Texas Employment Law Update

Conducting Internal I-9 Self-Audits

Russell Cawyer — Wed, 16 May 2012 07:32:30 -0600

In an election year, immigration issues remain front page news. With continuing scrutiny on immigration and employment, prudent employers should periodically conduct internal I-9 self-audits to ensure that its I-9 paperwork is complete and accurate. In this morning's guest post, Chris Taylor, immigration lawyer and publisher of the Texas Immigration Law Blog, gives us his tips for conducting effective I-9 self-audits.

Tips For Conducting An Internal Audit Of Form I-9s

From my experience, an employer can never be fully prepared for an I-9 audit; however, a prudent employer can have a firm grasp on what the government will likely find by conducting an internal audit. A trained eye can spot deficiencies very quickly but having a process can make things much easier for the untrained eye. I have outlined three basic steps and identified common mistakes for the prudent employer to consider when conducting an internal audit.

FIRST: GATHER THE I-9s AND DISPOSE OF ANY YOU DO NOT NEED

The most common mistake that could lead an agent to raise an unnecessary eyebrow is finding a mistake on an I-9 that was not needed in the first place. The golden rule is that "less is more" meaning that an employer should not keep I-9s that it does not absolutely have to. While the employer may mean well and want to show that it has nothing to hide, an unnecessary I-9 has no upside but can cause tremendous harm by making agents overly suspicious.

The employer's first mistake is retaining an I-9 for an employee who is exempt from the I-9 requirement. This usually occurs when the employer has long-term employees. Employees hired on or before November 6, 1986, are exempt from the I-9 requirement, unless that employee left the company and was rehired after November 6, 1986.

Another common mistake is keeping an I-9 past the mandatory time. If an employee is terminated, an employer must keep the I-9 for three years after the employee was hired or one year after termination, whichever is later. An employer should not retain the I-9 of a terminated employee when it can lawfully dispose of it. Why unnecessarily raise eyebrows? An employer also does not need I-9s for independent contractors.

SECOND: VERIFY THAT EACH I-9 IS COMPLIANT

This means looking at each I-9 to ensure that it complies with immigration regulations. Begin with Section 1 and ensure that everything is filled in correctly and legibly. The most common mistake that I have seen is a missing employee signature. Make sure that the employee has signed Section 1. Another common mistake is that the employee forgets to check his or her status, e.g. U.S. citizen or legal permanent resident.

The only caveat for Section 1 is that there is technically no requirement that an employee fill in his social security number. That part is optional, unless the employer participates in the E-verify program. Requiring an employee to give their social security number could be deemed unlawful discrimination. If the employer is not using E-verify, it can disregard the social security number portion. If an employee does provide his social security number, the employer should check for any blatant errors.

A common mistake in Section 2 is that the employer fails to put all the necessary information in the verification section, such as expiration dates. An employer should make sure that the employee lists the expiration date for drivers' licenses and other identification. Another common mistake is when the employer's representative fails to sign Section 2. Employers should sign the form and put the employer's entire address. It takes time, but better safe then sorry.

Another tip for Section 2, employers are not required to make photocopies of the documents presented unless it is using E-verify. If the employer is not using E-verify, then it should not keep copies of the documents. If an employer retains copies the supporting documents it must then do so for all of its employees. Plus, the employer's only requirement is to see if the documents are fraudulent on their face. Why keep a copy of these documents so that a highly trained agent can second guess your work? Don't keep copies.

THIRD: KEEP THE I-9s STORED IN A SAFE PLACE

ICE takes storage very seriously. Improper storage of I-9's can result in fines. For instance, Abercrombie & Fitch paid a fine of over $1 million due to technology problems related to its electronic storage system. A&F didn't have any undocumented aliens or problems with the actual documents themselves; merely problems with the technology related to the storage of those documents. Thus, if you want to use an electronic system make sure you have a reputable program. If you use the old-fashioned paper system, make sure that the I-9s are stored separate from the other employee files and that you know who has access to them. The name of the game is "limited access."

A self audit can be a time-consuming process, and I truly suggest speaking to an attorney that is familiar with the immigration regulations. However, if you choose to conduct your own internal audit, these tips should help you get started.

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Texas At-will Employees Cannot Prevail on Fraud Claims

Russell Cawyer — Mon, 30 Apr 2012 08:28:18 -0600

Common law employment claims have certain advantages for plaintiffs over statutory discrimination, harassment or retaliation claims. For starters, there are no administrative prerequisites to exhaust and the kinds of damages one can seek for common law claims can sometimes be be more "creative" than the straight forward, capped damages recoverable under statutory claims. In my nonscientific, anecdotal study, I've seen an uptick in the number of common law claims for fraud filed by "at-will" employees filed recently.

The Fifth Circuit recently published a new case that will be useful in defending all fraud claims filed by at-will employees. In Sawyer v. EI DuPont de Nemours & Co., the Court held that under Texas law, at-will employees cannot maintain a claim for fraud based on a loss of employment. The holding in Sawyer is not necessarily breaking new law; however, it summarizes its holding succinctly in a single paragraph making it easy to present to a trial court considering special exceptions or a summary judgment motion on an at-will employee's fraud claim.

You can access the complete opinion here.

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Wal-Mart Opts Out of Texas Workers' Compensation Scheme

Russell Cawyer — Thu, 26 Apr 2012 08:08:11 -0600

Texas is the only state that allows employers to opt-out of the workers' compensation system. Nonsubscriber status comes with benefits and disadvantages. Wal-Mart Stores' recent announcement that it would opt-out of the Texas workers' compensation system is significant given that Wal-Mart is one of the largest private employers in the state.

I invited Steve Bent, the Executive Director of the Texas Association for Responsible Nonsubscribers, to author a guest post on the ramifications of Wal-Mart's decision. Here are Steve's thoughts.

As one might expect Walmart's recent decision to operate as a nonsubscriber to workers’ compensation in Texas is drawing a lot of attention. Walmart represents its new program will give the company “an opportunity to provide better care for our associates while also better managing our costs.” I think Walmart will ultimately determine its own fate in the court of public opinion.

As we all know the key to nonsubscription is balance. It is no secret that a well designed, well governed nonsubscriber program can reduce workplace injuries and therefore significantly reduce related injury costs. But only those programs that utilize a proactive safety culture focused on injury prevention and quality benefits balance the desire for cost-savings without cost to employee welfare.

As the largest nonsubscriber in Texas and the largest employer in the nation, Walmart’s plan and plan governance will undoubtedly face intense scrutiny. I am hopeful Walmart will choose responsible leadership by building a nonsubscriber program to not only reduce workplace injuries but also offer quality benefits in a manner that its own employees agree is superior to options previously available.

I am hopeful Walmart will choose responsible governance and

Measure its success through injury prevention and the quality of care available to injured associates rather than mere cost savings.

Provide quality benefits in a straightforward manner rather than implementing an overly complex plan that provides avenues to escape responsibility.

Provide impartial options to address employee disputes rather than requiring employees to enter into agreements that limit options.

Work with independent professionals that support the needs of Walmart and its associates rather than those willing to only side with Walmart.

The importance of Walmart’s decision to become a Texas nonsubscriber is that Walmart’s actions will not only reflect on the entire nonsubscriber community but also the nonsubscriber option and the unique nature of Texas’ workers’ compensation system, which allows most private sector employers to choose nonsubscription.

If the nation’s largest employer can demonstrate an ability to operate as a responsible nonsubscriber; freedom, choice and innovation will hopefully prevail. If not, Walmart could prove to be a tipping point in the battle to maintain the freedom to provide quality benefits outside of workers' compensation.

If you are interested in learning more about nonsubscription status or keeping apprised of the most recent developments in this area, I would encourage you to contact Steve and join his organization.

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Supreme Court of Texas Confirms Availability of Punitive Damages in Public Policy Discharge Cases

Russell Cawyer — Mon, 23 Apr 2012 08:19:18 -0600

Texas is an at-will employment state where employees and employers are free to end the employment relationship at any time and almost for any reason. The Texas Supreme Court has created a single public policy exception to the at-will employment rule --the Sabine Pilot wrongful discharge claim. Under that judicially created claim, an employee has a cause of action against an employer if the employee is terminated solely for refusing to perform an illegal act.

In a recent Texas Supreme Court opinion, the Court considered whether punitive damages were available in a public policy termination case, and if so, what was the proper standard for such an award. The case arose after a former employee, Martinez, sued his employer after he was terminated for allegedly refusing to drive a company truck that was not in compliance with all Department of Transportation regulations. After a jury trial, he was awarded $250,000 in punitive damages (as well as other modest damages) against his former employer --Safeshred.

On appeal, Safeshred argued that punitive damages were not recoverable in a Sabine Pilot claim. Safeshred's theory was that the judicially created cause of action sounded more in contract law than tort law and therefore punitive damages should not be recoverable. Safeshred also argued that even if punitive damages were recoverable, Martinez's facts were insufficient to establish the requisite culpability for the recovery of such damages.

The Supreme Court of Texas concluded that a Sabine Pilot claims is more akin to a tort claim than a contract claim and therefore punitive damages were recoverable. In evaluating the standard necessary to recover punitive damages, the Court announced that a Sabine Pilot plaintiff may recover punitive damages where there is evidence that the employer: 1) circulates false or malicious rumors about the employee before or after the discharge; 2) actively interferes with the employee's ability to find other employment; 3) harasses the employee in connection with a wrongful firing; or 4) knows the retaliatory firing is unlawful and does it anyway. The illegal directive alone, however, is insufficient to warrant a punitive damage award. Similarly, negative remarks about the employee in internal personnel records of the defendant employer are insufficient without a showing that such information was publicly communicated to other companies in the industry.

In evaluating Martinez's evidence against this new standard, the Court held that there was insufficient evidence to support the punitive damage award and reversed that portion of the award.

You can download a complete copy of Safeshred, Inc. v. Martinez here.

Lubbock Company Offers New "Service" --An Incredibly Bad Idea

Russell Cawyer — Wed, 11 Apr 2012 07:49:25 -0600

This morning I heard about a new service offered by a Lubbock, Texas company that raised my eyebrows--nude maid service. I've heard of a lot of bad employment relations ideas in my career, but on my drive to work this morning, I was hard pressed to think of one that was worse than this one. Legal pitfalls apart and having gone to law school in this very conservative West Texas community, I cannot imagine this business succeeds. I mean, when I was in law school, Lubbock was so conservative that it was a "dry" town and you had to leave the city limits above 89th Street to buy beer (although I understand that since has changed). I also tried to image all of the impediments this "business" will face. For example, how will the company obtain essential and necessary insurance? Who would write even general liability coverage let alone EPLI insurance. Certainly law enforcement will provide the company with close scrutiny to ensure the "maid service" is not a front for other nefarious activity. Finally, can you say "potential for sexual harassment" of the employees/independent contracts?

By the time I arrived a work I had yet to think of a worse employment relations idea for a business that I remembered actually being implemented. If you can think of a employment relations idea worse than nude maid service, leave it in the comments.

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When is the Best Time to Try and Settle Employment Litigation?

Russell Cawyer — Tue, 10 Apr 2012 07:23:35 -0600

I like to try cases to judges and juries but my enjoyment almost always comes at great out-of-pocket expense to my employer-clients in terms of cost of defense. The reality of any civil practice is that most cases will settle or be disposed of short of trial When it comes to settling employment disputes, the earlier settlement are reached, the earlier the employer has certainty over the outcome and can focus its attention operating its business.

Jon Hyman is an employment lawyer in Ohio who recently opined that while an employer's motion for summary judgment is pending (and before can be an ideal time to leverage a settlement because the Plaintiff runs the risk of having the case disposed before trial and the employer risks increased settlement demands or an eventual trial if the motion for summary judgment is denied. I can't disagree with Jon's assessment and he makes a good point. However, in my experience I frequently encountered situations where the parties are so enamored by their summary judgment briefing (the employer just "knows" (read believes) the motion will be granted and the employee is equally convinced it will be denied) that that parties appear to be evaluating different cases making settlement more difficult (i.e., the employer believes the case is frivolous and the employee expects to try the case to a jury of his or her peers).

I once heard a plaintiff's lawyer I respect tell a defense lawyer that he would not agree to a mediation date until the employer's motion for summary judgment was heard by the court. The plaintiff's lawyer told me later than so long as the employer has a motion for summary judgment pending the employer wouldn't see the "value" in his client's case. Therefore, the plaintiff's lawyer wanted, even insisted, that the employer's motion for summary judgment heard and ruled on before going to mediation. Eliminating the uncertainty in whether a dispositive motion will be granted or not certainly ensures the parties are evaluating the "same" case and increases the likelihood that the case will be settled.

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Supreme Court of Texas Rejects At-Will Employee's Argument that Agreement to Waive Jury Trial was Coerced

Russell Cawyer — Fri, 09 Mar 2012 09:15:13 -0600

The Texas Supreme Court issued an opinion this morning holding that advising an at-will employee that his employment will be terminated if he does not sign a mutual waiver to resolve disputes without a jury is not unlawful coercion sufficient to sset aside the agreement. If you read this blog frequently, you know I am a big proponent of using agreements to waive jury trials instead of arbitration agreements. You can read my reasoning in the posts assembled here.

In In re Frank Kent Motor Company, the high-end luxury car dealer required its at-will employees to agree, as a condition of employment and continued employment, to enter mutual agreements to waive the right to jury trial and instead resolve claims before a judge sitting without a jury. Steven Valdez, a 28-year employees of Frank Kent, was presented with the agreement and originally failed to sign it. When approached about his failure to sign the Agreement, Valdez expressed his desire not to sign the Agreement. According to the opinion, Valdez's manager told him he would no longer have a job if he didn't sign the Agreement. Valdez then signed the Agreement. A year later, Valdez's employment ended. He sued in court for age discrimination and demanded a jury trial. Frank Kent filed a motion to strike the jury demand. The trial court refused to strike the jury demand. The court of appeals denied Frank Kent's request for mandamus relief. However, the Supreme Court conditionally granted the mandamus relief meaning that Valdez will not get a jury trial.

The Supreme Court of Texas reasoned that because Valdez was an at-will employee and could resign or be terminated at any time and for any reason, it was not coercion for an employer to require the at-will employee to agree to waive resolution of disputes by jury trial as a condition of employment or continued employment. Stated another way, Justice Lehrmann succinctly stated that "an employer's threat to exercise its legal right cannot amount to coercion that invalidates a contract." Because the Court upheld the jury waiver, the case will be remanded to the trial court for further proceedings including the possibility of a trial before a judge.

You can download a full copy of the Court's opinion here.

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NLRB Posting and Goose/Gander Rule for Employer and Employee NLRA Rights

Russell Cawyer — Mon, 05 Mar 2012 09:17:21 -0600

By now we know that one of two federal district courts considering the issue has upheld the NLRB's power to mandate most employers post Notice of Employee's NLRB rights to form and join unions. While the NLRB is making employers educate employees about some rights under the NLRA, the required posting doesn't go far enough in educating employees about their rights. Employers can (and perhaps should) advise employees, through postings of the employer's own, that employees have the right NOT to form unions and NOT to join unions. These employer-crafted posters can explain to employees, through posting, the reasons why union formation is not in their interest. (In fairness, the posting does say that employees have the right not to engage in any of the detailed activities, but its a mere passing reference and is not detailed like the rights in support of unionization).

Rather than relying on the NLRB's one-sided posting in favor of unionization, which most employers will now be forced to post in April 2012, employers should consider preparing their own posters to provide the other side of the notice equation and educate employees that they are under no obligation to create or form unions; remind employees of the wages, privileges and benefits they already possess without the necessity of paying a portion of their wages to the union in the form of union dues; and educating employees about the disadvantages and consequences that union membership offers.

Before an employer posts an employer-generated notice, however, it should be carefully reviewed by the employer's legal counsel because what can and cannot be said to employees about unions are subject to rules that are sometime counter intuitive. If the NLRB would publish a rule requiring employers to give this kind of full and fair notice, I would call it the "Goose and Gander" rule.

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BREAKING: NLRB Posting Rule Effective, But Not the Consequences of Failing to Post

Russell Cawyer — Fri, 02 Mar 2012 13:18:32 -0600

I wrote before about several challenges to the NLRB's controversial rule requiring employers to post notice of employee rights to form and join a union. Today, a court has rule on one of those challenges. In essence, the Court upheld the NLRB's ability to require employers to post the notice of employee rights. However, the Court struck the consequences the NLRB proposed for the failure to post the required notice (i.e., failing to post was an unfair labor practice in itself and tolled the statute of limitations for bringing other ULP claims).

You can download a copy of the Court's opinion in National Association of Manufacturers v. NLRB here.

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Paying Texas Employees Using Debit Cards

Russell Cawyer — Fri, 02 Mar 2012 09:30:09 -0600

Some employers have experimented using debit card payroll systems to decrease their payroll processing and administration costs. Frequently, Texas employers ask whether they can pay their Texas employees using debit cards. The answer is "yes" but only with the employee consent.

Texas law provides that employees must be paid in one of four forms:

In U.S. currency;
By written instrument issued by the employer and negotiable on demand at full face value in U.S. currency;
By electronic funds transfer; or
In any other kind or form agreed to in writing by the employee.

According to the Texas Workforce Commission advises that Texas employers can pay their employees using debit cards so long as the employees agree in writing and the use of the debit card does not result in any fee charged to the employee. Consequently, employer may be able to reduce their payroll processing expenses via debit card payments but they need to ensure that those means don't cost the employee anything and the employee agrees in writing to the form of payment.

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Archive for Webinar on Investigating Employee Complaints in the 21st Century Now Available

Russell Cawyer — Thu, 01 Mar 2012 06:21:12 -0600

Yesterday I hosted a webinar on Investigating Employee Complaints in the 21st Century: Comprehensive Investigations of Complaints of Discrimination, Harassment and Misconduct. There was a great turnout and many good questions posed from the participants. If you missed the presentation, you can watch the archive here.

I am actively seeking suggestions for interesting human resource or employment law topics for the next in our series of webinars scheduled for early this summer. Please leave your suggestions in the comments.

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Has the Expanded Definition of Disability under the ADAA Gone Too Far?

Russell Cawyer — Wed, 22 Feb 2012 07:33:26 -0600

Daniel Schwartz at the Connecticut Employment Law Blog has an interesting post today about the effect the American Psychiatric Association's proposed changes the Diagnostic & Statistical Manual could have to the Connecticut body of disability discrimination law. While Connecticut is unique, according to Schwartz, in its definition of disability and expressly includes mental conditions listed in the current DSM as disabilities, I wrote (facetiously) last year that under the ADA's new, expanded (and inclusive) definition of disability, having a disorder that compelled excessive masturbation (i.e., hypersexual disorder) could qualify as a disability under the American with Disabilities Act entitling an employee to all manner of reasonable accommodation in the workplace.

In determining whether a mental impairment qualifies as a disability under the ADA, plaintiffs sometimes argue that because the mental impairment is a recognized disorder under the DSM, it qualifies as a mental impairment under the ADA. While the identification of a mental disorder in the DSM is not alone sufficient to satisfactorily show that an individual with that disorder is disabled, given the lower standard necessary to show that an impairment substantially limits a major life activity, it is not a stretch to believe that a trial court would find a genuine issue of material fact as to whether a mental disorder like hypersexuality, qualified as a disability. I predict that eventually, Congress' massive expansion of the ADA will compel a trial court to recognize an individual as disabled under circumstances that were never contemplated by Congress and will be viewed as outrageous to much of the general public. Until that occurs, and the media uncovers and widely reports it, there is little likelihood that Congress will revisit (or rein in) its extension of ADA rights.

Court Holds Forfeiture Provision in Executive Stock Incentive Program Unenforcable Noncompete

Russell Cawyer — Thu, 16 Feb 2012 13:56:22 -0600

Covenant not to compete cases normally arise when an employer seeks to enforce a restrictive covenant by having a former employee enjoined from breaching the covenant and working for a competitor. They can also arise when the employee is not expressly prohibited from competing, but is subjected to severe economic penalty if he engages in competition. The recent case of Drennen v. Exxon Mobile Corporation from the Fourteenth Court of Appeals exemplifies the forfeiture scenario and the consequences that can arise when those programs do not comply with the Texas Covenant not to Compete Act.

In Drennen, the plaintiff worked for Exxon for 31 years. In August 2007, he tendered his retirement papers. During his employment, Drennen participated in Exxon's Incentive Program that awarded restricted stock awards and bonuses to reward high-performing employees and to dissuade high-achieving executive-level employees from leaving Exxon to work for competitors. At his retirement, Drennen had 73,900 shares (approximately $6.2 million) of Exxon stock through the Incentive Program.

The Incentive Program allowed Exxon to cancel the employee's awards if he engaged in "detrimental activity." Detrimental activity was defined, in relevant part, as the employee's acceptance of duties to a third party that creates or appears to create a material conflict of interest and includes becoming "employed or otherwise engaged by an entity that regulates, deals with, or competes with" Exxon. The Incentive Program provided that New York law would be used to govern the agreement. The program also lacked any restrictions as to time, geographic area or scope of activity that might constitute detrimental activity.

After Drennen retired, he interviewed for a position with the Hess Corporation --a global, integrated energy company. Drennen informed Exxon that he was considering taking a position with Hess and Exxon warned Drennen that he would likely forfeit his incentive awards if he accepted the position. Nonetheless, Drennen accepted the job with Hess and Exxon notified Drennen that his incentive awards were canceled.

Drennen sued Exxon on a variety of theories. Exxon won following a jury trial. Drennen appealed arguing that the "detrimental activity" clause of the Incentive Program was tantamount to a noncompete that was unenforceable under Texas law. In reviewing the case, the Court of Appeals had to determine two interrelated questions: 1) is the detrimental activity clause a noncompetition provision; and 2) does New York or Texas law govern the interpretation of the program.

The Court first analyzed whether the enforceability of the "detrimental-activity" provisions differed under New York and Texas law. According to the Court, the "detrimental-activity" provision was enforceable under New York law (Drennen loses) but not enforceable under Texas law (Drennen wins). The Court reasoned that under Texas law, "covenants that place limits on former employees’ professional mobility are restraints of trade and are governed by the Covenants Not to Compete Act." According to the Court, the Act applies regardless of whether the agreement at issue expressly prohibits an employee from competing or subjects the employee to severe economic penalty if he engages in competition. Because the "detrimental-activity" provision subjected Drennen to a severe economic penalty if he competed (i.e., a forfeiture of over six million dollars), the Act applied. It was undisputed that the Incentive Program lacked limitations as to time, geographical area and scope of activity to be restrained.

Having determined that New York and Texas law differed in conclusion of the enforceability of the “detrimental-activity” provision, the court then made the outcome determinative decision of what law should apply. While noting that parties are frequently permitted to elect the law that will govern their transactions, the appellate court concluded that Texas rather than New York law applied because Texas has a materially greater interest in the dispute between the parties. Texas has a strong public policy interest in determining the enforceability of covenants not to compete used in this state. Drennen worked the majority of his career in Texas; he signed the agreements in Texas; he currently resides in Texas and Exxon is based in Texas. The court rejected Exxon's argument that, as a large multi-national corporation, it has a stronger interest in uniform application of its employment agreements than Texas’s public policy interest because the Incentive Program at issue provides exceptions to New York law application for foreign-national employees that there was no showing that making other exceptions would significantly impede Exxon's operations. Because Texas law dictated that the "detrimental-activity" provision was not enforceable the court ordered that Drennen's awards be returned to him.

Because of the amount in controversy and the fact that the ruling likely impacts recipients of awards under an Incentive Program that is probably widely used (and has been in place since at least 1993), I expect that Exxon seek rehearing en banc or file a petition for review with the Texas Supreme Court.

You can download a full copy of the court's opinion here.

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TXANS to Host 22nd Annual Conference and Exhibition

Russell Cawyer — Thu, 16 Feb 2012 06:36:04 -0600

The Texas Association of Responsible Nonsubscribers (TXANS) Texas' leading proponent of sound and ethical practices relating to injury prevention and the provision of quality workplace injury benefits by non-subscribers to workers' compensation. TXANS is hosting its 22nd Annual Nonsubscriber Conference and Exhibition March 22, 2012 in Austin, Texas. I'll be speaking at the conference. Some of the other topics that will be covered during the conference, to both subscribers and nonsubscribers, include:

New Transportation Regulations: Managing Transportation Risks Effectively
ERISA Update: Fiduciary Duties and Liabilities
New Regulations to Protect Returning Service Members: Understanding USERRA
Engaging Employee to Gain Competitive Advantage
Misclassification of Employees: Avoiding Costly Tax & Legal Consequences
Union-Free but no Scot-Free: A Warning for Non-Union Employers
Navigating the Texas Unemployment Compensation System

You can access the Conference Brochure and register for the event here.

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Plaintiff's Repeated "I Don't Know" in Depositions Are Claim Killers

Russell Cawyer — Tue, 14 Feb 2012 07:16:00 -0600

A while back I took the plaintiff's deposition in a sex discrimination and harassment case where the plaintiff's primary answer to any question that called for facts that might undermine her claim was "I don't know" or "I don't recall." The deposition looked a lot like this one.

At a break, my client representative expressed a great deal of frustration because she believed the the Plaintiff was not answering the questions truthfully. My client didn't think the deposition was going very well because the Plaintiff wasn't providing good answers on the questions that would undermine her claim. Despite my client's uneasiness for the former employee's, I knew the deposition was going fine.

You see, the Plaintiff was unable to remember the specifics of any particular action or conversation she had with my client's key representatives. I knew that my witnesses, on the other hand, had very clear and specific recollections about what was said and done with respect to the plaintiff and her employment. Once the plaintiff has repeatedly claimed, under oath, that she doesn't know or doesn't recall things that were said or done, there will be no other witness to dispute my witness' version of events. And, if the plaintiff is able to miraculously remember all of the key dates and details of the things she denied knowledge of in her deposition, her credibility at trial will surely be damaged. Rarely do our memories get better with time. Credibility wins trials.

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Carrots and Sticks: Ensuring You Have Buy-Out Rights When Employees Own Part of the Company

Russell Cawyer — Wed, 08 Feb 2012 06:35:57 -0600

From time to time I'm approached by a small company that has given an employee partial ownership in the company. While I haven't yet had one written on the back of a bar napkin, the agreements usually aren't much more sophisticated than this (or formal either). By the time I'm consulted, like many once-good marriages, the employment relationship has ended the employer would like to have the former employee out of the company's ownership structure. What is the company to do? Unless the company has the right to buy the employee out, the employer may be left with a carrots and sticks strategy.

Anytime you consider granting an employee partial ownership in the company, you should retain a lawyer experienced in drafting these kinds of arrangements. The lawyer will ensure that the appropriate documents are drafted that provide the employer the right to buy-out the employee's interest upon the occurrence of certain triggering events such as the termination of employment. The documents will likely provide a clear and specific manner of valuing the employee's interest. Inevitably, the agreement will contractually require the employee to assign his or her interest back to the company in return for the required payment.

If you lack good contractual documents, you're left with carrots and sticks. By that I mean that the employer may be left having the employee agree to return the interest either by paying more than what the interest might be worth (i.e., the carrot) or holding the employee to all of the obligations that ownership of the company might require (i.e, the stick).

The best course of action is to spend the effort on the front end and have the agreement written in such a way that the employer and employee recognize the benefits of partial ownership but provide a clear and meaningful strategy for the business divorce if and when the employment relationship ends.

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Dodd-Frank Act Effect on Employer Arbitration Programs

Russell Cawyer — Mon, 06 Feb 2012 06:00:44 -0600

The Dodd-Frank Act created a "reward" (bounty) program for whistle blowers that voluntarily provide original information of fraud or unlawful activity in violation of the Sarbanes-Oxley Act, the Foreign Corrupt Practices Act and other securities law violations. The Dodd-Frank Act also provides whistle blowers protection from retaliation and renders pre-dispute arbitration agreements of whistle blower or retaliation claims unenforceable.

As a result of the provisions regarding pre-dispute arbitration agreements, a number of plaintiff-employees have attempted to invalidate their arbitration agreements based on the Dodd-Frank and Sarbanes-Oxley Act provisions. A recent federal trial court opinions illustrates the limits of those efforts.

In Holmes v. Air Liquide, Inc., the plaintiff asserted claims under the ADA, Texas Labor Code and Title VII following his termination. During his employment with the company, he signed an arbitration agreement agreeing to submit all disputes to mandatory, binding arbitration. When the employer sought to compel the case to arbitration, the plaintiff argued that the agreement was rendered invalid and unenforceable with the passage of Dodd-Frank. While ducking the issue of whether the invalidity of pre-dispute arbitration agreements applies only to claims asserted under Dodd-Frank (as opposed to other federal statutes like the ones Holmes sued on), the Court held the arbitration agreement was valid and enforceable because the agreement was entered before the passage of Dodd-Frank and the statute should not be applied retroactively. Consequently, the Court enforced the arbitration agreement and compelled the parties to engage in arbitration.

A full copy of the Court's opinion is available for download here.

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A Lighthearted Take on Deposition Preparation

Russell Cawyer — Wed, 01 Feb 2012 06:17:53 -0600

Every once in a while I write a post just for fun. One example was the post I wrote about religious reasonable accommodation and the Church of the Flying Spaghetti Monster. Today is another fun post I felt compelled to write to justify the hour I spent watching funny video's this weekend --the first weekend without real football (Yes, I know the Pro Bowl was last weekend but that is not real football).

If you are a human resources professional or manager of employees you will eventually give you deposition in a lawsuit. The lawyer that prepares you for your deposition will undoubtedly give you good tips. He or she will remind you to tell the truth; not to volunteer information and remind you to only answer the questions asked. Here are few examples of some things you shouldn't do in a deposition that your lawyer might not specifically cover.

So, from this clip we learned 1) not to argue with the lawyer; 2) don't bring your mother to the deposition; and 3) don't use a stocking to cover your face during a video deposition. A better example of how to behave in a deposition is this expert witness in a deposition taken by Texas legend Joe Jamail.

The witness remains calm, cool and out of the fray --for the most part --despite the chaos around him. So remember, when being deposed in a contentious case over an employment decision, be more like our expert witness and less like all of the parties in the first clip.

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Antitrust Concerns Raised When Competitors Get Too Cozy

Russell Cawyer — Mon, 30 Jan 2012 07:24:36 -0600

When competitors make agreements with one another about what they will charge, the territories they will divide, the customers each will sell or the employees they will hire, red flags should raise because antitrust issues may be implicated. Last year I wrote about the settlement several Silicon Valley technology companies reached with the US Department of Justice's Antitrust Division over their agreements not to cold-call recruit each others employees.

Last week, Bloomberg reported on the follow-along civil claim being asserted by a group of tech company employees who claim that their wages were unlawfully depressed by the agreements that were the subject of the DOJ settlement. According to lawyers for the plaintiffs, the unlawful conspiracy to violate the antitrust laws had the effect of artificially depressing employee wages that could amount to hundreds of millions of dollars. Regardless of the merits of the civil conspiracy action, it has and will take millions of dollars for the employers to defend the DOJ Antitrust investigation and the resulting civil action. Competitors must be careful when they work with one another to ensure not only that their actions comply with the relevant employment laws, but also with state and federal antitrust laws.

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Texas Supreme Court Holds Worker's Compensation Exclusivity Provision Bars Claims by Deceased Employee's Parents

Russell Cawyer — Fri, 27 Jan 2012 09:24:39 -0600

Today the Texas Supreme Court held that when an employee is employed by two employers (a staff leasing company and client company in this case) and both employers have workers' compensation insurance, the workers' compensation exclusivity provisions apply to bar negligence claims asserted by the deceased employee's parents.

You can review a copy of the Court's opinion here.

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