On August 20, 2024, Federal Judge Ada Brown blocked the Federal Trade Commission’s rule barring non-competition agreements.  Judge Brown ruled that the FTC’s promulgation of the rule was an unlawful agency action because the FTC exceeded its statutory authority.  Simply put, Congress did not empower the FTC to regulate competition in the workplace.  It was no surprise the rule never went into effect. An appeal appears unlikely.

Congress has not yet imposed limits on workplace non-competition agreements.  But that might change.  On February 9, 2023, Senator Marco Rubio (R-FL) and Senator Margaret Wood Hassan (D-NH) sponsored a bill that would bar noncompete provisions for any person who is not exempt from overtime under the Fair Labor Standards Act. Under this proposed legislation, employers could impose noncompete agreements only on persons who meet an FLSA overtime exemption (e.g., an executive, professional, or outside salesperson).  The bill is sitting with the Senate Committee on Health, Education, Labor and Pensions.  The text of the bill can be found at:  https://www.congress.gov/bill/118th-congress/senate-bill/379/text.    Perhaps the death of the FTC ban on noncompete agreements might spur Congress to take action on this bill.

In the absence of federal action, some states have passed laws that bar (in whole or in part) noncompete clauses (e.g., California, Colorado, and Oklahoma). I think those jurisdictions have gone too far.  But the Rubio-Hassan Bill is a logical and straight-forward compromise.  Texas (and other states) should consider this approach if the federal government does not act.  For an extreme example of the opposite opinion recall how Jimmy Johns learned that sandwich makers should not be subjected to a noncompete. See https://www.cnbc.com/2016/06/22/jimmy-johns-drops-non-compete-clauses-following-settlement.html.

In my view, a rule against noncompete agreements for hourly, non-exempt workers is good for business.  It levels the playing field for employers seeking quality workers, stops employers from imposing unjust restrictions on employees, and might eliminate wasteful litigation.

On April 15, 2024, the EEOC issued its long overdue final regulations enforcing the Pregnant Workers Fairness Act (PWFA). The regulations went into effect Tuesday, June 18, 2024. In broad terms, the PWFA is the ADA for pregnancy.  The PWFA and the regulations enforcing the Act require employers to provide reasonable accommodations arising out of pregnancy, childbirth, or related medical conditions.

Here are our takeaways for employers.

1. The EEOC regulations impose a broad meaning of “pregnancy, childbirth and related medical conditions.”

In the EEOC’s view, pregnancy and related medical conditions extend well beyond being with child.  It includes past pregnancy, potential or intended pregnancy, infertility, fertility treatment, the use of contraception, and abortion.  The inclusion of “abortion” immediately sparked litigation, and on Monday, June 17, 2024, a federal judge enjoined the EEOC from enforcement in Mississippi and Louisiana of the regulation as it relates to abortion.  A similar challenge failed in Arkansas.  The conflicting opinions will lead to further legal battles that are certain to make headlines.

2. “Temporary” means 40 weeks … plus.

The PWFA requires reasonable accommodation for a woman unable to perform an essential function of her job for a “temporary” period.   Unlike an unpredictable work injury or other illnesses, we know the duration of pregnancy.  Employers should assume the obligation to reasonably accommodate extends from conception through childbirth and recovery.

3. Accommodation means the temporary elimination of job requirements.

The regulations require an employer provide reasonable accommodation that allows a pregnant worker to continue in the job even if that means suspending “temporarily” essential functions of the job.  This mandate applies to applicants as well.  That means an employer must modify a job to remove hurdles that are otherwise requirements of the work even for someone not yet employed.  The EEOC provides examples of temporary modifications including eliminating lifting restrictions.  This may seem simple for some job positions but extremely challenging in more physically demanding work.

4. Employers may not demand the use of specific medical forms or detailed medical explanations.

The EEOC regulations criticize employers who require employees to use medical forms when requesting accommodation.  Indeed, the regulations specifically prohibit the use of employer written forms.  Any doctor’s note will suffice.  If an employer desires medical confirmation of a need for some specific accommodation it is limited in how and what it can obtain.  An employer may only seek “reasonable documentation” to confirm the employee has a condition that requires a specific accommodation.  An employer cannot inquire further and may not seek to obtain additional information.

5. Expect work from home request as a form of accommodation.

Employers should prepare for telecommuting requests under the new regulations.  The EEOC specifically identifies work from home as a potential reasonable accommodation. Nothing surprising since work from home is a commonly sought accommodation under the ADA.  But the regulations provide examples for accommodating pregnant workers that make telecommuting an automatic option for common pregnancy related conditions (e.g., nausea).

In sum, the PWFA and the EEOC regulations enforcing the act will present serious challenges for employers just as the ADA did decades ago.  Move slowly and cautiously — and get legal advice — when navigating these challenging waters.

Today I want to tell you a story that explains why meaningful harassment training helps employers avoid the courthouse.  A client has a small operation in California, where the state mandates sexual harassment training.  I conducted the training with the Company’s HR Director.  The next week, a male employee reported he had witnessed a male co-worker engage in obviously offensive conduct towards a new female employee.  The employee said the training motivated him to come forward.  Human Resources reached out to the victim who felt safe reporting the facts because she trusted the Company following its investment in training. As you might guess, the Company fired the harasser.

This situation could have easily resulted in a lawsuit.   Only meaningful training averted litigation.  Here are three thoughts on what we did right and what your business should consider for its harassment training.

1. A Legal-HR Partnership Works Best.

Employers typically outsource training to an outside counsel or a professional training service.  Yet, the reality is that employees do not relate easily to a lawyer they have never met or a professional trainer they will never see again.   Human resource professionals work so closely with employees that they might appear too familiar and perceived as informal. Combining an outside attorney with corporate HR achieves the best training result: the formality and seriousness of a lawyer; the personal relationship and company commitment from HR.

Take my story as an example. The HR professional and I are friends having worked together for years. We drafted the training content together and agreed on the message we wanted to deliver.  We collectively conveyed a clear, concise message that was formal and sincere.  If I can make it happen, every training I do for clients henceforth will be in partnership with HR.

2. Stress Every Employee’s Responsibility to Report Misconduct.

It is a simple fact. Many victims of harassment choose not to come forward.  Victims might be new to a company (as in my story) and be uncomfortable making an accusation against someone with more tenure.  Written policies promising no retaliation will not eliminate a natural and understandable fear that will discourage reporting harassment.  For these reasons, it is so important that employers encourage co-workers to be advocates for each other and come forward to report improper behavior.

My story is a perfect example.  The victim was new to the job.  The harasser had been with the Company for some years and seemed popular in the workforce.  It is easy to appreciate her reluctance to complain.  A good person witnessed some of the misconduct and told HR that the training motivated him to come forward.  My HR partner and I had stressed in our training that good employees report misconduct.  (So happy we did!)  But for this good person’s actions, it is entirely possible the harassment would have continued, and the situation turned into a lawsuit.

3. Address All Illegal Harassment in the Training.

The MeToo Movement motivated employers to refocus on harassment in the workplace and spurred some states to mandate sexual harassment training.  Every employer should conduct at least bi-annual sexual harassment training – the requirement in California.   We should not, however, lose sight that sexual harassment is one of many forms of illegal harassment that can plague a workplace.  Every sexual harassment training session can easily incorporate instruction and education on the illegality of race, disability, religious, age, and any other form of illegal harassment.

I hope you enjoyed this newsletter and ask that you encourage your management team to invest in meaningful harassment training in the New Year.  A small investment in meaningful training helps avoid the courthouse.

A few years ago, I won a bench trial when I convinced a judge that my client owed a former employee a $43,000 bonus and not the hundreds of thousands the plaintiff claimed.   That’s right. The win was still a loss in the sense my client wrote a check.  We owed the money.  The dispute was how much. So why did this go to trial: the company failed to think through the “what-ifs” that every employer should clarify in a written bonus (or commission) policy.

The lessons are simple:

• A poorly written bonus or commission policy promotes disputes.
• An employer without a written bonus/commission policy is asking to be sued.
• The business with a published, well-thought bonus and commission policy avoids the courthouse.

Too often employers make excuses for their inability to memorialize their bonus and commission plans. Most often I hear companies say that the plan is too complicated to write-out, but our employees understand the arrangement.  Sorry, but that’s a lame excuse.  Every bonus/commission plan can be reduced to writing.  It might require the assistance of an objective third-party to craft the plan.  Good lawyers take what a client envisions as complicated and craft a document that the average Joe understands.

The Texas Supreme Court made the necessity of a written commission policy even more important a year ago in its holding in a case called Perthuis v. Baylor Miraca Genetic Laboratories, LLC, 645 S.W.3d 228 (Tex. 2022).  In very general and simple terms, the case involved an employer who promised to pay a commission of 3.5% on sales to an executive and then fired the employee just as he closed a large transaction.  The employer refused to pay the commission claiming the employee was no longer eligible for the bonus because his employment ended.  But the requirement that he be employed was not in writing.  The Texas Supreme Court ruled that because the employee procured the sale, he earned the commission.  The Court noted that if the employer wanted to make employment a condition for earning the commission it could have said so in writing.  The holding seems equally applicable to sales-based bonuses.

Setting out the rule for post-employment bonus/commission entitled is just one critical consideration in drafting a policy.  A bonus/commission plan must address among other factors:

• Eligibility criteria;
• Calculation methodology;
• Define key terms in simple language; and
• Specify discretionary components.

January 1 is a great time to roll out a revised or new bonus/commission plan.  Consider reviewing your bonus or commission plan before the new year.

Driving back from a (thankfully) successful arbitration in Dallas and rushing home before a certain Hurricane Harvey, I received a phone call from a potential new client. He explained his situation. As he walked down the hallway on his way out to leave his job, he was met by two members of security. They escorted him to an office with human resources and his boss he resigned to earlier that day. They told him they knew that he had several thumb drives with company information and recommended he get a lawyer. They were correct, and he called me. Fortunately, he reached into his backpack and handed over the two devices, and then he and I talked about the next steps.  It ended peacefully with no money exchanged and no suit. My client kept his new job too.

He got lucky. He got caught so quickly that no harm had ensued. However, there were more than a few very irritated company officials contemplating legal action.

I have handled many and tried several trade secret cases to a jury, so I know most theft of data and trade secret cases are far more complicated. One recent trial took 37 days. (Not a typo.)  In most situations, suspicion raises the alarm for an IT forensic review. It typically takes time to get the full evidence of what a person may have taken by way of e-mail, external drives, or cloud-based storage (e.g., Dropbox).

There is an easier, often foolproof solution: get a receipt.

An exit interview – and you should have one – should require that an employee confirm in writing he has turned over all the intellectual property and physical property that might contain intellectual property. For a variety of reasons or excuses, employers sometimes skip this step.

Some companies presume employees will act honorably and that they will remember the confidentiality agreement they signed years earlier. We all know differently. People want a head start. Who wants to start over when they have the information in front of them necessary to continue the relationship with a competitor? It always helps to start a new job with a leg up.

Based on a lot of experience, I believe that if pressed to sign a document confirming compliance an ignorant, negligent, and even malicious employee will return what they never should have appropriated. I recommend this be accomplished in an in-person meeting with a signature on an “Acknowledgment”; I call it a receipt.

Tailored to your business the “Receipt” or “Acknowledgment” says something like:

“I hereby confirm that I (write your name):

1. Returned the company’s computer(s) to (write the name);

2. I do not have any external drives, USBs, or similar devices that contain any company information or property, including any information that originated during employment with the company (no matter the source). This includes but is not limited to, client list, financial information, personnel information, employee lists, contact lists for clients, customers, vendors, and suppliers, client/customer purchase history information, marketing and sales data (“Company Information”). (Again, defined to fit your business.)

3. I do not currently have access to any Company Information.

4. I have looked at my personal e-mail accounts and personal computers and other electronic devices and confirm that any work-related document, email, or information has been deleted, with the exception only to documents needed for my personal tax obligations.

5. In the space below I have noted any exceptions to my commitments above.”

It works both ways. I counsel people transitioning to a new job to create a receipt (like the above) to confirm they honored their obligations when their employer never bothered to ask. Guess how many of those clients got sued for taking company information? Right… none.

I hope you enjoyed this newsletter offering a simple process for avoiding the taking of company information.

The Harvard Business Review picked its twelve favorite articles to republish and highlight through 2022 to celebrate its 100-year anniversary. The December reprint of “The Feedback Fallacy” by Marcus Buckingham and Ashley Goodall captured my attention.  It challenges conventional thought on how employers should review and assess their workforce and helped me think about my own management strategies for 2023. One theme of the article particularly resonated with me: focus on the wins.

In their article, Buckingham and Goodall tell the story of how legendary Cowboys Coach Tom Landry critiqued game film with his players of only the outstanding plays. Coach Landry recognized that teaching by reviewing solid performances was more likely to repeat the desired result. Apparently, it worked.

On a quite different athletic level, my son and I made a deal some years ago that we would no longer watch clips of his strikeouts… except when he’s pitching but you get the idea.   Watching videos of solid hits reminds us of the success that comes with dedication and practice. Focusing on poor performance might lead to repeating what we want to avoid.

Translate this to the workplace. Managers should focus employee reviews on the wins of the past year. Build from the positive to develop a strategy with the employee on how to create more wins. Consider how to help an employee convert less successful past events to the future plus column. Approach employee errors and mistakes thinking how it deviated from how the employee’s other success stories.

Why wait for the formal annual review? Celebrate the wins when they occur. Waiting for an annual review to talk through the positive experiences misses the opportunity to reproduce the steps that lead to success.

For example, I was so proud of Hamed Moradi this past year. He hit 1,000 going 3-0 defeating attempts to certify collective actions on overtime claims. The first win came in a substantial case that put Hamed and I up against very big-name lawyers in the FLSA plaintiff-world.  When we got that first win, I congratulated him with a high five or fist bump and (most likely) some exuberant language.  We talked through the steps that helped deliver the win. He needed only a little guidance from me to get the next two wins on his own.

I hope you enjoyed this newsletter and encourage you to read “The Feedback Fallacy” by Marcus Buckingham and Ashley Goodall.

Calling your lawyer should not be a scary event. Reaching out to your lawyer before the bad stuff occurs is like knowing someone is around the corner ready to jump out and say, “Boo”.  You know it’s going to happen, might be a little startled, but you will be prepared.  In the world of litigation, calling your lawyer when things get concerning helps avoid the courthouse.

Today I offer three tips for when you should call your lawyer before a tough situation turns into litigation.

Hiring someone with a book of business

Companies recognize the need for legal advice when they consider hiring someone with a non-competition or non-solicit agreement. Simply a no-brainer. I suggest employers take a broader approach: call your attorney when you consider hiring someone who is expected or likely to bring a book of clients from his prior employer. You can be certain that the former employer will be looking for every possible way to protect what it identifies as its clients irrespective of whether the departing employee has signed a non-compete.  The prospective new employer needs the assistance of legal counsel to position itself best to hopefully avoid litigation and certainly be ready in the event of a demand letter or threat of suit.

Help navigate an internal hot potato

A trusted lawyer can be a great resource when human resources wants help working through an internal disagreement that might be the backdrop for a lawsuit if not handled appropriately.   Human resources, even the in-house counsel, might be unable to steer effectively through office politics to get the right result. But outside counsel holds a fiduciary duty to the corporate client and not to the individual managers intertwined in the situation. The lawyer must steer management to the best decision for the business. This may be a struggle for an attorney uncomfortable dealing with challenging egos. Fortunately, most lawyers are known for having sufficient “self-confidence” to match the personalities of company executives.

Confronting bad optics or bad timing

The boss hands you a list of names to terminate in a layoff. You notice he has two people out on worker’s compensation leave, a woman who announced her pregnancy the prior week, and the only black person in the department.  Right, call the lawyer. My example obviously pushes the extremes to make the point. Human resources really must reach out to their legal support when placed in objectively difficult fact patterns. The law does not recognize a “human resource privilege”, but we clearly respect the attorney-client communications privilege. There may be an explanation for the optics or timing, although not likely in every situation in my hypothetical. A good lawyer can help walk management through the facts and, if artfully done, might present the scenario so that the manager comes to the best conclusion with a gentle nudge and not forceful commands.

People might find this odd or even disturbing, but the truth is, I love jury trials.  Nothing else in my work spurs the same exhilaration and thrill.  Rarely does my client share this perspective, so it becomes very important that I make sure the HR professional seated with me at trial is ready for the experience.  With this in mind, I thought I would share with you three things juries expect of human resource professionals.

1. Juries think HR can stop bad decisions.

Juries view HR like a judge assessing the facts and witnesses to protect employees from unfair decisions. They think of HR as a gatekeeper ensuring management makes prudent decisions.  While seemingly unrealistic, juries expect HR to intervene and stop a wrongful termination.  They believe, correct or not, that HR has powers that might not exist in every workplace.

This jury expectation of HR makes it so important that HR do its best to help management make sound, well-reasoned decisions.  When management is headed in the wrong direction, HR should ask the smart, tough questions that force reexamination of the situation.  Sometime, where the facts warrant it, HR figures out how to get the employment-law attorney on the phone with management to help steer the situation to a good decision.

2. Juries expect HR to be excellent witnesses.

Juries might give some witnesses a little slack, but not HR.  HR is held to a higher standard.  People associate HR to lawyers believing HR is experienced in legal matters and ready to tell their story at trial.  Similarly, HR is a job that involves working and interacting with people.  That translates to an expectation that an HR professional should be very comfortable on the stand.

3. HR listens to everyone’s opinion.

Most employee handbooks explain that the company has an open-door policy.  The idea is that management wants to hear from employees about all their concerns.   Translation: employees expect they can walk into HR and talk about anything and everyone.   Come trial, juries expect that open door concept to mean that HR has an obligation to listen to everyone’s opinion.   HR is there to make sure everyone’s side of the story is told and, more importantly, recorded and reflected in notes and written statements.  Juries will not excuse a failure to collect a statement from a key witness or missing the opportunity to hear from every person who had something important to share about a termination decision.

FINAL TIP:   Watch a trial.  Jury trials happen all the time in Harris County and in the post-COVID environment trials are broadcast on Court run Zoom lines.   Nothing will teach HR more about the trial experience than watching an employment law case.

I hope you enjoyed this newsletter!

Over the years, I have seen FLSA violators commit silly acts that everyone reading this newsletter knows to be unlawful.  The classic error is paying straight time for overtime, or, the far more aggressive, cash paid off the books for more than 40 hours worked. This newsletter is not for the employer seeking to avoid the law, but rather for those who want to handle it correctly.   So here are three things the honest employer can do to ensure FLSA compliance.

1. Review Lowest Paid Salaried Employees

Employers unknowingly and mistakenly often believe that paying a salary renders a worker exempt from overtime.  This is false.   An employee must also perform specific duties to qualify for exemption under the FLSA.  The Department of Labor has easy to understand guidance on this issue at:  https://www.dol.gov/agencies/whd/fact-sheets/17a-overtime

Even in a workforce familiar with the FMLA, some managers overstate an employee’s responsibilities to try and avoid overtime obligations.  The crafty manager might use broad strokes to describe a very important job; however, the salary the manager wants to pay seems not to match the alleged significance of the role.  The quickest way to catch these misclassification errors is to examine and analyze the lowest paid salaried employees in the workforce.  Depending on the workplace, you might find, by way of example, team leads, entry level managers, accounting staff, dispatchers, and in-house salespersons, who might not perform the duties required for exemption status.

TIP:    Smoke out FLSA concerns comparing the highest paid hourly, non-exempt employees against the lowest paid salaried-exempt.

2. Beware of Creative, Out of Place Job Titles

The law looks to the duties of a position and not the job title.  I find, however, that job titles often lead to unintentional FLSA misclassifications.  Take this common scenario.  An employee wants the grandest job title he can get.  A manager is all to happy to grant that job title if it correlates with what HR typically deems an exempt position that keeps the manager’s costs controlled.   Here the employee and manager are aligned.  But neither the employee nor manager think about the FLSA in this negotiation.  Only when something goes wrong in the relationship does the employee later claim he should have been paid overtime all along.

LESSON:  Review job descriptions for FLSA compliance.

3. Spot Check for Off the Clock

Before COVID-19, employers struggled with work from home arrangements because they present obvious challenges with ensuring all worktime is properly counted.   Now, with hybrid and remote arrangements so prevalent, employers must be very aware of the potential for claims that employees are working off the clock.  Periodic audits should be conducted to confirm all work hours are recorded and compensated.

TIP:    HR should implement semi-annual written questionnaires with remote and hybrid employees to confirm all workhours are reported.

I hope you enjoyed this newsletter!

April Fool’s Day took on a new and special meaning for me because it is my workplace anniversary at WKPZ.  Margo and I joined the firm twelve years ago.  Sort of ironic that I get to celebrate something special on a day I really hate.   I find practical jokes distasteful and mean-spirited, and I think they have no place at work.  Thinking on the topic of foolish workplace antics, I thought in this newsletter I would offer my thoughts on three foolish things employers should avoid.

1.  Never distinguish formal from informal complaints of harassment/discrimination.

After 28 years of practicing law, I still cannot define an “informal” complaint.  But I will do my best to explain the bad explanations offered to me over the years by employers who tried to distinguish informal from formal complaints of harassment and discrimination.     First, an “informal” complaint excuses an employer from investigating the allegations.   Second, an “informal” complaint remains so secretive that management neglects to record the complain as if the conversation never happened.  Third, with “informal” complaints the alleged bad actor faces no disciplinary action.

Tip:  When you hear the term “informal complaint” promptly ensure the matter turns into a formal investigation.

2.  At-will employment does not justify ignoring progressive discipline.

Every employee handbook explains that employment with the company is on an at-will basis, except if you have a contract signed by a Company officer.   Managers frequently distort this statement to quickly fire an employee and ignore the basic notice of progressive discipline.  Fairly often I hear a manager say: “I thought this was at-will employment; why do I have to explain my reason for firing someone?”   Easy answer:  most people (and juries are a collection of 12 people) expect every employee be given a fair chance before termination.   No juror cares about at-will employment.  I have never mentioned “at-will employment” at any trial.   Juries want and expect every employer to have followed some form of progressive discipline unless (and this is rare) someone did something so bad they should be fired on the spot (e.g., serious sexual harassment, assault, drunk driving, theft).

Tip:   A manager who refers to “at-will” employment in a disciplinary discussion might lack a defensible reason for taking the proposed action.

3.   Avoid Bad Timing

Smart employers accept the need to delay a termination when presented with new circumstances. For example, firing an employee for performance reasons should get pushed out when an employee announces they need Family Medical Leave.  Similarly, it would be unwise to issue a PIP to an employee who recently announced she is pregnant.  This all sounds so obvious.  Yet, sometimes a company gets very set in a decision and unwilling to pull back even when a situation clearly warrants a pause.

Tip:   Act promptly with disciplinary and termination decisions to avoid new circumstances that may complicate a situation