or legal relationship such as:

where an employee provides day-to-day care for his or her unmarried partner’s child (with whom there is no legal or biological relationship) but does not financially support the child;
where an employee who will share equally in the raising of a child with the child’s biological parent would be entitled to leave for the child’s birth ;
where an employee who will share equally in the raising of an adopted child with a same sex partner, but who does not have a legal relationship with the child, would be entitled to leave to bond with the child following placement, or to care for the child if the child had a serious health condition, because the employee stands in loco parentis to the child.

You can access a complete copy of the Administrator's interpretation here.

DOL Issues Administrator's Interpretation on Definition of "Clothes" and Whether Changing Clothes is a Principal Activity

Russell Cawyer — Wed, 16 Jun 2010 10:25:00 -0600

The Department of Labor's Wage and Hour Division issued its second Administrator's Interpretation. The Administrator Interpretations are issued by the Division in areas where it believes it is useful to clarify the law as it relates to an entire industry, a category of employees, or to all employees.

Administrator's Interpretation No. 2010-2 discusses the Fair Labor Standards Act's exclusion from work time for certain preliminary and postliminary activities like changing clothes. The FLSA excludes from compensable time the time spent "changing clothes or washing at the beginning or end of each workday" if that time is excluded from compensable time pursuant to "the express terms or by custom or practice" under a collective bargaining agreement. Interpretation 2010-2 provides that exclusion from compensable time "does not extend to protective equipment worn by employees that is required by law, by the employer, or due to the nature of the job." Consequently, the Division takes the position that time spent changing into or out of protective equipment required by law, the employer, or the nature of the job is compensable under the FLSA.

Second, the Interpretation offers the Division's opinion on whether whether noncompensable clothes changing can be a principal activity under the Portal to Portal Act rendering all subsequent activity compensable. The Portal to Portal Act clarifies what activities are intended to be compensable work time such as work occurring before and after the employee's regular work activities. Any activity that occurs after the employee's first principal activity and before the last principal activity is compensable. For example, once an employee performs the first principal activity of the work day, all subsequent activity (e.g., waiting time) is compensable until the last principal activity of the workday. It is the opinion of the Administrator that changing clothes, even if noncompensable, may be a principal activity such that it can make subsequent activities such as walking and waiting compensable.

You can download the full Administrator's Interpretation here.

Can Mega-Class Adjudication of Discrimination Claims Ever Be Fair to Employers?

Russell Cawyer — Mon, 14 Jun 2010 07:55:58 -0600

Mega class-actions attempting to adjudicate discrimination claims on behalf of thousands or tens of thousands of class members are often fundamentally unfair to employers and violate their right to due process. The recent $250M jury verdict against Novartis (5,200 potential class members) and the affirming of a class certification order of up to 1.5 million Wal-Mart workers for various pay and promotional practices highlight the threat that mega-class actions can pose to large employers.

Large class actions adjudicating the claims of hundreds or thousands of employees may be fairly tried when they adjudicate a specific, objective written policy of an employer and significant variables are absent. However, when large class actions attempt to adjudicate claims involving inherently subjective components (such as unwritten rules or practices with dozens, if not hundreds of variables); individual issues must predominate. This is especially true when the issue may involve hundreds or thousands of discrete decisions made by different decision-makers (e.g., promotions or job assignments). A class trial of thousands of discrimination claims tends to devolve into evidence of the personal experiences of a hand-full of class representatives based on a few anecdotal (and usually extreme) examples of conduct (e.g., the Novartis baby-carriage rhyme). This process deprives an employer of being able to defend the individual employment decisions on a case-by-case basis and sacrifices the employer's right to due process in the name of perceived efficiency or economy.

The trial of a mega-class action to adjudicate the claims of 1.5 million employees reminds me of Isaac Asimov's 1955 short story "Franchise". In Franchise, a futuristic United States turns to electronic democracy. Rather than conducting political elections, a supercomputer, Multivac, selects a single "most representative" person from the population. Multivac then questioned the “most representative” person to determine the overall electorate orientation. All elected offices are then filled by candidates the computer deems acceptable to the populace as determined by the "most representative" person.

It would be fundamentally un-American to choose our elected officials by selecting a "single most representative" voter. It similarly violates fundamental notions of due process and fairness to hold employers liable for wide-spread, systematic discrimination involving dozens of variables in a trial that considers the stories of only a handful of the potential class members. Courts should reexamine whether an employer's due process rights can be adequately preserved in the collective adjudication of mega-class action of discrimination claims.

Texas Supreme Court Serves Up Significant Victory for Texas Employers

Russell Cawyer — Fri, 11 Jun 2010 13:22:50 -0600

The Supreme Court of Texas served up a significant victory for Waffle House in a case holding that a plaintiff alleging both a statutory sexual harassment claim and a negligent supervision and retention claim based on the same conduct is limited to recovering solely on the statutory remedy.

Here are the facts as reported by the Court. Cathie Williams worked as a Waffle House waitress for approximately eight months beginning in 2001. During her employment she was subjected to offensive sexual comments from a male co-worker cook. These remarks were sometimes accompanied by physical gestures or attempts at unwelcome flirting. Additionally, the harasser occasionally pushed Williams into the counters and grill; rubbed his arm against her breast; and on one occasion came up behind her, held her arms and pressed his body against hers.

Williams complained to the restaurant manager, but the conduct did not stop. Williams then complained to the district manager. According to Williams, little effort was made to investigate or remedy the offensive conduct. Williams ultimately resignedly complaining that she was constructively discharged.

Williams filed her lawsuit against Waffle House alleging a statutory sexual harassment claim under the Texas Commission on Human Rights Act (TCHRA) and a common law negligent supervision and retention claim for retaining the harasser after Williams' complaints. The jury returned a total verdict on both claims of approximately $3.89 million. Williams elected her remedies under the common law negligence claim which provided her a greater recovery than the statutory claim (and its caps) allowed. The trial court ultimately entered judgment in Williams' favor for $900,000.

Waffle House appealed arguing that Williams' common law negligent supervision and retention claims were completely preempted because her exclusive remedy for workplace sexual harassment was the statutory claim under the Texas Commission on Human Rights Act. Waffle House argued that, at a minimum, the damages had to be reduced to reflect the lower damages caps provided for under the TCHRA.

In its analysis, the Court was persuaded that the statutory remedies should be the exclusive remedies under these facts given the comprehensive procedural rules and remedies the Texas Legislature crafted in creating a statutory sexual harassment claim. Although not specifically articulated, the Court also appeared to be concerned that plaintiffs subjected to workplace harassment might forego the comprehensive administrative procedures under the TCHRA to pursue potentially more lucrative negligence claims, thereby rendering the Texas Workforce Commission's Civil Rights Division less relevant.

The Court held that a sexual harassment plaintiff cannot recover under a negligence theory where the negligence is entwined with the facts of the complained-of harassment. Stated differently, where the "negligence is rooted in facts inseparable from those underlying the alleged harassment," the plaintiff's sole remedy is a statutory harassment claim. However, where a negligence claim arises from facts unrelated to the sexual harassment (e.g., assault-based negligence claim), the TCHRA may not necessarily provide the sole remedy.

You can download the majority opinion and dissent here.

Supreme Court of Texas Directs Trial Court to Vacate Order and Send Case to Arbitration

Russell Cawyer — Fri, 11 Jun 2010 11:11:45 -0600

Texas courts routinely enforce arbitration agreements between employers and their employees. In most parts of the state, lawyers representing employees agree to go to arbitration upon being presented with a copy of an arbitration agreement signed by the plaintiff-employee. On occasion, however, there are disputes over the enforceability of an arbitration agreement. The Supreme Court of Texas’ recent opinion spotlights another challenge to an employer’s alternative dispute resolution program.

In In re Odyssey Healthcare, Maria Morales sued her El Paso-based employer (and her supervisor) for negligence after she was injured at work when she tripped on an uneven step at a patient’s home. Odyssey is a non-subscriber (i.e., it does not have workers’ compensation insurance) and provides its employees with an “Occupational Injury Benefit Plan.” All Odyssey employees must enroll in the program as a condition of employment. The program requires that all disputes between the employer and employee must be resolved through mandatory, binding arbitration. The arbitration was to be conducted with an arbitrator selected from a panel based in Dallas. The employer reserved the right to modify or terminate the arbitration program, but only after providing the employees with advance notice.

The plaintiff challenged the arbitration program arguing that it was invalid, unenforceable and substantively unconscionable; it violated the Texas Workers Compensation Act’s non-waiver provisions; the Federal Arbitration Act violated the Tenth Amendment by encroaching on a state’s power to enact and regulate its workers’ compensation system; and the agreement was illusory. The Texas Supreme Court rejected each of these arguments and directed the trial court to vacate its prior order and grant the motion to compel arbitration.

You can access the full opinion here.

Fifth Circuit Holds Employer Used Per Diem as Ruse to Avoid Proper Overtime Rate

Russell Cawyer — Thu, 10 Jun 2010 14:52:20 -0600

The Fifth Circuit Court of Appeals affirmed that an employer willfully violated the FLSA by excluding “per diem” from the employee’s regular rate of pay and thereby avoiding increased overtime wages. In Gagnon v. United Technisource, Inc., the employer separated the plaintiff’s compensation into straight time, an hourly per diem payable up to the first 40 hours worked each week, and an hourly overtime rate. After a year of employment, the employee received a “raise” for which the employer increased both the per diem and overtime rate by $1, but not the regular rate of pay.

The employee sued for unpaid overtime under the FLSA, while the employer argued that the overtime rate already exceeded that required and that the per diem should not fall under the regular rate of pay because it equaled reimbursable expenses. Rejecting those defenses, the Court agreed that a per diem could be excluded, but reasoned a legitimate per diem would not vary based on number of hours worked. The employer also tried to offset the back overtime wages by the amount of expenses saved when the employee moved closer to work. The employee’s change in address would have resulted in fewer per diem expenses, but the Court reasoned that since the hourly per diem should have been included in regular rate of pay in the first place, the employer could not offset the overtime pay owed.

Texas employers should review their methods of calculating overtime rates to ensure compliance with the FLSA, and specifically to ensure that per diem pay is included in the regular calculation. Failure to properly calculate these rates may render employers vulnerable to significant liabilities in the form of back overtime wages, attorney fees, costs, and liquidated damages.

The Editor thanks Chandler Craig, a third year law student at the University of Texas who is clerking for the firm, for drafting this post.

U.S. Department of Labor Issues Revised Child Labor Regulations

Russell Cawyer — Tue, 25 May 2010 06:00:00 -0600

The U.S. Department of Labor has issued revised regulations dealing with child labor in non-agricultural employment. The new regulations take effect on July 19, 2010. The new regulations specify the kinds of employment that minors may perform and the hours in which they can perform the work. Any Texas employer employing individuals age 18 or younger should closely review these new child labor regulations to ensure that the child workers are engaged in appropriate activities. You can access a full copy of the revised regulations here.

U.S. Supreme Court Reverses Disparate Impact Win for Employer

Russell Cawyer — Mon, 24 May 2010 09:51:16 -0600

The U.S. Supreme Court reversed and remanded a win the City of Chicago obtained against an African-American class of firefighter applicants seeking positions with the City. In Lewis v. City of Chicago, a group of firefighter applicants filed a lawsuit against the City challenging the City's 1996 decision that it would only consider those applicants who scored "well-qualified" on the entrance examination. Applicants who passed the test, but only scored "qualified" were not further considered for employment opportunities.

The plaintiffs challenged their exclusion from the screening process when the City exhausted its pool of well-qualified applicants but failed to begin considering those who scored "qualified" on the test. The thrust of the plaintiffs' claim was that the arbitrary decision to only consider those "well-qualified" applicants had a disparate impact on racial minorities. The plaintiffs won at trial, but their victory was reversed when the court of appeals held that because none of the applicants filed a timely charge of discrimination from the date the decision was made to only hire applicants from the "well-qualified" list, their claims were untimely and barred.

The U.S. Supreme Court reversed the court of appeals holding that a plaintiff who does not file a timely charge of discrimination challenging the adoption of an allegedly unlawful practice may still assert a disparate impact claim in a later charge challenging the employer's use of that practice as long as the plaintiff alleges each of the elements of a disparate impact claim. A complete copy of the Court's opinion can be accessed here.

A Non-Employment Case Important to Employment Lawyers

Russell Cawyer — Tue, 27 Apr 2010 10:58:34 -0600

In a non-employment case of significant importance to employers and employment lawyers, the U.S. Supreme Court held today that imposing class arbitration on parties who have not agreed to class arbitration is inconsistent with the Federal Arbitration Act and is therefore not permitted. This case arose out of an MDL antitrust case alleging that certain competitors were engaged in a price-fixing scheme. The parties to the underlying transaction were signatories to an arbitration agreement that was silent on whether the arbitrator had the authority to conduct class action arbitrations. For a more detailed review of the factual and procedural background of the case, see the SCOTUS Wiki on the case here.

The significance of this case to employers is that many employment agreements containing arbitration provisions are also silent on the issue of class arbitration (and some specifically exclude class action arbitration). Without doubt this opinion will be used to argue that an arbitrator lacks the authority under the FAA to arbitrate class action employment disputes where the parties' agreement, or other probative evidence, fails to establish that the parties agreed to arbitrate those claims collectively.

Reduce 2010 Payroll Taxes by Hiring the Unemployed

Russell Cawyer — Mon, 26 Apr 2010 07:05:33 -0600

In March 2010, the President signed the Hiring Incentives to Restore Employment Act (“HIRE Act”). The law was part of a $17.6 billion jobs creation package that includes incentives for businesses to hire unemployed workers. This law provides Texas employers with an opportunity to reduce some of their payroll tax obligations for 2010.

The HIRE Act provides, among other things, an exemption for the employer’s share of Social Security payroll taxes in 2010 (normally 6.2 percent for the first $106,800 of wages) for each eligible employee that is hired between February 3, 2010 and January 1, 2011. To qualify for the exemption, the employee must: 1) swear that he did not work more than 40 hours during the last 60 days; and 2) not replace another employee except one who voluntarily resigned or was terminated for cause. Additionally, the eligible employee must not be related to the employer. The IRS has published an affidavit for use by eligible employees. (Form W-11). The affidavit is not filed with the IRS but is retained by the employer to justify the use of the exemption in the event of an IRS audit.

Additionally, the law provides a tax credit for retaining employees. Employers that retain newly hired employees for at least 52 consecutive weeks can claim a tax credit on their 2011 tax returns if they meet certain conditions. To be eligible for the tax credit (i.e., a dollar for dollar reduction in tax), the employee must: 1) be employed for 52 consecutive weeks; and 2) the employee's wages in the last 26 weeks of the 52 week period must be at least 80 percent of his wages during the first 26 weeks of the period. The tax is capped at the lesser of $1,000 or 6.2 percent of the employee’s wages during the 52 week period. These provisions provide an opportunity for an employer to reduce its payroll tax obligations during this period of economic recovery in 2010.

For more information, see these links:

Two New Tax Benefits Aid Employers Who Hire and Retain Unemployed Workers

HIRE Act: Questions and Answers for Employers

Special Payroll Tax Exemption Form Now Available

Supreme Court of Texas Grants Review in Stock-Options Noncompete Case

Russell Cawyer — Fri, 09 Apr 2010 14:28:30 -0600

Last summer, I detailed the Dallas Court of Appeals' decision in Marsh USA, Inc. v. Cook where the court held a noncompetition agreement supported only by stock-options as consideration was unenforceable. You can read that post here. Today, the Supreme Court of Texas announced that it would hear the appeal from the Dallas Court of Appeals. You can view the order list here.

Review of the Cook case gives the Court an opportunity to extend (or break) its streak of easing the standards for enforcement of restrictive covenants in Texas that I have previously detailed. (Post here).

Is the EEOC Getting Interested in Disparate Impact Claims?

Russell Cawyer — Tue, 06 Apr 2010 05:00:05 -0600

Last week the EEOC issued two Informal Discussion Letters addressing employment practices or policies that might create liability under a disparate impact theory of discrimination. Since the discussion letters do not constitute official opinions or interpretations of the Commission, the significance of back-to-back letters on the same topic is not the content (the letters do not break any new legal ground or make any surprising pronouncements), but that it suggests the Commission might be interested in finding and bringing more disparate impact claims. The following is a brief summary of the discussion letters.

The first letter dated February 19, 2010, discusses whether a proposed qualification standard that Public Health Directors possess a master's degree, without the possibility of substituting experience or other education, violates Title VII. The Attorney-Advisor of the Office of Legal Counsel noted that if the master's requirement had a significant disparate effect on a protected group, it might be unlawful if the employer cannot justify that the requirement is "job related and consistent with business necessity" and there is no alternative practice "that would be equally effective in predicting job performance, but that would not disproportionately exclude the protected group."

The second letter dated March 9, 2010, discusses employers' use of credit checks to screen job applicants. While acknowledging that the EEOC has no authority to enact legislation to prohibit employer credit checks, its authority does extend to circumstances where an employer's use of credit information disproportionately excludes minority candidates and the employer was unable to show that the practice was needed to operate safely or efficiently. The Commission's Assistant Legal Counsel also noted that in May 2007, an attorney who primarily represents class action plaintiffs against employers testified that "credit checks have not been shown to be a valid measure of job performance." Including a reference in the discussion letter to testimony opining that credit checks do not effectively predict job performance (and then posting the letter on the Commission's website) suggests that some at the Commission may share a similar view about the use of credit checks to screen applicants.

While these Informal Discussion letters do not constitute a written opinion or interpretation of the EEOC they are instructive in that they highlight an issue that the EEOC is focusing at least some of its resources.

City of Houston Adds Sexual Orientation and Gender Identity as Prohibited Types of Discrimination

Russell Cawyer — Mon, 05 Apr 2010 09:48:17 -0600

By Executive Order dated March 25, 2010, Houston Mayor Annise Parker, added sexual orientation and gender identity as protected categories under the City's anti-discrimination, harassment and retaliation policy. The Order prohibits discrimination, harassment and retaliation based on gender identity and sexual orientation in all of the City's employment, contracting and vending activities and in the provision and accessing of all City services, facilities, programs and activities.

Specifically prohibited the policy are the following:

Failing or refusing to hire, recruit, appoint, promote or train any individual or otherwise discipline, demote, transfer lay off, fail to recall, or terminate any individual because of such individual's sexual orientation and/or gender identity;
Limiting, segregating or classifying employees or applicants in a way that would deprive, or tend to deprive, any individual of equal opportunity or otherwise adversely affect the status of the employee or applicant because of the individual's sexual orientation or gender identity;
Failing or refusing to recommend any contract or purchase for award based on a contractor or vendor's sexual orientation or gender identity;
Failing to make available to any member of the public or employee use of a city facility or receipt of city service because of their sexual orientation or gender identity;
Impeding access by an employee or member of the public to a city restroom facility that is consistent with and appropriate to that person's expression of gender identity;
Limit participation by any city employee or member of the public in any city-sponsored activity because of the person's sexual orientation or gender identity in which they would otherwise be permitted to participate.

You can access a full copy of the Executive Order here.