Smooth Transitions : Rob Radcliff : Texas Non-Compete Lawyer & Attorney : Langley Weinstein LLP Law Firm : Dallas Employment & Employee Departures : Smooth Transitions Law Blog

I know it's been a while since my last post, but a trial always gets in the way of blog posts.  So after the dust has settled on the trial I have a few thoughts  on what business owners and employers should always consider when considering the pros/cons of going to trial.  Hopefully these are things that you already knew but better to discuss now than later.  So, off we go:

1. Loss of Control - The judge and jury will be making the decision, not management.  Unfortunately you can't always predict what the fact finder will do.
2. Trials are expensive - That's not groundbreaking news, but think about all of the extra costs:  (a) multiple lawyers, paralegals, and support staff working around the clock on the case (depending on size of course); costs for courtroom presentation equipment (rentals); meals for all involved in the trial; and the costs involved in having you employers tied up in a trial.
3. Trials are a time-suck - Employee witnesses will have to be on call.  Lawyers can never quite tell when the employee will testify.  Of course, a client representative will have to be at trial the whole time.
4. Trials are stressful for all involved.
5. People (witnesses) don't always say what they should or what you think they will say;
6. Things go wrong during trials that you don't expect;
7. The trial is not the end - there are always filings after the verdict, maybe another mediation, maybe even an appeal; and
8. Did I mention trials are expensive?

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Recently the IRS came forward with an amnesty program for workers who improperly classify their employees as contractors. There are a number of issues in considering the program.  These include the interplay between the IRS and the Department of Labor, the effect such an amnesty agreement would have on your business going forward, and whether the business actually misclassified its contractors. 

The Proactive Employer podcast considered the issue recently. I would recommend that discussion as a starting point for anyone considering this issue. It is complex and can have fairly significant ramifications. Please consult with an attorney before you make a decision one way or the other as to proceeding.

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Earlier in the week we discussed policies and procedures that should be in place to deal with end of year employee departures. Companies should also consider a number of other HR related issues as the year draws to a close. Here are my thoughts:

1. Evaluation of all employment policies, including the employee handbook;
2. A review of all federal and state law changes that may impact employment practices - talk to your lawyer;
3.  A review of all employment contracts;  
4. A review of all employment files - are they up to snuff?; and
5. An evaluation as to whether the company should adopt post-employment covenants including non-competes, non-solicitations, and garden leave policies.

Now is the time to make any necessary changes before the New Year begins. Let me know if you have any additions to the list.

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Generally, many employees will wait to move to another employer until after they have received any year end bonuses or commissions they are due.  We are all familiar with stories where a top producer bolts after they get their end of year check. 

For these reasons, it is important the employers be prepared to review company policies for employment transitions. This would include post-employment covenants such as non-competes.

Critical to the employment transition practice is ensuring that the employer has protected any proprietary or trade secret information that departing employees can access. Departing employees should immediately lose access to any type of proprietary or trade secret information. This should include locking the employee out of their email account or limiting access.  That employee is now a competitor.

Employers who are vigilant about having these types of policies in place will ultimately protect their business and their product from an inevitable employee departure.

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Many businesses have workplace dating policies in order to address potential conflicts of interest situations or sexual harassment claims. Another reason to consider having a policy is in the event of a relationship where one or both of the participants is married.

Many employers will run into a situation where this is an office affair. This could be between subordinates or a superior/subordinate relationship. Unfortunately, as long as people are people, these types of situations are going to arise. 

These types of relationships are distracting, generate all sorts of rumors within the workplace, and ultimately impact productivity. Employers need to be out in front by having a clear policy that is appropriately tailored for their business and circumstances.  Companies generally don't have anti-affair policies so in most circumstances the relationship will be governed by the dating policy.

There are a number of different policies that can be employed that range from outright prohibitions (which can be problematic) to a modified policy that requires a consent/disclosure. There is no one size fits all solution but some type of policy is recommended. 

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 I’ve seen a few employee handbooks in my time, but nothing quite like the 1943 Disney handbook, which is filled with a number of illustrations as one might expect and some blatant sexism along the way.  It’s kind of like watching an episode of “Mad Men” where you can’t believe what was acceptable or the norm.

Some of the highlights: 

• Charges of outgoing calls - “At the risk of interfering with the even tenor of your social life, we must ask that you limit personal phone calls to emergencies.  You know, of course, that you will be charged for all outgoing personal calls.”
• Holidays are the same - “You will be provided holidays for New Years’ Day and Memorial Day, Fourth of July, Labor Day, Thanksgiving and Christmas.
•  Not sure if there are any all male penthouse clubs any more - “Penthouse Club – For all particulars, membership, and like that, check with Walt Pfeiffer  - Men only!  Sorry, gals. . .”

There are a number of other interesting tidbits from the manual.  The running theme throughout the manual is that the exemplar male employee is obsessed with his co-female employee and restaurant waitress. (see below) By the way Walt Pfeiffer was a writer for Disney according to IMDB but apparently also ran the penthouse club.

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It recently came to light that two Merrill Lynch executives were fired and paid approximately $11 million in exchange for signing a non-compete and release agreements.  Some were outraged about the payment considering the current plight of BofA and Merrill. But for most employers, a severance payment in exchange for a release makes good sense.

In many situations it makes sense for an employer to seek a release from an employee at the time that their employment term ends. The conclusion of the employment relationship presents the opportunity for the employee to obtain a release in exchange for some type of severance payment. There is no hard and fast rule as to what that amount should be. Severance is not required in the state of Texas.

Under the Texas Payday Act and other statutes, the employer must pay the employee whatever he or she is owed at the time of termination. Put another way, the employee cannot be forced to sign a release in exchange for receiving money that they are already owed. 

The release should be designed to have the employee give up any potential claims that he or she may have against the employer. Please consult with a lawyer to ensure that the release is drafted broadly enough to cover the claims and that any statutory requirements are met for the release. The last thing you want to do is prepare a release that is ineffective. 

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Over the last few weeks we’ve discussed some key components in employment contracts including venue and jury trial waivers. Another key provision is choice of law. As was discussed in the Sam Adams case, choice of law  was critical because it permitted the employer to pursue an action against a former employee for breach of a non-compete agreement which would not be enforceable in the state of California. In that case, there is both a venue and choice of law provision for Massachusetts. 

As with venue and jury trial waiver provisions, the choice of law should be tailored to circumstances of the agreement at hand. Many employers like to default to the choice of law where their headquarters is located or many times the state of Delaware (shareholder disputes are very difficult to prosecute in that jurisdiction), but that will not always make sense in an employee/employer relationship. 

Additionally, courts do not always enforce choice of law provisions and employers should consult with their attorneys to put themselves in the best position contractually to enforce the provision. There is always a preference of the Court to enforce the contract based on laws of that jurisdiction because the judge is typically more familiar with those laws as opposed to some other jurisdiction. 

In the context of post-employment covenant litigation, there are certain jurisdictions state laws employers will want to avoid because they are not friendly to enforcement and vice versa. Employers need to be cognizant of the effect of a choice of law provision and also put some thought into its use because it will be an issue on down the road.

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Last week, Baylor Healthcare System made employment waves in Texas when it announced it would no longer be hiring individuals that smoked.  There is no prohibition that, as of yet, would prevent an employer from hiring or even firing an employee because of their use of tobacco products – they are not a protected class.

There have been a number of commentaries and articles about the policy, the links of which are below. The reasons for instituting such a policy vary. There is no doubt that smokers can affect workplace productivity. They take breaks during the day to smoke and those breaks affect workflow and continuity of the office. Additionally, there are the health issues to consider that come along with smoking ranging from respiratory issues to cancer.  Smokers can also drive up health insurance premiums.

It makes sense for a healthcare provider to implement such a policy, though I imagine there will be more to follow. There are not pros or benefits from smoking in the workplace. More and more employers, regardless of the industry are sure to implement such policies.

Links

The Baylor Policy

Lawyer Russell Cawyer's Thoughts

Related Stories

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Employers should always be careful and cognizant of venue provisions in their employment agreements. Many employers will simply include a venue provision making venue mandatory where the home office or headquarters is located, but this doesn’t always make sense in the context of an employment dispute. 

Recently, I reviewed a contract which required mandatory venue in the federal court where the company headquarters was located. Employees who would actually sign the agreement were located in a state a thousand miles away. While it’s nice to have venue in your own backyard, that doesn’t always work for enforcement of the agreement. 

In the context of most post-employment covenants, like non-competes or non-solicitation agreements, it is much easier to enforce these agreements in a venue where the actual defendant/former employee resides. In many of these cases, the employer will want to obtain equitable relief in the form of a temporary restraining order or injunction preventing the former employee from working or soliciting. 

It is much easier to institute and enforce these types of claims in the state or federal court where the actual employee lives, as opposed to one that is many thousands of miles away. In preparing employment agreements, employers should be cognizant of what makes sense in terms of enforcement, if enforcement is a key consideration. 

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To Jury or Not to Jury

It is always interesting to hear people talk about the runaway jury and risks of letting a jury determine the fate of a business/employer.  Most jury members, like most people, are not employers but are employees.  It's a fair statement that they are likely to have some bias against the employer whether they admit it during jury questioning or not.  That natural bias can be overcome, but it is not easy.  For all intents and purposes, employers are the "Man".

In the context of employment agreements two popular alternatives to juries have developed - the arbitration and the jury trial waiver.  Though arbitrations are a good alternative, they can be expensive and impractical for the typical employment agreement.  Opting for a judge as opposed to a jury can be a good alternative.

The Typical Waiver

Waiver of Trial by Jury. Seller and buyer knowingly and conclusively waive all rights to trial by jury, in any action or proceeding relating to this Contract.

The Texas Supreme Court ruled that the provision above was enforceable.  Though this provision was in a business transaction, it can be amended for use in the employment context. 

Yes or No.

First, the waiver eliminates any potential jury bias (of course Judges have their own biases).  Second, in most cases a trial date for a non-jury trial will be earlier than a jury trial setting because the cases take less time.  Finally, a non-jury trial is typically shorter and as a result less costly.

Waivers make sense.  They are  easy to use, enforceable, and probably a better alternative to arbitration these days. 

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Many Texas employer have policies that prevent their employees from keeping their guns in  employee parking areas.  As of yesterday, employees who have conceal carry licenses in the state of Texas can keep their guns in their cars as long as they are locked.  Of course there are exceptions in the law that went into effect September 1, and there is even an immunity provision for the employer.

Also, you can apparently hunt feral pigs from the air now for a fee. 

Don't Mess With Texas.

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I’m embarrassed to admit to watching “The Real World” when it first came out in the early 90’s. It’s been many years since I have tuned in, but I always wondered what the contract was like that cast members had to sign. Luckily, the Village Voice has obtained the agreement. 

Some highlights:

I acknowledge and understand that, as for the participating in other hazardous activities, my participation in the Program carries with it the potential for death, serious physical injury, extreme emotional distress, mental or physical illness and property loss.  

I understand and acknowledge that Producer may or may not screen or conduct background checks or investigations of the other participants or any other person who appears, or may appear, on the Program (including an investigation of any person’s medical, professional or criminal history) and Producer has no duty to conduct such an investigation.

The Producer is not responsible if any of the cast members obtain a sexually transmitted disease. 

And my favorite: 

I further understand that my appearance, depiction, and sexual portrayal in an in connection with the Program (including without limitation, the title of the Program), in my actions and the actions of other displayed in and in connection with the Program, may be disparaging, defamatory, embarrassing or of an otherwise unfavorable nature, may expose me to public ridicule, humiliation or condemnation and may portray me in a false light.

So, I get to live with persons who have had no background check and may be disease-ridden and the producers of the Program can portray me in any manner that they see fit, whether or not it is accurate or even true. Where do I sign up? Certainly not your typical employment contract.

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Dallas City Hall revealed that a number of city employees were on Facebook a few too many hours during the workday:

• A City analyst had his Facebook account open for 68 hours during a three month period beginning in January. 
• One racked up 198 hours in the same three month period. 
• Others, including a code Inspector, office assistants, convention centers, a convention center group leader, a water utilities engineer, and a cultural affairs coordinator all had in excess of 100 hours. 
• Employees together clocked in more than 3,000 hours on the site.

Now these numbers may be a little misleading because tracking the amount of time the actual user was logged in is not necessarily indicative of how long they were actually using the site. Needless to say, these results are not surprising. Take a walk around your office -  odds are someone is on some social networking site.

The question for the employer becomes how to govern this use?  In some cases, social networking may be encouraged for business reasons.  Ultimately, the employer must have a clear social media policy in place that addresses what appropriate use is or is not - policy - policy - policy.  This will vary from employer to employer.

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• Email - Does the company monitor employee email - probably not.  As distasteful as it may sound someone in HR or someone on the business side may need to examine the substance of the employee's emails (from the company email address).  How far back? Depends on the situation.  The employee's  emails need to be scrubbed to determine if they are offloading or have offloaded proprietary information to competitors or personal email accounts for future use.  Further, the IT department needs to maintain and preserve the email account but end the employee's access to the account either immediately or upon some agreed time.

• The network - Most employees are not going to email company information to a competitor or even a personal email account - some still do though.  The delivery device of choice is the thumb drive.  It's small, cheap, and can hold a lot of information.  I'm no IT expert but many IT folks can determine what type of downloading an employee has been up to including the use of zip drives or thumb drives.  How far back should the company go?  As far as necessary to obtain some "comfort" level.  

• Beyond email and the network - Many companies have proprietary databases where customer/client information is maintained.  In one non-compete case a client was able to show that the former employee had dumped the entire database (through printing) the night before they were fired.  Can you do the same?  Many databases require an additional log in and indicate the when, what and where of the employee access.  Was there a middle of the night access prior to quitting or strange access from home? Find out.

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Friends: I am pleased to announce that I have become a partner at Langley
Weinstein LLP. Langley Weinstein LLP is a Texas trial and appellate firm
practicing in the areas of surety and construction, commercial litigation, and
employment litigation with offices in Dallas and Houston.

My new contact information is:

Robert K. Radcliff
Langley Weinstein LLP
901 Main Street
Suite 600
Dallas, Texas 75202
rradcliff@lwllp.com
TEL: 214.722.7160
FAX: 214.722.7161

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Here is a link to a presentation on the Top Ten Issues for Texas Employer and FINRA Social Media compliance. I hope you find it helpful.

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Back in April I addressed the Supreme Court's review of City of Ontario, California v. Quon et al and the implications it might have on employer access and review of employee electronic communications.  A few weeks ago the Court's opinion was delivered and did little to shed light on the Court's view of privacy rights in text messages for private employees.

As you may recall, the opinion dealt with a police department that decided to review the personal text messages of one of its officers that were made with a police owned phone.  Justice Stevens upheld the search of the phone noting that Quon:

should have understood that all of his work-related actions–including all of his communications on his official pager — were likely to be subject to public and legal scrutiny

He also wrote:

The Court must proceed with care when considering the whole concept of privacy expectations in communications made on electronic equipment owned by a government employer.  Moreover, agencies and officers should explore whether state privacy laws might create a different standard. Some states have statutes that require an employer to notify an employee when electronic communications are being monitored.

So the Court was unwilling to go beyond the public employee domain, not surprising.  So questions remain:  Is the employee that uses a company owned phone subject to having his text messages reviewed?  What if there are personal emails on the company owned phone through a yahoo or gmail account?  What if the phone is owned by the employee but the service is paid for by the company?  These questions remain unanswered but employers should have policies in place that address these situations. 

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Mark Shank and Bridget Blinn are lawyers at my firm who focus on advising employers on the Fair Labor Standards Act.  Their recent article, What is Work? FLSA Pitfalls at the Beginning and End of the Work Day tackles this statute:

The basic requirements of the federal Fair Labor Standards Act (“FLSA”) are easy to understand. Employees must be paid a minimum wage of $7.25 per hour (per the latest increase that went into effect in July 2009). Employers must also generally pay nonexempt employees overtime at a rate of at least one and one half times the regular rate of pay for all hours work in excess of 40 hours in a work week.

Unfortunately violations of the FLSA can be costly for the unsuspecting employer:

These two seemingly simple requirements are surprisingly difficulty to implement. Getting it wrong can be costly: Employers found liable for violations of the FLSA may be assessed damages for the unpaid overtime or minimum wages, liquidated damages equal to the amount of unpaid overtime or minimum wages, and reasonable attorneys fees and costs. Willful violations may carry criminal penalties upon conviction with fines of not more than $10,000 or imprisonment for not more than six months, or both, and there are also civil money penalties (payable to the Secretary of Labor) for repeated and willful violations of minimum wage and overtime requirements.

Their article provides an up to date perspective on the FLSA and is worth a look.

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It’s amazing what people will put in their emails, even after they have been warned by their lawyers.  There have been a number of cases I have been involved in where an employer has been able to access emails from an employee's web-based hotmail account that show he or she is actively violating a non-compete or even sending work to a competitor.  The question is, can an employer access an employee's web-based email?

A recent law.com article investigated a number of decisions arising from use of the Stored Communications Act. The SCA creates a criminal offense and civil liability for whomever “intentionally accesses without authorization a facility through which an electronic communication service is provided” or “intentionally exceeds an authorization to access that facility” and by doing so, “obtains, alters, or prevents authorized access to a wire or an electronic communication while it is in electronic storage in such system.” 18 U.S.C. § 27.01.  The decisions vary.

The article suggests a robust electronic communications policy  will go a long way to protect the employer, but it is unlikely that any employer has a policy that would allow them to obtain and use an employee’s password in order to access their web-based accounts. Obviously, once the employer uses the emails in the litigation, it will become obvious that they have utilized the password to obtain that information.  The employer could consider simply requesting the communications through normal avenues of discovery.  If you are going to use such evidence be prepared for the ramifications.

(H/T to Jon Hyman of the Ohio Employer's Law Blog)

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Tomorrow I will be speaking at the University of Houston Law Center Advanced Employment Law Seminar in Dallas regarding employment torts.  The paper prepared for the presentation covers the latest and greatest in torts ranging from false imprisonment to tortious interference.   

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Two weeks ago on the Office, Michael Scott gave Dunder Mifflin notice of his  resignation. Upon return to Scranton, Michael hatched a plan to start Michael Scott Paper Company and started with some due diligence (I apologize for the advertisement but NBC has to pay the bills):

Michael then asked most of the Scranton staff to come to his new company and started working on putting together  paper order forms.  Eventually the higher-ups got wind of Michael's new venture:

Unfortunately, for Michael there is no two week "immunity" period. Employees in Texas can set the stages for starting a competing venture (assuming there is no non-compete or other restrictive agreement) on their own time, but not while at work.  The good news for Michael is that Pam the receptionist left Dunder Mifflin to join Michael.

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Recording phone conversations.

One issue that I frequently receive questions about is whether it's permissible to record phone conversations that you are a party to?  The answer varies from state to state.  In the absence of more restrictive state law, federal law permits an individual who is a party to the telephone conversation to record it. 

Some states require both parties to consent to the recording (two-party consent).  Texas does not (one-party consent).  The rub arises when there is an interstate call between a one-party state and two-party state. The California Supreme Court (.pdf) has held that in such a situation, two-party consent is necessary.

Recording a phone call can be a useful tool for avoiding misunderstandings and I have even used them in breach of contract cases where an oral agreement is disputed.  If you are going to record, the best practice is to get the consent of the other party.  If you're not going to do that make sure you know the law of your state and the state you are calling. 

Polygraph testing your employees.

Jon Hyman provided a primer on employee polygraph testing in the Ohio Employer's Law Blog this past week.  Frankly, I had never heard of the Employee Polygraph Protection Act of 1988 but it prohibits with limited exceptions:

• Requiring, requesting, suggesting, or causing an employee or prospective employee to take or submit to any lie detector test;

• Using, accepting, referring to, or inquiring about the results of any lie detector test of an employee or prospective employee; and

• Discharging, disciplining, discriminating against, denying employment or promotion, or threatening to take any such action against an employee or prospective employee for refusing to take a test, on the basis of the results of a test, for filing a complaint, for testifying in any proceeding, or for exercising any rights afforded by the EPPA.

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