The Fifth Circuit Court of Appeals recently updated employees’ guide to southern manners. Don’t worry, employees should still say “yes ma’am” and “no ma’am.” But you know the old saying that you should never discuss politics or religion at work? Well employees better forget that saying ever existed. Not only should employees discuss their religion at work, they should make their religious beliefs known to management when religious accommodations are necessary. Yes. You read that right. Employees should tell their bosses about their specific religious beliefs to establish their inclusion in a protected class.

In Nobach v. Woodland Village Nursing Center, Inc., et al., the Fifth Circuit ruled that if a company’s decision makers involved in an employee’s termination are unaware of the employee’s religious beliefs, then the company cannot be liable for religious discrimination. Nobach, a certified nurse’s aide at Woodland Village Nursing Center, was terminated for refusing to pray the rosary with a patient. Nobach refused because she was a former Jehovah’s Witness and still held many of the same beliefs.

Unfortunately, Nobach made a big mistake. She didn’t discuss her religious beliefs with her boss. I know most people are thinking, “well of course she didn’t!” But the Court held that because the managers involved in her termination were not made aware of her religious beliefs until after her termination, they could not have discriminated against her based on those beliefs. So the Fifth Circuit overturned her sizeable monetary award granted by a jury.

Employers, I’m not suggesting that you go out on a “witch hunt” and attempt to identify the religious beliefs of all of your employees. I’m suggesting quite the opposite. While most employers know not to ask about these sensitive issues in an interview, if a current employee does not tell you about their religious beliefs or need for a religious accommodation, DON’T ASK! This is one case where what you don’t know actually can’t hurt you. If you’re not aware of someone’s inclusion in a protected class—age, sex, religion, race, color, ethnicity, pregnancy, military status, disability, genetic information, and national origin—then it will be hard for a court to find that you to discriminated against an employee without knowledge of their protected status. Now you can’t turn a blind eye or bury your head in the sand. But some classes are more discreet than others. Obviously, if an employee is wearing a burqa and refuses to pray the rosary – you probably have some idea that the employee was may be Muslim (and, hence against her religious beliefs).

That said, employers need to have open lines of communication with management teams. If a manager learns about someone’s religious beliefs, national origin, or other inclusion in a discreet protected class, there needs to be policies and procedures in place that require reporting up the food chain. Such policies will allow upper management to avoid unlawful discrimination and protect the company from potential lawsuits.

For those who missed it, “Losing My Religion” is the title of a 1991 REM song.  I forget that some people who read this won’t be of my vintage.

On June 26, 2013, the United States Supreme Court issued a decision in the case of Windsor v. United States holding the Federal Defense of Marriage Act (“DOMA”) unconstitutional.  This decision will have implications for employee benefit plans and, specifically, benefit plans governed by the Employee Retirement Income Security Act of 1974 (“ERISA”).  The extent to which Texas employers and employees will be impacted is yet to be seen, but this article addresses what is currently known and outlines certain areas which we should all monitor for further developments.

While the ruling in Windsor v. United States will have a significant impact upon the administration of ERISA benefit plans in states that recognize same-sex marriages (there are currently twelve such states), it is unclear at this time what impact the ruling will have on states that do not recognize same-sex marriages.  Texas does not recognize same-sex marriages – the Texas Defense of Marriage Act, signed by Governor Perry in 2003, mirrors DOMA and stipulates that Texas does not recognize a marriage or civil union between persons of the same sex, regardless of the jurisdiction in which it is created.  Further, the Texas Constitution defines marriage as a union between a man and a woman.

In the twelve states that do currently recognize same-sex marriages, the Windsor decision requires employers to extend federal benefits and protections to same-sex spouses that were previously offered only to opposite-sex spouses.  Note, however, that we are only talking about “marriage” here – i.e., the decision does not apply to same-sex couples who have entered into civil unions or domestic partnerships.

Employers in states that recognize same-sex marriage will need to update their administrative procedures to address certain benefits issues that only previously arose in the context of opposite-sex marriages.  Here are a few of the issues that will likely arise:

  1. Tax treatment of health coverage:  the cost of a same-sex spouse’s benefits has heretofore been treated as imputed income for federal income tax purposes.  Now, in states that recognize same-sex marriages, employees will no longer be required to pay federal income taxes on the cost of same-sex spouse health coverage.
  2. Health insurance:  in states where same-sex marriages are recognized, group medical plans that offer spousal coverage will need to extend coverage availability to same-sex spouses.
  3. COBRA continuation practices:  the separation of an employee and his/her spouse is a qualifying event that entitles the former spouse to COBRA continuation rights.  Now, in states that recognize same-sex marriages, a same-sex spouse’s separation from an employee will entitle the former spouse to elect COBRA coverage.
  4. Section 125 Cafeteria Plans:  entering into or terminating a marriage is a qualifying event that entitles an employee to make a mid-year election change under the employer’s section 125 cafeteria plan (e.g., to add or drop the spouse/former spouse from benefits).  Now, in states that recognize same-sex marriages, entering into or terminating a same-sex marriage will create the same mid-year election rights for employees.
  5. Surviving spouse annuities and death benefits under retirement plans:  in states that recognize same-sex marriages, same-sex spouses will now be eligible to receive surviving spouse annuities or death benefits under retirement plans.
  6. Spousal consents to 401(k) plan beneficiary designations: many 401(k) plans require spousal consent to the designation of a beneficiary other than a spouse (e.g., if an employee wants to name a charity or his/her best friend as the beneficiary of his/her 401(k) benefits, the employee must first obtain the written consent of his/her spouse).  Now, in states that recognize same-sex marriages, this same spousal consent must be obtained from the same-sex spouse.

There are many unanswered questions that arise after the Windsor decision.  For Texas employers, a key question is what will happen if an employee enters into a same-sex marriage in a state that recognizes same-sex marriages and then moves to Texas to work.  Will that employee be afforded federal benefits and protections?  At this time, the answer is simply unknown.  But, Texas employers should bare the above listed issues in mind since they may become relevant in Texas, particularly with respect to workers who move to Texas from states that do recognize same-sex marriages.

Thanks to Looper Reed Associate Jason Luter for preparing this entry.

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.

 

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.

Periodically, an employer will ask about giving references for an employee.  Some feel compelled to provide at least a neutral review, others feel that they have to protect the world from making the same bad decision they did.  Still others think it is the “law” to provide the dates of employment and whether the person was eligible for rehire.

Bad ReferenceSo, what is the best advice?  Don’t return the call.  Or, if you happen to get stuck on the phone with someone asking for a reference, simply say “We do not provide references” and hang up.

Why?  Well, that’s a different question.  It is all about managing risk.  If you provide a reference and it is not sufficiently glowing, your former employee may sue you.  You could have told the absolute truth, but who, other than you and this stranger on the phone, really knows what you said?

And, what if that stranger is really the friend of a former employee with a recorder?  Think about it.  If you left a job under questionable circumstances, or even good circumstances, you may want to know what kind of a reference your former boss will provide.  Wouldn’t it make sense to have a friend call from “Vandalay Industries” (hopefully you get the Seinfeld reference) and ask for a reference?  Sure.  And, if you suspect your former boss has a particularly hateful view of you that is not necessarily accurate, wouldn’t you record it?  Darn right.  In fact, this exact situation happened to one of my clients.  They got sued and spent thousands having me defend a basically meritless claim only to settle for a few thousand dollars to cut off the legal expense.  Ouch!

If you don’t provide a reference, you have zero risk of this type of claim.  Given that the reward for providing a reference is basically nothing, this seems like the smart path.

Now, what if you want to be really sneaky?  Give that poor performing employee a glowing reference to get them a job quick so they will get off the unemployment rolls.  This path is also fraught with danger.  A Texas medical group did just that with a former nurse that provided dangerously poor patient care.  She was given a glowing recommendation and quickly snatched up by the new group.  Then she darn near killed a patient.

During the medical malpractice lawsuit against the nurse’s new employer, the injured patient obtained the personnel file for her from the original medical group.  As part of the legal process the file was provided to the new employer who went through the roof!  Then, they filed a cross-claim against the former employer for fraud and negligent misrepresentation.  I guess that approach doesn’t work either.

I realize it is counter to the system of cooperation between employers, but maybe my advice isn’t so bad after all.  If you tell the truth, you can get sued.  If you tell a lie, you can get sued.  If you say nothing – ah ha – you can’t get sued.

That said, if you still insist on providing references, at least control the situation.  Limit references to one supervisory employee who is trained to appreciate the risks and knows what to say.  Even if they did not work with the employee, they can get the scoop and sanitize it for the prospective employer.

P.S. In case you were still wondering at this point – there is no law about references.  The approach of reporting dates of employment and rehire status has been adopted by many very large corporations to limit their risk.  The idea is now so pervasive that it has effectively become a “law” in the minds of many.

One of my dental practice clients called this week to inquire about an idea he heard of recently called a “working interview.”  The idea is to have an hygienist come in for a couple of days to find out whether they are good at their job without officially hiring them.   What is better, my client said, “you don’t have to pay the person for their time.”

I don’t know how the idea of working interviews became so pervasive in the dental world.  It was probably a topic of discussion at one of those dental practice building seminars.  From there I imagine it spread like wild fire.  And, like the game we used to play in my kindergarten class passing some phrase down the line, the details of what was said at the seminar got lost in the translation.  Dentists everywhere got the idea that a working interview is a way to find out if a prospective employee will work for you without having to follow any of the employment law rules in the process.

It is time to put out the straight dope on the subject and shatter a few myths in the process:

1.  Pay – The theories on pay for a working interview are all over the map.  Some, like my client are led to believe that you don’t have to pay the person for their time.  Others are told that you can just issue a check without proper withholding and 1099 the payment.  Wrong. Wrong.  If you bring someone in for a working interview you must pay them for their time in compliance with state and federal law and make appropriate withholding.

2. Paperwork – Some believe that since they are only going to be there for a few days, you don’t have to do new-hire paperwork.  Just skip the I-9, background check, application, and W-2.  Wrong again.  If you hire anyone – for 1 day or 1,000, you have to do new hire paperwork.

3. Unemployment – Still others believe that you are not responsible for unemployment if you choose not to hire the person. Wrong, yet again.  Unemployment tax is tied to the prospect’s wages during the preceding year, not the employer.  That said, the shorter period the person is employed by you the less they will draw from your unemployment account.

Yes, I’m a kill-joy.  My client was looking forward to the free time from a prospect employee and the ability to learn whether someone will be a good fit without having to go through all the motions.  Unfortunately, most of what he was hoping for is not legal.

But is there anything that can be done?  Yes there is.  Depending on how long you would like to conduct your interview, we can create a day contract or a week contract for the prospective employee.  This will limit your exposure under unemployment compensation laws, and you can even reduce the amount you pay.  Where you might pay a good hygienist $20 per hour or more as a full time wage, you can pay them minimum wage during a working interview.  You might also forego the background check, etc, during this brief period having the person only complete a W-4 and an I-9.

Many of my clients put new-hires on a 90 day probationary period.  They do this either for their own convenience or because they mistakenly believe the law requires it.  The idea that it is “required” by a law is a myth.

Now that we have that out of the way, is there a reason one to still have one?  It is debatable.  The main reason that employers want to have a probationary period is to make themselves feel less guilty if the new-hire doesn’t fit or can’t do the job.  Texas is an at-will state.  From a purely logical standpoint, employers don’t need to feel guilty when then let any employee go regardless of their tenure.

The only legal reason to even consider one is that it might set better with a jury if you let someone go during the probationary period.  It might be easier for the jury to believe an employer’s explanation that the employee was not a good fit for the culture of the business or that the employee simply could not meet the tasks of the job.  At the same time, a jury should be able to appreciate that for a new employee within 90 days of employment even without the use of a probationary period.

Is there a downside to having a probationary period?  In my opinion, yes.  If an employee is told that they are on probation for 90 days, how will they feel after the 90 days is up?  I think they will feel like they have some sort of tenure – as if they can only be let go “for cause.”   To make matters worse, the employee is likely to act on their best behavior for the first 90 days and then show you how they really act!

At that point, a jury would be less likely to believe that the employee was not a good fit and that the employer may have acted with some type of bad motive if there were litigation.

If you do decide to have a probationary period.  Be very clear about what it means.  I would recommend putting the information in your employee handbook with a clear explanation that the 90 day period is probationary but that they can be let go for the same reasons or any other reason after the probationary period is over.  This may somewhat defeat the purpose of the probationary period, but it protects your business.

 

Sometimes posts should just be fun.  One of my co-workers forwarded me a story yesterday on Lowering the Bar, a humor site for lawyers – about lawyers.  Apparently, a law firm in San Mateo, California has decided to hire some new associate lawyers and they are doing so with a little twist . . .

The firm plans to hire many candiates and then vote them off the island, so to speak until there is only one standing.  This is taken from the post on Craig’slist:

The Firm utilizes the following hiring process:

* All candidates are allowed to begin a paid contract legal assignment at $20.00/hour. If you apply you will be given an assignment.

* Each day the candidate with the weakest work product will be cut until one candidate remains. This process will take one or two weeks until the final candidate is offered on-going employment. If you have seen reality television shows where contestants are cut from episode to episode such as Top Chef, Top Shot or Project Runway — it will be like this. Do you have what it takes to be Top Associate?

* If you want to participate you will come to the first day of hiring with your laptop ready to begin. You will be given a group orientation, and then an individual interview. You should be free to work 8 hours per day for the next two weeks to participate in the evaluation.

If you are interested in applying to the Mellen Law Firm please call Molly Bell-Mellen re: “hiring” at (650) 638-0120 between the hours of 12:00 and 5:00 pm on October 3rd, 4th and 5th.

Setting aside the apoplectic reaction most HR professionals would have about what this might do to the moral of the applicants, the process sure feeds on the competitive personalities many lawyers have and that the firm likely wants to cultivate.

But is it legal?  I can’t speak for California where the firm is located because of all the unique laws they have favoring employees, but in Texas it certainly would be.  Texas is an at-will state and employers can hire as many people as they want and then fire them as soon thereafter as they choose.  It might not be the wisest decision in terms of your unemploment claims count with the Texas Workforce Commission, but you can do it.

And, in this case, I am not sure I object.  The applicants who choose to participate know the score at the beginning.  There are no secrets about how it will work.  It is not facially discriminatory.  In the end, the law firm benefits from what it percieves is the most important characteristics in a future employee.

The traditional method of interviewing candidates is such a crap shoot anyway.  They all will tell you in varying degrees what they think you want to hear.  The only way to know for sure is to take a chance.

“Mia” Macy applied for a job with the Bureau of Alcohol Tobacco and Firearms and interviewed as a male candidate.  A former police detective from Phoenix relocating to San Francisco, Macy was repeatedly told by persons she interviewed with that she would be given the job she applied for.  Some time after interviewing, but before being hired, Macy reported to the organization that she was beginning the process of changing from a man to a woman.  Shortly thereafter Macy received notice that she would not receive the position because it was allegedly closed due to lack of funds.  Later, however, Macy learned that the position was not closed and had been filled by another candidate.

Following the public sector EEO procedures which are different than those in the private sector, Macy alleged sex discrimination and discrimination regarding gender assignment.  The allegation under gender assignment was rejected and Macy filed an internal appeal with the EEOC.  On April 20, 2011, the EEOC ruled that gender assignment is a “sex” discrimination claim.

What does this mean for Texas businesses?  Maybe a lot.  Maybe not much.  The decision is not binding on Texas or federal courts, but it will be used to suggest that these courts should adopt the position that gender assignment can result in a sex discrimination claim.  If a Texas state or federal court adopts the view that it is a claim, it may become the law.  I wouldn’t count on it happening any time soon, though.   The appeals courts that govern Texas both at a state and federal level have a reputation for being very conservative.  If a decision is made at a local level that gender assignment supports a claim for sex discrimination, it will most certainly be appealed and I cannot see any of the Texas appellate courts finding in favor of it.

Regardless of your views on the issue, however, it may be worthwhile to take the decision into consideration in future employment decisions.  Gender assignment is not likely to become a viable claim in Texas any time soon, but you would probably prefer to avoid the publicity and legal expense that comes along with being the guinea pig chosen to find out!

With unemployment for people 20 – 24 hovering around 13.2%, college students are flocking to unpaid internships to gain some experience, stay busy, and better position themselves for jobs afterward.  As recently reported by Josh Sanburn at Time MoneyLand and Steven Greenhouse in the NYT, however, these unpaid internships have serious legal problems.

Businesses are taking advantage, offering “internships” that are supposed to put the grads on the path to a super career.  Instead, interns are working 12 hour days in some cases cleaning out closets, getting coffee, and running errands.  They are no more learning the business than the man in the moon, unless they are studying for a runner job they could have gotten – with pay – before college.

A few of these interns have gotten smart though, and are filing lawsuits for minimum wage and overtime and employers should be concerned.  In addition to collecting these back wages, the interns can collect liquidated damages of an equal amount, and attorney fees.

So, how do the employers that are using internship programs for the right reasons know they won’t get in trouble?  Well, to properly be an unpaid internship, the intern must not be an employee within the meaning of the Fair Labor Standards Act (FLSA).  Of course, as you might imagine, the congress painted with a pretty broad brush when they defined “employ” under the FLSA because the wanted to prevent just this type of conduct.

Though not having the force of law, the Department of Labor came up with a six factor test that it will use to decide if an internship must be paid.  And, since the Department of Labor is the organization who enforces the FLSA, employers should sit up and listen.  To properly be an unpaid internship:

1.  The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;

2.  The internship experience is for the benefit of the intern;

3.  The intern does not displace regular employees, but works under close supervision of existing staff;

4.  The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;

5.  The intern is not necessarily entitled to a job at the conclusion of the internship; and

6.  The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Of course, after reading the criteria, employers with anything less than the purest motives will want to drop the idea of an internship program all together.  C’est la vie!