Texas Employer Handbook

Insight on Employment Law for Texas Businesses

EEOC Hit with Sanctions for Frivolous Claims

Posted in In the News

Last week the Associated Press reported that the EEOC was sanctioned by a US District Court judge for $4.7 million dollars.  The sanctions were awarded because the EEOC brought a number of frivolous and groundless claims against trucking company CRST.

According to the opinion, the EEOC filed a lawsuit in 2007 against CRST alleging sexual harassment of a number of female employees.  In litigation over the next three years, the EEOC could not prove its claims and CRST sought to recover its attorney fees for defending the suit.  The Court ruled that 153 claims of the total claims brought by the EEOC initially were without foundation and sanctioned the EEOC approximately $4.5 million dollars.

The EEOC appealed to the 8th Circuit Court of Appeals.  On a technicality the case was reversed and returned to the US District Court for further rulings.  Again CRST sought its fees and again the judge ruled in its favor, this time adding the fees CRST incurred on the appeal.

This is an important decision for employers.  It will hopefully cause the often overzealous EEOC to temper its approach.  It also provides the basis for other employers across the US and Texas to make the same request if they prevail in a claim against the EEOC.  With the real possibility of recovering their fees, hopefully more employers will stand up to EEOC abuses and further reign in the agency’s excesses.

Of course, the sadest part of the whole situation in my opinion is that we the tax payers to this already strapped government will bear the cost of paying CRST.  Someone should be held accountable for the consequence to us and I, for one, have asked my representatives in Congress to do so.

Big Red and Fried Chicken: Dallas Law Firm Sued for Discrimination

Posted in In the News

Even law firms get sued for discrimination once in a while, but you would expect lawyers to be smart enough not to serve Big Red and fried chicken to black employees in celebration of Juneteenth.  Talk about stereotyping!!

Sadly that is just what has happened to Dallas law firm Eberstein & Witherite (Better known as the 1-800-Carwreck firm).  The firm’s “all white” management allegedly made the decision to celebrate Juneteenth with Big Red and Fried Chicken after two employees asked to have the day off.

According to the petition, the firm’s HR manager replied to the request by saying:  ”Y’all don’t need no day off. Ya’ll need to work.”  She then allegedly sought and obtained permission to serve Big Red and fried chicken to employees on that day instead.

For those who are not familiar, Juneteenth, or, Freedom Day, is an unofficial holiday on June 19 each year to commemorate the announcement of the abolition of slavery in Texas.  On June 18, 1865, during the civil war, Federal General Gordon Granger landed on Galveston Island.  The following day June 19th, General Granger proclaimed the slaves of Texas freed.  Over time, a celebration developed around the day each year.

The law firm’s racist traits do not appear to end with the Juneteenth incident, however.  The lawsuit alleges that the firm’s HR manager made other comments such as:

  • Complaining that she is “sick and tired of Black women bitching about being the victim” (interesting for a personal injury firm).
  • Quizzing black employees by saying “I don’t even know if you’re Black.”
  • Commenting “Oh no. You’re not going to have that mad, bitter Black attitude with me.”

Later, the firm is alleged to have terminated both black employees for being unhappy with their jobs.

Handling these types of cases for as many years as I have, you would think nothing surprises me anymore.  This one did.  Take a lesson from the claims made here:  Don’t try to be cute.  And, (no opinions cast here) be sure that your HR Manager is not a racist.

Employment Law 101: Your Guide to Workplace Investigations

Posted in Handbook Articles

Who, What, Why . . .

Who does it apply to: All employers – who have ever wondered whether an investigation of some sort should be made regarding an issue involving employees.

Should I investigate: Let’s face it, not every dispute will merit an investigation, and sometimes, the investigation merited will not require all of the steps below. Like so many issues in business, it comes down to an evaluation of risk, and in some cases that might mean intentionally not investigating. For example, it is tempting to always conduct a post-accident investigation, but what if your employee has injured a non-employee who might sue? It might be wise not to have a drug test as part of the investigation. Keep all of these considerations into mind.

Who should do it: This question may be more complicated than you think. Impartiality, professionalism, and credibility are the keys. How would a jury perceive your decision? Should it be someone of the same race, color, or religion (as an example) for a discrimination claim so a jury will find the investigator more credible? Should it be a team to double the potential credibility?  If the head of the company or an executive is under investigation, it may be better to choose an outside investigator. An outsider is also worth considering if the situation already seems headed toward litigation, i.e. a claimant has filed an EEOC charge or hired a lawyer. Should your investigator be your lawyer, or a lawyer? Attorney client privilege attaches to your discussions with a lawyer and that can be a powerful protection if you don’t want your investigator to be forced to discuss their private conversations with you about the investigation.

What is the plan: Take time to think before you act. It may be tempting to jump right in and start talking to folks, but Mom always said to think before you speak. What do you already know? What do you need to fill in the blanks? Who should you interview? What order should you interview? What should I ask? When should I start? Do I need outside help, i.e. should I involve the police in a theft or violence investigation or a forensic accountant in an embezzlement investigation? Does anyone need to be suspended until the investigation is concluded? This could be appropriate in a number of instances such as letting a thieving, drunk, or violent employee back into the office.

How should the interviews be conducted: If you are not going to use the assistance of a lawyer or experienced investigator, you should think about how you will ask questions of your interviewees. Things lawyers naturally take into account when interviewing or questioning a witness include: asking open ended questions; avoiding accusatory questions that put a witness on the defensive; repeating the story as you understand it to be sure it was understood initially; whether you have gotten the facts or just a string of opinions; and what contradictions in the story need to be ironed out. While interviewing keep your opinions, observations, and the results of your investigation to yourself. Finally, if you are in a union environment, be alert of the interviewee’s rights to representation.

What about recordings: It may seem convenient or the best possible evidence to record interviews. After all, no one can argue with a recording. That is true, but it means your words as questioner will be put under the microscope, too. Recording interviews also may stunt the interviewee’s responses. I personally prefer clients to take copious notes. That said, if an employee wants to record the interview you should allow it on condition that you receive an immediate copy. Because Texas allows a conversation to be recorded as long as one side knows it is being recorded, ask the interviewee if they are recording to be sure you know what you are up against.

Where else will there be evidence: Though the outcome of a lot of investigations will turn on the interviews, there are a myriad of other places that evidence may show up. Emails will often play a part, but consider these other additional sources of evidence: electronic documents, voicemails, texts, pictures, sales receipts, equipment logs, notes, expense reports, inventory records, payroll records, customer complaints, prior warnings, productivity reports, and any other place you might find something to support the final determination. Remember, from our prior EH edition on polygraphs that they can be used in appropriate circumstances, but strict procedures must be followed.

Are there privacy or confidentiality issues: As you know from the previous EH edition on privacy, there are few privacy rights in the workplace, but you have to be careful. Searches of areas where you have created an expectation of privacy are prohibited as is listening to telephone calls without consent. You should maintain confidentiality of your investigations and be careful who is in the loop to avoid rumors. Under the National Labor Relations Act, you can ask employees to maintain the confidentiality of their interviews or put a “gag-order” over discussion of the incident at issue only when you can demonstrate that such confidentiality is essential to the investigation. And, when the investigation is over, you must release employees from the confidentiality obligation unless it remains justified.

What should I do (the result): Only you can decide the right answer, but whatever the result may be, you must document it.  Prepare a final assessment commensurate with the severity of the investigation documenting your reasoning and final decision.  Depending on the circumstances, it is always good to consult with your employment lawyer about the legally correct result under the circumstances.

Common Situations:

Regimented mistake: The HR VP at Smiley Face, LLC decided to have the department manager where a discrimination claim arose conduct an investigation. Because the manager was not experienced in handling discrimination claims, the HR VP provided him very strict guidelines for the investigation and the questions to be asked. The manager followed the HR VP’s instructions to the letter interviewing the employees listed and collecting documents requested. Because Suzy was not on the list to be interviewed, the manager did not follow up on the observation she might have valuable information. In fact, Suzy knew specific facts to support the discrimination in an otherwise close case. Business owners have to guard against such a regimented approach. Go where the investigation takes you.

Be wary: Melvin has just taken ownership of Shady Pines Nursing home. The prior owners warned him that the residents often complain of mistreatment by the staff when nothing really happened. Mel takes this to heart and looks the other way when Sophia complains about the staff locking her in her room to keep her from riling up the other residents. Has Mel made a bad decision? Of course. He is required, by law, to investigate all claims of patient abuse even if Sophia is just making it up. Workplace investigations are not always optional. Know the legal requirements for your industry and conduct tests when they are necessary.

What should I do:

Good: When an issue arises, take a moment to determine whether an investigation is appropriate and the scale of the investigation. Let the right person handle it and record the result.  Investigate when legally required to do so in your business.

Better: All of the above, plus, preserve copies of all physical evidence and document the results and any interviews. Be sure to document delays in starting to be able to justify later.  Make sure your employee handbook provides for all manner of searches and surveillance to compliment your investigations.

Best: That is all. Good and Better get it done this month.

 

What Can Be Done About a Workplace Bully?

Posted in Quick Questions

With bullying in the news of late, I was recently asked how employers should deal with a star employee that bullies or berates co-workers.

Each August my wife begins a new school year with 22 bright shiny faces that all come from different home environments.  Some are very polite.  Some are sneaky.  Some are bullies.  Some are bully targets.  All of them are about to begin a new relationship with their teacher that will set the tone for the next 9 months.

In these crucial first days, the students will learn what they can and cannot get away with.  They will learn whether “Mrs. K” demands respect or is a push-over, etc.  Knowing this from years of experience, Mrs. K immediately provides the ground rules and delivers swift punishment for students who test the limits.  Separate and apart from what is on the white board, Mrs. K teaches the students how to treat her.

Over the years, I have developed the view that employees are not altogether different from my wife’s fourth graders.  Employers must teach the employees how to treat them and the other employees of the business.  The rules must be laid out in a way the employees can understand at the beginning and punishment must be carried out for employees who break the rules.  If the employer has no follow through on punishment, there will be pandemonium.  The employees, just like the students, will learn that the supposed consequences never happen and the rules mean little or nothing.

This does not mean the workplace can’t be a fun environment.  Most of Mrs. K’s students think she is the most fun teacher they’ve ever had.  She makes games of their desk work and grants prizes and breaks when the students perform well as a group.  In this same way the office does not have to be “all stick and no carrot.”  As long as employees follow the rules, employers should provide benefits.

A bully can ruin an office environment.  And, even if that bully is a star performer, the entire productivity of the office may be dragged down by his or her actions.  The profits the bully may generate are often muted by the decrease in productivity from other employees who perceive their employer will not stand up for them.  These other decent employees often look for another job and bolt when the opportunity arises.

Like it or not, the only way the problem gets better is if there are rules and those rules are enforced.  If the employer does not have the stomach to discipline the bully because they are afraid of losing him or her, there will be no way to curb the present conduct.  In that case, creating rules that are not carried out may actually be more harmful.

Once the rules are created, the employer should provide advance warning.  The employees – including the bully – are all operating on the assumption that the status quo will continue.  They need and deserve an opportunity to understand how things are changing.  From there, the employer must enforce the rules.  I know it is easier said than done, but nothing is going to change unless you teach the bully how to treat his or her co-workers.

So what kind of punishment should employers mete out?  Punishment that will actually cause a change in behavior.  With a bully in the office, employers need to act quickly to re-establish control.  Working through a few weeks of write ups to get to a point where punishment is finally given will likely be unacceptable.  In most cases, this means affecting compensation.  It is after all the biggest control the employer has and the biggest reason the employees come to work.

If the bully is an hourly employee or a salaried non-exempt from overtime, consider sending him or her home without pay on a day of your choosing (not a day that would seem like a vacation to the employee).  Let them know the punishment will be coming and then randomly send them home after they get to the office on a Tuesday or some other day where they will not be able to convert it into a vacation day.

If the bully is salaried and exempt from overtime, consider reducing the bully’s salary for a week by an amount that will hurt.  Provide advance warning that the reduction is coming.  It is not legal to do it after the fact.

If you provide bonuses, cut back on the bonus.  If you offer vacation days, start taking them away (but remember to establish this rule in writing before beginning to use it).

All the while, document the bully’s conduct.  This way, if nothing else works, you can take that final step to terminate the bully without risking some type of legal claim.

 

Can an Owner be Personally Liable for Wages?

Posted in Quick Questions

You’ve set up a your business as an LLC or a Corporation and followed all of the legal requirements to keep the business up under Texas law.  Your lawyer tells you the company will protect you from personal liability to your creditors as long as you follow all the required formalities.

After a few years of really making a go of it and going without a paycheck yourself for months, you suddenly discover that you will not be able to make payroll this week.  The big order you were counting on is not coming in and you have nothing to pay your 5 employees.

You call everyone into a conference room and let them know you are shutting down.  There will be no more company.  There will be no paychecks.  The only solace you have is that what is left of your personal savings is exempt from creditors.  Or is it?

The Federal Fair Labor Standards Act (FLSA) requires “employers” to pay their employees at least minimum wage.  The definition of “employer” includes “any person acting directly or indirectly in the interest of an employer in relation to an employee.”  Federal courts use what is known as the “economic reality” test to decide who meets the definition.  Did the person or company:

(1) possess the power to hire and fire the employees,

(2) supervise and control employee work schedules or conditions of employment,

(3) determine the rate and method of payment, and

(4) maintain employment records.

Since there can be more than one “employer” under the FLSA, the owner of the business often also meets this definition and Federal courts have regularly held these business owners personally liable for back wages due employees.

The same is true under Texas law which has the same definition of “employer” but no clear guidance of what is required to meet the standard.  That said, Texas did adopt the FLSA definition of employer and will be likely to follow the “economic reality” test, also.

What is worse, under the Texas labor code, “wages” has a much broader definition than under the FLSA.  It includes vacation pay, holiday pay, sick leave, and severance pay.  This means an owner who meets the definition of “employer” may be personally liable for these additional types of pay.

Be careful employers.  It may be better to stop while you are behind than bet on that next job to cover payroll.  Former employees have up to 180 days from the time the last wages were due to file a complaint with the TWC.

Equal Pay Act 50th Anniversary

Posted in In the News

Fifty years ago yesterday John F. Kennedy signed the Equal Pay Act into law.  Even with that much time to eradicate unfair pay between men and women, many still believe a gap exists.  Stories from the Huffington Post, the Washington Post, and NPR, all cite a 2010 Census Bureau Report that women earn just 77 cents for every dollar earned by men.  More specifically, the median salary earned by men was 23% higher than that earned by women.

According to a January 2009 Report prepared for the US Department of Labor, however, the difference is just 20.4% between the sexes and several factors account for most of that gap.  These include:

  • A greater percentage of women than men tend to work part-time.  Part-time work tends to pay less than full-time work.
  • A greater percentage of women than men tend to leave the labor force for child birth, child care and elder care.  Some of the wage gap is explained by the percentage of women who were not in the labor force during previous years, the age of women, and the number of children in the home.
  • Women, especially working mothers, tend to value “family friendly” workplace policies more than men.  Some of the wage gap is explained by industry and occupation, particularly,the percentage of women who work in the industry and occupation.

The research also suggests that differences not incorporated into the 2009 Report may account for part of the remaining gap.  The 2009 Report focuses on wages rather than total compensation. Other research indicates that women may value non-wage benefits more than men do, and as a result prefer to take a greater portion of their compensation in the form of health insurance and other fringe benefits.

Regardless of your point of view, several in Congress do not believe the Equal Pay Act has done enough.  They have been advocating for the passage of a Paycheck Fairness Act since 2005 when Hillary Clinton first offered the legislation for consideration.  Senator Kristen Gillibrand, D-NY appeared yesterday on CBS News to advocate for the 2013 version of the proposed law.

The proposed Paycheck Fairness Act modifies the existing language of the Equal Pay Act to curtail one of the exemptions for disparate pay between men and women.  Rather than having a reason “other than sex” which will be acceptable to a court, the new act proposes that employers must have a “bona fide reason other than sex such as education, training, or experience.”  This new language is perceived to be more stringent.

Additionally, the Paycheck Fairness Act proposes more significant penalties for employers who violate the law and training for women in how to negotiate wages better.  According to Senator Gillibrand in her CBS interview, just 7% of women will attempt to negotiate a higher salary when offered a new position as opposed to 55% of men.

It will be interesting to see if the 2013 version of the law is passed.  Each edition proposed since 2005 has died on the vine.

Employment Law 101: What Restaurants Need to Know About Tips

Posted in Handbook Articles

Who, What, Why . . . 

Who does it apply to: Employers who take the “tip credit” against wages of some or all of their employees.

What is the “tip credit”: Employees who earn tips may be paid a lower hourly rate than the standard minimum wage on the theory that they make it up in tips. Currently, employers may take a credit against minimum wage reducing the tipped employee’s pay to $2.13 per hour (as opposed to $7.25). As long as the tipped employee earns at least $5.12 per hour in tips, the employer has no further obligation. If the employee falls short of this mark during any week, however, the employer is obligated to make up the difference.

Who does the credit apply to: Well, “tipped employees,” of course. A tipped employee is a person who receives more than $20 per month from tips, retains all the tips (except for tips shared in a legitimate pool), and is employed in a job that customarily and regularly receives tips (not just holidays or special occasions). This includes employees like a busboy who may not receive the tip directly, but is awarded the tip as part of a legitimate “tip pool.” Tipped employees typically include: waiters, waitresses, bellhops, counter people who serve, busboys, service bartenders, and perhaps hostesses, seaters and greeters.

 What is a “tip:” A tip is a monetary payment by a customer that is totally discretionary. It does not include service charges, i.e a restaurant that automatically taps your bill for a certain amount on top of the food to pay for the service you receive. That said, the Department of Labor (“DOL”) does not consider the automatic gratuity charged by some restaurants for tables of 6 or more to be a service charge as long as the employee receives the tip.

How does prep time count: Prep time is dangerous for employers. Many restaurant owners, for example, have employees come in 30 minutes to an hour before their shift to set up tables and prep the restaurant. During this time they pay only the tip credit amount. Technically, this would be a violation because employees should only be paid the tip credit amount while they can be earning tips. The DOL has an informal rule that prep time is not an issue as long as it does not exceed 20% of the employee’s shift. Employers must be careful though, because any time during a shift may count toward this limit. It is very easy to run afoul of this rule.

Who has the burden of proof: Employers need to keep in mind that the burden to prove tips were handled properly is on them. Recordkeeping is, therefore, very important. After all, the consequence of losing the tip credit is to go back and make the employees whole at the full minimum wage rate.

What do I have to tell the tipped employees: Tipped employees must be placed on notice of their employer’s tip scheme, including the time and manner in which tips are paid. This notice does not have to be in writing, but it is recommended so that employers can prove to the DOL that the employee was on notice if it becomes an issue. Employees must also be placed on notice of any tip pool and its manner of tabulation.

How do tip pools work: A tip pool is simply the pooling of tips received from the service of a customer at a meal for the service staff. While the check is usually paid to the waiter or waitress and customers attribute the tip to their service, there are many employees involved in the process – including hostesses, busboys, and the like.

To be legal, the pool must pay out to only those who customarily and regularly receive tips (see above). The tip pool cannot include the portion of the server’s tips that are required to cover the tip credit or take away more than what is customary and reasonable in that locale. DOL takes the position that the customary and reasonable deduction cannot exceed 15%, but there may be special cases. If instituted by the staff itself, however, a tip pool taken can be any amount. All participating employees must have advance notice of a tip pool.

Who pays the credit card company on tips: Employers can charge credit card companies’ fees against the tip portion of a customer’s total bill by payroll reduction or direct reimbursement at the time the tip is earned. Larger employers will likely have software to handle this calculation and employees will be charged only the precise amount that each credit card company they exceed 5% of the tip on any transaction.

Common Situations:

But I thought I got the tips: The front of house manager at Romeo’s Restaurant is annoyed at how much his waitresses are earning from tips. In a stroke of brilliance, he decides that he will collect all of the tips, take the tip credit on the waitresses, and pay them back the difference to bring their wages up to minimum wage. Thus, all of the “profit” in the tips will go to him. Is this legal? No. An employer cannot take the tip credit and then give the employee back the tips they earn only to the point of minimum wage. That said, the manager could hire all of the wait staff at minimum wage to begin with and collect all the tips for the house – assuming anyone will take the job.

Tipping out the cooks: Bob’s Bar-B-Que decides that the food is truly the star of its restaurant and that customers are basing their tips, at least in part, on the skill of its cooks. To even things out, Bob institutes a tip pool and has the wait staff tip out the kitchen. The tip pool is handled correctly in all other respects. Is it legal? Nope. Tip pools may only include those employees who “customarily and regularly” receive tips. According to the DOL, this may include a busboy, but it does not include cooks, chefs, dish washers, laundry room attendants, or janitors.

Multi-tasking: Hotel Bizarre is just getting off the ground. Everybody that works there has more than one job. The day manager tends bar at night. The night doorman waits tables during the breakfast rush at the restaurant. How does the business handle the fact that these employees have one job for which they can take the tip credit and another for which they must earn at least minimum wage? The time must be segregated. When they work the tip credit position, they can be paid $2.13, with tips. When they are in their other job, they must be paid at least minimum wage. Now, there is likely to be a lot of overtime in this situation. Unfortunately, resolving that issue requires a slide rule and a ream of paper. Contact your attorney to help you determine overtime in that situation.

What Should I do:

Good: Determine which employees are entitled to receive tips and monitor their tips on a weekly basis to be sure that they are receiving at least minimum wage for each hour worked. Make sure the employees are at least orally on notice of the tip system you employ.

Better: Put your tip system in writing and have new employees sign to receive notice. If you have a tip pool, put that in writing as well. Collect and keep records of all tips received by employees on a weekly basis. Maintain a credit card fee deduction of less than 5%. Watch out for prep time. I recommend employers pay employees minimum wage for any pre or post shift prep time in excess of 15 minutes on each side to be protective of the limitation.

Best: Invest in software that keeps all records regarding tips for perfect evidence to show the DOL in an audit. Pay all employees minimum wage for all prep time before and after shifts to be certain there can be no argument. This is a common basis for suit by employees.

 

Governor Signs New Trade Secrets Law

Posted in In the News

On May 2, 2013, Governor Perry signed the Texas Uniform Trade Secrets Act into law.  So, let’s cut right to it.  What does it do different for employers?  The most notable feature is that the law allows the “prevailing party” to recover fees in certain circumstances.

This is a nice feature.  Trade secret litigation is expensive and it is often difficult to prove that the employer has really suffered loss due to their theft.  Employers can spend an arm and a leg trying to stop the employee who stole the secrets only to fall short when it comes to showing how much money they lost.  Damages from stolen trade secrets can sometimes be difficult to prove.  Perhaps (we won’t know until cases start interpreting the new law) the threat of paying the employer’s fees will become at least some kind of stick against the former employee under those circumstances.

Employers need to be careful though.  Because fees can be awarded to the “prevailing party” there is a chance that the employee can recover fees if the theft of trade secret claim is made in “bad faith.”

The act takes effect on September 1, 2013, and applies to misappropriations after that date.

Update on the NLRB Poster Litigation

Posted in In the News

As Business Week reports this week, the US Court of Appeals for the District of Columbia struck down the poster requirement created by the National Labor Relations Board.  For those who do not know or do not remember, in August 2011, the NLRB adopted a rule requiring private businesses to post a notice of the rights employees have to unionize.

The poster was initially required to be posted as of November 14, 2011, but the NLRB postponed the start date several times.  When suit was filed, the NLRB decided to wait until the resolution of the litigation to set a new deadline.

It’s a good thing the NLRB waited.  The rule is now invalid in the area covered by the DC Circuit  Court of Appeals and has been found invalid by a US District Court in South Carolina with an appeal pending before the 4th Circuit Court of Appeals.

It may be boring legal reasoning which some are not interested in, but the DC Circuit overruled the NLRB requirement for two reasons.  The first we can all understand: free speech.  The Court found that employers have the right not to be forced to speak about employee rights to unionize.  Second, the Court found that the NLRB overstretched its authority because the penalties it imposed were beyond NLRB power.

What does this mean for Texas employers?  We reside under the jurisdiction of the 5th Circuit Court of Appeals – not the DC Circuit or the 4th Circuit.  There is not presently an appeal pending in the 5th Circuit, but, with the delay imposed by the NLRB to wait for the other cases to be resolved, employers here are safe for the moment.

 

Employment Law 101: A Guide to At-Will Employment

Posted in Handbook Articles

Who, What, Why . . .

Who does it apply to: All employers regardless of size or shape.

What does “at-will” employment mean: You might be inclined to think that it means that employees serve at the will of the master, or at the master’s pleasure. While this historically makes sense, “at-will” employment is something more. It represents the idea that employer and employee are each free to terminate their relationship at any time without any strings attached for good reason, bad reason, or no reason.

Why an entire edition devoted to it then: If there are no strings attached, why would we need this edition? As I tell clients, at-will means you can let them go, but it does not mean they won’t sue you to claim it was for an illegal reason. The courts and legislature have created exceptions to the at-will doctrine. This edition is designed to give you a list of all the ways that the at-will employment doctrine is limited so you can minimize the risk you will be sued.

What is the exception created by the courts: Employees cannot be discharged solely for refusal to commit an illegal act. This does not include acts which would bring an administrative penalty or a lawsuit down on the employer. And, it only works if the sole reason for termination was the refusal.

What are the exceptions created by a statute: There are a bunch. Both the federal and state legislatures have created exceptions to the at-will doctrine:

Union or pre-union activity: Employees may not be discharged for being in a qualified union, acting under a collective bargaining agreement, or engaging in pre-union concerted action (complaining about the terms and conditions of employment).

Discrimination: Employees may not be discharged because of their membership in a protected class, i.e. race, sex, sexual orientation, pregnancy, national origin, religion (Under Title VII, the Texas Labor Code “TLC,” and other laws), age (under the Age Discrimination in Employment Act “ADEA”), disability or handicap (under the Americans with Disabilities Act “ADA” and Rehabilitation Act, genetic information (under the Genetic Information Non-Discrimination Act “GINA”), or military status (under the Uniformed Services Employment and Reemployment Rights Act “USERRA” and TLC).

Polygraph: Employees may not be discharged for refusing to take prohibited polygraph examinations under the Employee Polygraph Protection Act.

Without required notice: Employers engaging in a mass layoff must follow the Worker Adjustment and Retraining Notification Act.

In retaliation: Employees may not be discharged in retaliation for making a complaint of discrimination or coming to the aid of another person who makes a complaint of discrimination (Title VII, ADEA, ADA, GINA, and USERRA). Employees also may not be terminated in retaliation for taking medical leave (under the Family Medical Leave Act), approved military leave (USERRA), responding to a subpoena (TLC), attending jury duty or a political convention (TLC), making a good-faith workers’ compensation claim (TLC), refusing to join a union or participate in an abortion (TLC), or, believe it or not, refusing to make a purchase at a company store (TLC).

Wage and hour: Employees may not be discharged for making a claim for overtime, unpaid minimum wage, or other claim under the Fair Labor Standards Act. Employees also may not be discharged for complying with an investigation by the Department of Labor.

Health and safety: Employees may not be charged for filing complaints, assisting in investigations, testifying in a proceeding or otherwise exercising their rights under the Occupational Safety and Health Act, Hazard Communication Act, or Agriculture Hazard Communication Act.

Employment benefits: Employees may not be discharged to prevent them from vesting in employee benefits.

Returning from Military Service: Under USERRA, a vet cannot be let go for a year after returning from duty without cause.

What about employment agreements: An at-will employment relationship is a contract of sorts, but it can be terminated by either side at any time. That said, sometimes an employment contract is entered for a specific length of time or an employer sets down a particular set of rules limiting the employer’s ability to let an employee go. These agreements can be oral or written, with certain limitations. An agreement that specifically requires more than one year to perform must be in writing and all limitations on at-will employment must provide in a specific and meaningful way that the employer has a restriction on its right to terminate the employee.

Common Situations:

Whistleblower who: The captain of the ship Devil May Care, and owner of Angel Transport Company, discharged the bilge tank of his transport ship in environmentally protected coastal waters near Galveston. One of his crew discovered the act and confronted the captain, who, in turn, asked the employee not to report the violation. The employee refused and the captain fired him as soon as the ship landed. Is the employee protected? No. Employees are protected from termination when asked to commit an illegal act. The exception to the at-will doctrine does not extend to a request not to report the illegal act of another.

The old employee handbook trick: Mary discovered a provision in her employee handbook that promised employees would not be punished for reporting the negative or inappropriate acts of their co-workers. Taking this to heart, and being a lifelong tattle-tail, Mary took to reporting everyone – for everything. Mary could hardly get her work done she was tattling so much. This wore on the company’s owner to a point she could no longer take it and fired Mary. Mary filed a lawsuit claiming that she could not be fired for reporting the acts of others. Did the court side with Mary? Not in this case. The employee handbook included a couple of key “outs” for the company. It stated the handbook could be changed at any time and that nothing in it could change the “at-will relationship.”

You won’t be fired for . . .: Bob worked for Titan Oil and Gas Company, a giant oil production company. Titan had a policy of prohibiting employees from competing with the company without express written permission, so when Bob got an opportunity to go in with his brother to open a gas station he asked his supervisor, who sent Bob an email back indicating that Titan would not stand in his way. Years later, Titan changed the policy to require approval from senior management and told Bob to drop his interest or be fired. Bob filed suit. What was the outcome? Bob won. The company specifically provided a rule and Bob followed it. The fact that the rule was later changed did not affect Bob’s initial compliance with the rule at the time.

What should I do:

Good: Review this edition each time you let someone go as a quick check to be sure that your risk of suit is low. Remember, former employees will grasp at anything. You may not think there is a claim there, but the employee may make it up. Be careful in your consideration and, if you have doubts, check with your lawyer for some guidance about managing your risks.

Better: Follow the above advice and be sure that your employee handbook provides that no change from at-will is created by it.

Best: All of the above, plus, be careful about the language in any employment agreements regarding termination. Be sure your offer letters reiterate that no period of employment is guaranteed, even if there is an “annual salary.”