Texas Employment Law Update

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.

Investigating Employee Complaints in the 21st Century --A Complimentary Webinar

Russell Cawyer — Mon, 20 Feb 2012 08:19:32 -0600

Just a reminder that on February 29, 2012 at 10:30 a.m. (Central), I will be hosting a complimentary webinar on Investigating Employee Complaints in the 21st Century: Comprehensive Investigations of Complaints of Discrimination, Harassment and Misconduct. The presentation has been submitted to the HR Certification Institute for review and credit.

Topics I intend to cover include:

Essential items to include in an anti-harassment/discrimination policy and compliant procedure;
Selecting the investigator;
Who to interview and what to ask;
Details on how to properly administer a complaint procedure;
Best practices for conducting a prompt, thorough and impartial workplace investigation;
Key considerations in making credibility determinations to resolve he said/she said dilemmas that might arise during a workplace investigation

You can register for this complimentary webinar here.

Follow me on Twitter @RussellCawyer.

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.

Follow me on Twitter @RussellCawyer.

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.

Follow me on Twitter @RussellCawyer.

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.

Follow me on Twitter @RussellCawyer.

Webinar: Investigating Employee Complaints in the 21st Century

Russell Cawyer — Thu, 09 Feb 2012 06:39:04 -0600

On February 29, 2012 at 10:30 a.m. (Central), Paige Biggs and I will be hosting my firm's first-ever webinar. Our topic: Investigating Employee Complaints in the 21st Century: Comprehensive Investigations of Complaints of Discrimination, Harassment and Misconduct.

During the presentation, we'll cover:

Essential items to include in an anti-harassment/discrimination policy and compliant procedure;
Selecting the investigator;
Who to interview and what to ask;
Details on how to properly administer a complaint procedure;
Best practices for conducting a prompt, thorough and impartial workplace investigation;
Key considerations in making credibility determinations to resolve he said/she said dilemmas that might arise during a workplace investigation

You can register for this complimentary webinar here. The webinar has been submitted to the HR Certification Institute for review.

Follow me on Twitter @RussellCawyer.

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.

Follow me on Twitter @RussellCawyer.

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.

Follow me on Twitter @RussellCawyer.

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.

Follow me on Twitter @RussellCawyer.

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.

Follow me on Twitter @RussellCawyer.

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.

Follow me on Twitter @RussellCawyer.

Quick Cites for Common Evidentiary Issues in Discrimination, Retaliation and Harassment Cases

Russell Cawyer — Thu, 26 Jan 2012 08:29:01 -0600

Yesterday I had the privilege to serve on a panel discussion of employment defense attorneys covering Title VII Litigation: Persistent Evidentiary Challenges. We had lawyers from twenty-two states registered for the program. If you have an evidentiary question involving a discrimination, retaliation or harassment claim, these materials may provide you a head start on your research or quick answer to your issue.

You can download a copy of the presentation materials here.

Follow me on Twitter @RussellCawyer.

Fifth Circuit Holds 24 Hour Fitness Arbitration Agreement Illusory and Unenforcable

Russell Cawyer — Wed, 25 Jan 2012 14:51:07 -0600

24 Hour Fitness operates health clubs and fitness facilities across the country. As part of its operations, 24 Hour Fitness employs sales representatives. As a condition of employment, employees are required to enter into arbitration agreements to arbitrate their employment disputes with their employer. FLSA claims (i.e., overtime and minimum wage claims) are covered within the scope of the arbitration agreement. John Carey was a sales representative for 24 Hour Fitness. He signed a handbook acknowledgment containing the arbitration agreement. Not only did the arbitration agreement require the arbitration of disputes, it further provided that disputes could not be brought as class actions or in representative capacities. Unfortunately for the employer, the handbook also included a provision that permitted it to revise, delete or add to the handbook at any time and that it would communicate those changes to the employees through official written notices. Nothing in the policy precluded the employer from applying changes to the arbitration agreement retroactively.

After Carey's employment ended, he filed an FLSA collective action seeking unpaid overtime on behalf of all similarly-situated employees. 24 Hour Fitness moved the court to compel arbitration. Carey, in response, argued that he agreement was illusory because the employer retained the right to unilaterally amend the agreement.

The Fifth Circuit Court of Appeals found against the employer holding that its arbitration agreement was unenforceable. The Court held that the arbitration agreement was illusory because: 1) 24 Hour Fitness retained the right to alter, amend or changes the policy at any time; 2) the policy did not foreclose the prospect of unilateral amendments to claims existing on or before the amendment; and 3) nothing in the policy precluded the employer from applying any of its changes retroactively. As a result, 24 Hour Fitness will be left to defend Carey's lawsuit in Court, with a jury, and potentially as a collective action.

The take-away form the opinion is that regardless of the type of ADR you use (e.g., arbitration, waiver of jury trial), if the agreement is contained in an employee handbook, ensure that the handbook's express contractual disclaimer contained in the handbook (You know, that provision that says nothing contained in this agreement is intended to create an express or implied contract) carves out those ADR procedures and specifically states that such provisions are intended to be contractual in nature; that the employer and employee are bound by such provisions and that neither party may alter or amend the contract unilaterally. At a minimum, if the employer wants to retain the right to unilaterally amend the policy, it should state that the employer cannot amend it to apply retroactively to claims that existed prior to the amendment and notice to the employee.

A full copy of Carey v. 24 Hour Fitness is available here.

Follow me on Twitter @RussellCawyer.

Texas Law Prohibits Employers from Requiring Employees to Purchase Employer's Goods

Russell Cawyer — Tue, 24 Jan 2012 08:29:22 -0600

As I was driving home last night, NPR played a clip from the 1947 folk song "16 Tons." Its a catchy tune about 1940's coal mining. The chorus of the song has the coal miner asking St. Peter to delay his death because he owes his soul to the company store. Employers used to provide "company stores" for employees where they could purchase items (usually at inflated prices) from a store owned by the employer. Employees "paid" for their purchases through debts secured against their wages. Here is Tennessee Ernie Ford's rendition of "16 Tons."

While there are few employers that maintain "company stores," many states have enacted laws that prohibit employers from requiring employees to purchase the employer's products. Some employers have been sued because they maintained policies that require employees to buy and wear their brands while working --the modern equivalent of the "company store."

Texas has a law that prohibits employers from requiring, through coersion, employees to purchase items from the employer. The Texas Labor Code provides a modest monetary penalty for any person that requires or attempts to require an employee to purchase food, clothing or merchandise from a place or store. Despite the fact that this law has been in place since 1993, there are no Texas cases citing the section. This suggests that Texas employers are not requiring employees to purchase items from the employer or the statute's lack of a civil remedy (i.e., a cause of action to sue for in court) means that these practices aren't seeing the light of courthouse.

A copy of the Texas Labor Code provision is available here.

Fifth Circuit Case Demonstrates Consequences of Failing to Make Prompt and Thorough Investigations of Employee Complaints

Russell Cawyer — Fri, 20 Jan 2012 08:59:26 -0600

A new Fifth Circuit case reveals the consequence that can occur when an employer and its managers fail to take harassment complaints seriously; fail to promptly and thoroughly investigate the complaints; and reach conclusions following the investigation that just plain wrong. In Cherry v. Shaw Coastal Inc., a male employee (Cherry) complained that his immediate male supervisor was making making inappropriate comments of a sexual nature and causing unwanted physical contact. Because I don't want this blog to show up in Google's search results for unsavory topics, I'll let you read the opinion itself the graphic details of the egregious, same-sex sexual harassment that was experienced by Cherry. Needless to say, it included unwelcome comments of a sexual nature and unwanted touching that the jury concluded amounted to sexual harassment by the male co-worker.

The conduct of was so severe that one of Cherry's co-workers initially complained about what he witnessed. Cherry also made repeated complaints to the managers in his supervisory chain. The supervisors receiving the complaints failed forward them to human resources as required by company policy and instead questioned whether the conduct complained of was merely horsing around. Cherry ultimately went directly to human resources and made a complaint. Despite the fact that Cherry made an estimated ten complaints, had an eyewitness to the harassment, and text messages demonstrating the unwelcome sexual comments, the company's human resources staff concluded there was "insufficient evidence" to corroborate the complaint. Cherry and the alleged harasser were placed on different work crews, but Cherry complained that he continued to get "dirty looks" from the alleged harasser. Finally, six months after the first complaints of harassment occurred, Cherry resigned his employment specifically pointing the on-going harassment and retaliation to which he claimed he he was subjected.

A jury found in favor of the Cherry on the sexual harassment claim but the trial court entered judgment in favor of the company. On appeal, the court of appeals reversed the trial court. The Court found that the Company had done enough to avoid a punitive damages finding (i.e., that the company did not act with malice or reckless disregard) because it had a policy against sexual harassment with a complaint procedure and, while not acting promptly, ultimately transferred the harasser to a different crew.

As to liability for the sexual harassment, the Court found that there was sufficient evidence to support the jury's verdict and that the company did not act promptly. The Court concluded that the human resources department's decision not to act because of "insufficient evidence" could be reasonably interpreted as a failure to take prompt remedial action. Consequently, the appeals court reversed the judgment in favor of the employer and directed the trial court to enter judgment in favor of the plaintiff-employee on the sexual harassment claim.

You can take a few things away from the Cherry opinion:

Ensure supervisors are trained on their responsibilities under the company's sexual harassment policy and make sure they forward complaints they receive to human resources for investigation;
Don't conclude there is insufficient evidence of company violations where the complaining employee has eyewitness corroboration and text messages to support his claim;
Investigate all complaints of alleged harassment promptly.

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

Follow me on Twitter @RussellCawyer.

Communicating Termination Decisions Requires Humanity

Russell Cawyer — Thu, 19 Jan 2012 06:00:14 -0600

Last week there was a lot of coverage about Mitt Romney's remarks on being able to terminate those who provide services to him. In viewing his remarks, I think the criticism of his comments comes, not so much from what he said, but how he said it. In a somewhat cavalier manner, Romney said he liked have the option to be able fire people; not that he liked firing them. Here is the context of what he had to say:

Romney's remarks have been construed to mean that he likes firing people; something I don't think he said or meant. However, I've written before on the dynamics of terminating the employment relationship with employees. Studies have shown that losing a job can be one of the most stressful life events one can experience --akin to the loss of a family member or divorce. And while terminating the employment of an employee is not normally easy, it is an inevitable part of most manager, supervisor and human resource professional's job.

Terminating the employment relationship with an employee is a serious matter and should be treated as such. When communicating the decision, an employer should be guided by being as compassionate as is possible under the circumstances. That doesn't mean that the decision is debated with the employee. Rather, it goes more into delivering the planning of the announcement. Plan to communicate the decision in a way that will minimize the trauma to the employee to the extent possible. Take steps to ensure that the employee is not unduly embarrassed by the decision. It is good to remember that we are all human before communicating an employment termination decision, particularly where there is not egregious. We all have families to support and the decisions made by employers, and the employees who call upon employers to make those decisions, have consequences. Communicate adverse employment actions to employees accordingly. And never, never (whether you are running for President or not) tell anyone you like firing people.

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Court Strikes Employer's Arbitration Agreement With Employee For Lack of Consideration

Russell Cawyer — Tue, 17 Jan 2012 11:01:48 -0600

There are a few pockets in the state where lawyers representing employees still vigorously fight the arbitration agreements their clients signed with employers agreeing to arbitrate all disputes. One of the pockets is in El Paso, Texas as evidenced by the number of opinions out of the court of appeals addressing the enforceability of an arbitration agreement between employers and employees.

An example of one of these challenges is found in the recent opinion of Mendivil v. Zanios Foods, Inc. In Mendivil, the plaintiff-employee challenged the arbitration agreement he signed with his employer when he wanted to sue in court under a workers’ compensation retaliation theory. Mendivil challenged the agreement on a variety of grounds including the fact his employer did not promise to arbitrate its disputes with Mendivil; he had to arbitrate his claims in New Mexico rather than El Paso; he had give notice of intent to arbitrate within thirty days of the incident and respond to all correspondence from his employer within ten days or waive arbitration; and he had to pay for one-half of the arbitration fees. In legalese, Mendivil claimed the agreement was illusory and not supported by adequate consideration (because the employer made no return promises) and was legally unconscionable (because it made him arbitrate far away, bear one-half of the arbitration expenses and make requests for arbitration on short time tables).

The court of appeals considered Mendivil’s challenge to the trial court’s order to arbitrate. The appeals court was persuaded that the agreement was unsupported by adequate consideration because the employer made no promises to Mendivil and that alone was sufficient to warrant reversal of the trial court’s arbitration order.

The takeaway from this case is twofold. First, an employer that desires to enforce an arbitration programs with its workforce must make sure the agreement is supported by valuable consideration. This is usually accomplished by having the employer make the return promise to arbitrate all of its disputes it has with employees. The mutual promises to arbitrate claims will almost always suffice as adequate consideration to support the arbitration agreement. Second, arbitration is meant to be a meaningful alternative to a judicial forum. Where a party uses the arbitration agreement to impose onerous conditions far more restrictive than would be found in a judicial forum, the court will view the enforceability of the agreement more skeptically. Remember, pigs get fat but hogs get slaughtered.

You can download a full copy of the Court’s opinion in Mendivil v. Zanios Foods, Inc. here.

Follow me on Twitter @RussellCawyer.

Court Holds Ministerial Exception Bars Teacher's Discrimination Suit

Russell Cawyer — Thu, 12 Jan 2012 07:19:38 -0600

Yesterday, the U.S. Supreme Court unanimouslyy held that the ministerial exception bars a federal employment discrimination suit brought by a teacher challenging her church-employer's decision to terminate her employment. While this holding is limited to religious affiliated employers, it firmly establishes the ministerial exception as a bar to certain employment discrimination claims against religious organizations.

Plaintiff Cheryl Perich was a teacher at the Hosanna-Tabor Evangelical Lutheran School --a school affiliated with the Lutheran Church. The school had two kinds of teachers --lay and called teachers. Called teachers were regarding as having been drawn to their vocation by God and had to complete certain religious academic requirements and become "Commissioned" in the Lutheran faith. Lay teachers were not required to undergo the religious training or ordination requirements. Moreover, lay teachers were only used when called teachers were unavailable. Perich stated out as a lay teacher but was asked to, and agreed to become a called teacher.

Perich subsequently developed narcolepsy during the 2004-05 school year and took disability leave. The school contracted with a substitute teacher to complete the academic year. When Perich wanted to return to work, the school declined because it had replaced her position with the substitute. Perich was offered a paid continuation of her health insurance in return for her resignation. She refused the offer and instead reported to work. When asked to leave, she refused to leave until she was provided a note confirming she had reported to work. She was later told by the principal that she would likely be fired to which she responded that she had spoken to an attorney and intended to assert her legal rights. The school terminated her employment for insubordination and disruptive behavior as well as the damaged she allegedly caused to her relationship with the school by threatening to take legal action.

Perich filed a charge of disability discrimination and the EEOC issued a cause finding and filed suit on her behalf against the school claiming that she was fired in retaliation for threatening to file an ADA lawsuit. The church and school defended against the disability claim arguing that the First Amendment's Establishment Clause's (i.e., the provision that precludes the government from passing any law establishing a religion or interfering with the free exercise of religion) ministerial exception prohibited the application of the ADA claim against it because it would undermine the church's decision in who become and remains a minister of the church. The EEOC argued that the Court should not recognize a ministerial exception. The Court rejected the Commission's arguments holding that to do so would effectively allow the government decide for the church who could act on its behalf as a minister.

Significant aspects of the case included that the teacher was ordained by the church as a minister. While most of the duties she performed were similar to non-ordained teachers, she also taught religion class, led students in daily prayer and devotional exercises, took her students to a weekly school-wide chapel service and led the chapel service twice a year. Both the church/school and the teacher held the teacher out as a minister with a role distinct from most of its members; her role required a significant degree of religious training and a formal process of commissioning and that her job duties reflected a role in conveying the church's message and carrying out its mission. Because she qualified as a minister, the Court concluded that the EEOC's action challenging the decision to terminate her employment would be tantamount to dictating to the church who could and could not be a minister on the church's behalf. As such, the ADA claim was barred by the First Amendment's Establishment Clause and ministerial exception.

The quick takeaways from the case are:

Ministerial exception exists;
It only applies to religious groups and organizations (although what qualifies as a religious group or organization is unclear);
The ministerial exception does not only protect religious organizations from suits alleging religious discrimination;
Ministerial exception applies to internal decisions of the religious organization in deciding who to select or retain as a minister;
Ministerial exception is not limited to the head of a religious congregation but it is unclear how far the exception can be extended;
Holding is limited to cases where minister brings an employment discrimination claim challenging a church's decision to fire her.

It will be left to the lower court's to flesh out the outer boundaries of the ministerial exception to determine who qualifies as a minister and what decisions can be said to interfere with the religious body's free exercise of religion.

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

Follow me on Twitter @RussellCawyer.

Title VII Litigation Webinar on Persistent Evidentiary Challenges

Russell Cawyer — Wed, 11 Jan 2012 14:36:27 -0600

On January 25, 2012, at 12:00 p.m. I'll be speaking on a panel titled "Title VII Litigation: Persistent Evidentiary Challenges." The webinar will cover common evidentiary issues that employment lawyers who try discrimination, retaliation and harassment claims face including:

Admission and exclusion of "me too” evidence;
“Other supervisor” evidence, including Cat’s Paw Liability case developments;
After-acquired evidence;
Character evidence;
Evidence from social media websites;
“Stray remarks” doctrine;
“Similarly situated” defense; and
“Better qualified” defense

Readers and subscribers of the Texas Employment Law Update (RSS-feed and e-mail subscriptions) receive a 50 percent discount on registration. To get more information on this webinar or to register using the discount, click here.

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NLRB Says Agreements to Waive Participation in Class Action Violate Federal Labor Law

Russell Cawyer — Mon, 09 Jan 2012 07:29:29 -0600

Wow! That is all I could say after I read the recent NLRB decision holding that an employer's requirement that employee sign mandatory arbitration agreements waiving the right to litigate claims in a collective or class action violates the National Labor Relations Act.

In the case styled D.R. Horton, Inc. and Michael Cuda, the Board considered an arbitration program used nationwide by the home builder employer. The arbitration agreement, signed by all employees, required that all disputes be resolved through arbitration and that no disputes would be arbitrated on a class or collective basis in any forum, judicial or arbitral. When Michael Cuda sought to bring a nationwide wage and hour class action on behalf of all of the company's superintendents, the company sought to enforce the arbitration agreement and its mandate that claims be litigated individually --not collectively. Cuda filed an unfair practice charge claiming that the waiver of arbitrating or litigating claims on a representative, class or collective action basis violated the employees' Section 7 rights to engage in mutual aid or protection.

Since the U.S. Supreme Court decision in Concepcion, more employers have incorporated strategies to ensure that claims are litigated on a level playing field by requiring employees to arbitrate or litigate those claims on an individual (or non-class action) basis. Notwithstanding the Board's commentary to the contrary (i.e., the Board professed that the decision would impact few agreements), the Board's decision will have widespread ramifications on companies use of arbitration programs. Despite the disadvantages that arbitration carries, one advantage was the widespread belief that employers could better manage the prospect of having to litigate class actions with large numbers of their workforce through arbitration agreements designed to decide claims on an individual basis. The decision in D.R. Horton eliminates that potential advantage of arbitration. Moreover, the Board's decision is not limited to arbitration programs and its rationale may be applied outside of arbitration agreements such as agreements with individual employees

Finally, because it is a decision applying federal labor law, a law that applies to most employers and employees, the Board's position could have wide-reaching, adverse consequences for employers seeking to control the risk of defending against class or collective actions. This is an important decision that warrants following through the inevitable appeal that D.R. Horton will make.

You can download a full copy of the Board's decision here.

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