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BROWNING-FERRIS JOINT EMPLOYER TEST

In Employment on January 10, 2018 at 9:48 AM

In a recent 3-2 vote, the National Labor Relations Board overturned the Browning-Ferris Test, a commonly known test whereby a company and its contractors or franchisees could be deemed a single joint employer, even if the company has not exerted overt control over the workers’ terms and conditions. In the Browning-Ferris case, the board determined that Browning Ferris was a joint employer of recycling workers provided by a staffing agency at a Browning Ferris owned recycling facility. In Browning-Ferris, the board revised the standard to include “indirect control” or the ability to exert such control.

The board’s latest ruling now returns the test back to a “direct and immediate” control standard analysis. Commenting upon their ruling, the board’s majority stated: “[a] finding of joint-employer status shall once again require proof that putative joint employer entities have exercised joint control over essential employment terms (rather than merely having ‘reserved’ the right to exercise control), the control must be ‘direct and immediate’ (rather than indirect), and joint-employer status will not result from control that is ‘limited and routine.’”

The significance of this result is that an employer is less likely to be held liable as a joint employer under the NLRB, because indirect control alone is no longer sufficient to establish liability.  Thus, in the event an entity works with and supervises employees who are construed as part of a collective-bargaining organization, and those employees are employed by another entity, so long as the “non-employer” entity does not exercise “direct and immediate” control over the terms and conditions of the employees of other entity, such as hiring and firing, then the “non-employer” entity is unlikely to be considered a joint employer for purposes of liability under the National Labor Relations Act.

This standard is similar to standards for determining joint-employer liability under the Fair Labor Standards Act, as demonstrated in the Tenth Circuit, “(1) whether the alleged employer has the power to hire and fire employees, (2) supervises and controls employee work schedules or conditions of employment, (3) determines the rate and method of payment, and (4) maintains employment records.”  See Jensen v. Redcliff Ascent, Inc., No. 2:13-CV-00275-TC-EJF, 2014 U.S. Dist. LEXIS 82478 at *6-8 (D. Utah June 17, 2014) (discussing tests applied by various circuits); Baker v. Flint Eng’g & Constr. Co., 137 F.3d 1436, 1440-41 (10th Cir. 1998).  And Fifth Circuit, “whether an individual or entity is an employer, the court considers whether the alleged employer: ‘(1) possessed the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.’”  Williams v. Henagan, 595 F.3d 610, 620 (5th Cir. 2010).

Thus, the takeaway for employers to remember is that under the NLRB and FLSA, liability typically attaches to any entity, regardless of whether it is the “hiring-employer,” when that entity exercises control over determining the terms and conditions of employees’ employment.

Refining the Focus of Disability Discrimination

In Employment, Federal Law, Litigation on January 3, 2012 at 5:43 PM

Though persons with disabilities have constituted a protected class since the effective date of the Americans with Disabilities Act of 1990 (ADA), that class has been relatively small, due to the limitations the U.S. Supreme Court placed on the definition of “disability” under the act. In Sutton v. United Airlines, 527 U.S. 471 (1999), the Court ruled that an impairment’s limitation on a life activity must be considered in light of any mitigation to that impairment. As a result, persons whom United Airlines would not hire as pilots because of impaired but corrected vision could not successfully sue under the ADA. In Toyota v. Williams, 534 U.S. 184 (2002), the Court stated that the standard in determining whether a condition qualified as a disability was “demanding.”

With the passage of the ADA Amendments Act of 2008 (ADAAA), these definitional limitations have been removed, and covered employers (those engaged in interstate commerce and having 15 or more workers), public entities, and places of public accommodation need to be careful now more than ever not to discriminate based on a person’s disability. Though the ADAAA does not change the words for the definition of disability—a physical or mental impairment that substantially limits a major life activity—it adds numerous measures broadening that definition (for the complete text of the Act, see http://www.law.georgetown.edu/archiveada/documents/S3406FinalEngrossed Version.pdf):

  • The ADAAA explicitly overturns the standards enunciated in Sutton and Toyota, stating, “The purposes of this Act are to reject” them.
  • The Act broadens the protected class “to the maximum extent permitted by the terms of this Act.”
  • It provides a non-exhaustive list of “major life activities,” including caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, and working.
  • As part of “major life activities,” it also includes “the operation of a major bodily function,” which includes functions of the immune system, normal cell growth, digestive, bowel, bladder, neurological, brain, respiratory, circulatory, endocrine, and reproductive functions.

These measures and others found in the ADAAA emphatically broaden the sweep of potential liability for discriminating against persons with disabilities by shifting the focus of the inquiry from whether an individual is disabled to whether discrimination occurred. As the case law begins to develop, employers and other covered entities should be aware that conditions held by federal courts not to constitute a disability under the ADA (such as epilepsy, HIV/AIDS, diabetes, cancer, vision in only one eye, and asthma) will (along with all other physical impairments) get a very strong second look by the same courts under the ADAAA. As a result, employers will need to defend disability discrimination lawsuits more on the merits, and cannot rely on early dismissal of such lawsuits in the future. Of course, such lawsuits can still be defeated by disproving discrimination.

Payday Payback: Collecting Earned Wages from Deadbeat Employers

In Contracts, Employment, Legal, Texas Law on September 29, 2011 at 8:24 AM

It is unacceptable for an employer to not pay earned wages. Accordingly, the Texas legislature has provided avenues by which jilted employees can make life very difficult for recalcitrant employer-debtors.

Because wage disputes are usually small—one study shows the average dispute amount to be $420.00—the cost of pursuing redress through litigation usually greatly exceeds the value of the remedy sought. Texas therefore provides a cost-free administrative remedy to unpaid workers by empowering the Texas Workforce Commission (TWC) to investigate, rule on, and then enforce wage claims. Engaging this process requires little effort and education. One need only follow the instructions and complete the form found at http://www.twc.state.tx.us/ui/lablaw/ll1.pdf. These instructions include filling out the form completely and accurately, notarizing it, and then returning it to the address thereon indicated. The claim must be filed within 180 days of the date payment was originally due. (If 180 days have already lapsed, a claimant should NOT file with the TWC, as doing so may endanger a claimant’s ability to seek redress through the courts. See Igal v. Brightstar Information Group Tech. Inc., 250 S.W.3d 78 (Tex. 2007).)

The TWC then conducts an investigation, requesting information from the claimant and the employer as needed.  The investigation timelines can vary, and the TWC informs claimants of the estimated length of investigation. Upon completion of the investigation, the TWC issues a Preliminary Wage Determination Order (PWDO). If the TWC feels the employer engaged in a bad-faith failure to pay, it may assess an administrative penalty against the employer of up to $1,000.00.

After the PWDO is issued, the claimant and the employer have 21 days from the issue date to make an appeal. If neither the claimant nor the employer appeal, and if the employer fails to pay the amount determined by the TWC to be due (if any) then the PWDO becomes a final order 30 days after its issuance. The TWC’s Collections Unit then seeks recovery through a variety of avenues, such as bank account freezes and real property liens. Those employers who: (1) intend to withhold wages at the time the employee is hired; and (2) do not pay wages after a demand is made, can be subject to criminal penalties, including a two-to-ten-year prison sentence and a fine of up to $10,000.00. 

Sometimes—such as when there is a larger amount in controversy or when the TWC’s claims process has born no fruit in the past with a particular employer—an employee may instead decide to enforce a wage claim dispute through the courts. Enforcing a wage claim through the courts is the same as any other lawsuit, however, Texas legislators have likewise made efforts to facilitate this recovery process for jilted workers. The most daunting aspect of filing a civil suit is hiring and paying an attorney, yet under Texas law, the dead-beat employer can be made to pay attorneys’ fees. The Texas Civil Practices and Remedies Code §38.001 allows the plaintiff to recover attorneys’ fees if the claim is for performed labor or an oral or written contract. To recover the attorneys’ fees, the claimant must simply: (1) be represented by an attorney; (2) present the claim to the opposing party; and (3) give the opposing party thirty days to meet the demand.

Because the dead-beat employer-debtor will be footing the bill in a litigation proceeding, because of the administrative penalties the TWC may impose in an administrative proceeding, and because of the potential for criminal liability, Texas legislators have provided attention-getting incentives for employers to timely pay up; otherwise, they expose themselves to painful payback.

Employment Law Update

In Employment, Texas Law on September 1, 2011 at 10:39 AM

++This memo summarizes recent developments in Texas employment law during the spring and summer of 2011.

ADA (Americans with Disabilities Act)

  • Medical Certifications

Under the ADA, an employer can request a medical examination or make a medical inquiry, but it must be related to the job and supported by business necessity. The point of the exam must be to determine whether the employee can perform her duties after the employer identifies a legitimate reason to doubt her capacity to do so. The bottom line is that employers must have a legitimate reason before requesting a return-to-work medical exam. Examples of cases in which an employer was found not to have violated the ADA: (1) One court found that it would be “grossly negligent” for an employer not to order a psychiatric examination when an employee makes serious workplace threats; (2) An employer was within its rights to require a medical examination when the job required driving and the employee disclosed a condition that required medications that could impair the ability to drive.

  • Definition of Disability Broadened Under ADAAA (ADA Amendments Act of 2008)

Previously, to establish a disability, an employee had to show not just that he had an impairment, but that the impairment stopped him from leading a normal life (i.e. affected his ability to perform daily activities). That high standard has been wiped away. An employee can now establish that his disability is covered by the ADAAA, even if the only major life activity that is substantially affected is normal cell growth. A Texas federal trial court recently decided this issue and relied on the Equal Employment Opportunity Commission’s (EEOC) recent promulgation of regulations interpreting the ADAAA, which became effective May 24, 2011. The EEOC regulations provide that certain impairments, because of their severity, will almost always result in a determination of an actual disability. And, not surprisingly, cancer is one of them. Managers must be trained to understand that the definition of disability is so broad under the ADAAA, conditions that once seemed as if they were common impairments will now be covered. Managers don’t need to understand the details of the amendments, but when an employee says (a) I have this medical condition and (b) it causes limitations, they should get HR involved immediately.

FMLA (Family Medical Leave Act)

  • Care Defined

An employee brought suit against his employer after he was fired because he missed work to prepare his home for the return of his daughter, who had recently sustained serious head trauma. The employee was at home by himself, and the daughter was in the hospital in another state with her mother. The employee claimed he was “caring” for his daughter because of the work he was doing in the house and that he was in constant telephone communication with her and his wife. The federal court of appeals that covers Texas decided this constant telephone communication was not enough and that under the FMLA, “caring” for a family member with a serious health condition contemplates being in close physical proximity to that family member. The court talked about two other cases in which there was a “to care for” element. In one of those cases, the court said it could be a violation of the FMLA to fire an employee who stayed home with three healthy children for two days while his wife cared for a sick child in the hospital. In the other, the court said it could be a violation of the FMLA to terminate an employee because she returned home to take a nap after spending the entire day with a sick child. As the court noted, in neither case was the caregiver out of state for weeks at a time.

  • Unexcused Leave Grounds for Termination Under FMLA

In another case decided by the same court of appeals, an employee was granted intermittent leave because he had a serious health condition. He used this leave for unplanned absences and scheduled leave. After the employee had missed a number of days in one month, his employer placed him on full-time FMLA leave until his physician authorized his return or he exhausted his leave. After this, the employee called in sick five days in a row. This prompted his employer to look at his attendance record. Upon review, his employer discovered that the employee’s non-FMLA absences had exceeded the permissible limit in the leave policy. The employer fired the employee, and the employee sued for FMLA retaliation. The trial court threw the case out, and the court of appeals said it was right to do so. The employer won because it fired the employee not because he sought to use FMLA leave, but because his non-FMLA absences were excessive. It was those absences that had a negative effect on the office’s productivity. This case underscores an important principle: Whenever an employer terminates an employee for absenteeism, it should double-check to make sure none of the absences he is counting toward termination are FMLA-covered. If they are and the employer decides to terminate the employee anyway, the employer will be violating the FMLA. This case also underscores the point that absences that aren’t FMLA-covered can form the basis of discipline.

  • Temporary Impairments

A federal trial court in South Texas recently refused to dismiss a case based on the issue of whether the employee was entitled to FMLA leave to care for her adult daughter, who was injured in a car accident. The employer argued that the daughter was not “incapable of self-care because of a physical disability,” which is required for an employee-parent’s eligibility for protected leave to care for an adult child. However, evidence indicated that the daughter still needed assistance with grooming, hygiene, bathing, dressing, and eating, and was therefore incapable of self-care. Evidence also showed the daughter was disabled. In this regard, the court looked to the recently amended ADA, which now provides that temporary or non-chronic impairments can be disabilities. Moreover, the daughter was substantially limited in the major life activity of walking, among other things, during her mother’s leave period.

  • Medical Certification

The FMLA allows an employer to require an employee to provide a health provider’s certification supporting the employee’s request for FMLA leave. If the employee fails to provide a certification, the employer may deny leave. In one recent case, the employer requested a medical certification from the employee, and the plaintiff provided a letter from a physician stating that the plaintiff suffered Post-Traumatic Stress Disorder and was unable to return to work. However, the letter failed to include the date on which the employee’s condition began and the probable duration of the condition. The employer then requested a further certification that would include the missing information. The employee did not provide a timely certification with all the necessary information. The court ruled that the employer was authorized to terminate the plaintiff’s employment under these circumstances.

Absenteeism

According to CareerBuilder’s latest annual survey on absenteeism, 29% of workers took a faux sick day in 2010. A similar share of employers, 27%, thought they were seeing a rise in employees calling in sick when they were actually well, possibly from “stress and burnout caused by the weak economy.”

FLSA (Fair Labor Standards Act)

  • Retaliation

The U.S. Supreme Court said earlier this year that employees may sue for retaliation under the FLSA. The Supreme Court held that the FLSA anti-retaliation provision protects an oral complaint about FLSA violations, provided the complaint is “sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected by the statute and a class for their protection.”

  • Statute of Limitations

The FLSA’s statute of limitations varies depending on whether a violation was “willful.” If the violation was willful, a three-year statute of limitations applies, but if the violation was not willful, a two-year statute of limitations applies. A separate FLSA remedial provision states that a district court may decline to award liquidated damages if the employer proves it acted in “good faith” and had “reasonable grounds” to believe its actions complied with the FLSA.

Title VII Retaliation

The Fifth Circuit held that an employee’s request to her employer for a copy of a sexual harassment complaint she made against another employee four years earlier (and had declined to pursue) did not qualify as “opposition” to unlawful employment practices under the Title VII retaliation provision. The employee admitted that her motivation in requesting the documentation was to find another position within the employer’s workforce. Therefore, no reasonable jury could find that she made the request in order to “confront, resist, or withstand any long ago discriminatory practices” by the employer.

Sex Discrimination

The U.S. Supreme Court recently ruled in favor of Wal-Mart, the nation’s largest private employer, in a massive law suit that has been called the largest employment class action in U.S. history. The class of plaintiffs in the case included approximately 1.5 million female former and current Wal-Mart employees seeking relief that could have amounted to billions of dollars in back pay. Although the case involved alleged sex discrimination, the Court wasn’t asked to decide whether it occurred. Rather, the Court’s decision was limited to whether the suit could be handled as one massive class-action case. In what could be called a unanimous decision, the justices all held that the case shouldn’t proceed as a class action; however, they were divided in their reasoning. One of the lessons to be taken away from this decision is that for employees to be able to file their claims as a class, they have to show a high level of “commonality” between their claims. They are going to have to be able to demonstrate that they “have suffered the same injury” (e.g., “significant proof that an employer operated under a general policy of discrimination”).

Pregnancy Discrimination

Employment law requires employers to make individualized determinations. The case law says that if an employee makes a decision to put herself in harm’s way in performing her job, the employer cannot stop her.

USERRA (Uniformed Services Employment and Reemployment Rights Act of 1994)

The federal court of appeals covering Texas recently ruled that the USERRA does not create a free-standing cause of action for hostile work environment military service harassment.

Evidence of Discriminatory Intent

The “cat’s paw” theory was recently endorsed by the Supreme Court in a USERRA case. Under the cat’s paw theory, an employer may be liable for the action of a decision maker who was not motivated by illegal intent, if the decision maker was partly influenced by another supervisor who was motivated by illegal intent.

Non-compete Law

  • Money as Consideration

On June 24, 2011, the Texas Supreme Court rewrote Texas non-compete law. While the court’s opinion answers many questions, it leaves some still unanswered. The change is radical. Before: An employer could have a non-compete agreement with employees if he gave them something of value. That “something of value” could be his confidential information. After: Now it appears that money can buy a non-compete.

The case the court addressed involved an employer who gave his employee an option to buy 500 shares of stock in the company and the employee agreed to accept the stock options. However, the option agreement also provided that if the employee left the company within three years after exercising the options, he couldn’t compete with the employer for two years after the termination of his employment. The employee signed the agreement, subsequently left, and then got sued by his former employer. The Texas Supreme Court said the stock options were sufficient consideration. The court’s reasoning was that giving an employee stock options makes him work harder; employees who work harder create greater “goodwill” for their employer. That goodwill is deserving of protection (because it was bought and paid for) and a non-compete can be that protection. The supreme court did not decide whether cash would be sufficient to buy a non-compete, but it said that the business interest being protected (that is, goodwill) has to be “reasonably related” to the consideration being given. Cash would most likely do it. The question then becomes how much money and when. The court answered the “when” part by saying that past consideration can suffice: “There is no requirement under Texas law that the employee receive consideration for the non-compete agreement prior to the time the employer’s interest in protecting its goodwill arises.”

The prediction: Money will do it in the form of a signing bonus when someone first comes onboard or as a bonus while he is currently employed. The amount of money needs to be significant enough that the employer can argue the employee was “incentivized” to go out and create goodwill. Of course, an employer can still use confidential information as consideration, but money makes it easier to enforce a non-compete.

  • Employment at Will

According to the Dallas Court of Appeals, a trial court erred in denying an employer’s request for temporary injunctive relief against two hairstylists who allegedly breached an agreement not to solicit customers or divulge “trade secrets.” The trial court denied such relief strictly on the ground that the employment was at will, but it is now clear after the 2006 Texas Supreme Court case Alex Sheshunoff Management Services, L.P. v. Johnson, that it is possible for parties to agree to an enforceable covenant not to compete in employment that is at will, provided other requirements are satisfied.

Jury Waivers

An employee had signed a mutual waiver during his time of employment that waived his right to a jury should a dispute between him and his employer arise. He later sued his employer for age discrimination and demanded a jury trial. The trial judge denied the employer’s motion to toss the jury demand. The Fort Worth Court of Appeals agreed, but the case is now before the Texas Supreme Court. The Texas Constitution says that the right to a jury trial shall remain “inviolate.” But what the law says is not always what the constitution means.

Prediction: The supreme court will agree with the employer and hold the employee to his promise to forgo a jury.

Legislation

Senate Bill (SB) 1024 amended the Penal Code Section 31.04. The law now says that an employer violates the law if it fails to make “full” payments after a demand for compensation. The legislature also added a section stating that “partial payment” of wages is not a loophole. Also, if the employer pays the employee on a periodic basis, the intent to avoid payment for his services can be formed at any time during or before a pay period. This section also applies to independent contractors.

SB 321, which will take effect September 1, 2011, will allow an employee who holds a license to carry a concealed handgun or who otherwise lawfully possesses a firearm to bring it onto an employer’s property. Property includes any parking lot, parking garage, or other parking area an employer provides for employees. The weapon must be in a locked, privately owned motor vehicle. There are some exceptions. First, if the car is owned or leased by a public or private employer and used by the employee in the course of her duties, then the law is inapplicable. An employer may still prohibit an employee from possessing a weapon on business premises other than the parking lot. There’s also a section of the law that holds the employer immune from lawsuits except in cases of gross negligence. This means that if the gun is used to harm someone at work, the employer is off the hook. Also, the law does not impose a duty on employers to inspect parking lots, garages, or other parking areas to confirm or determine if employees are complying with the laws relating to the ownership or possession of firearms or ammunition. Employers should create a policy or amend one they already have to let employees know they may bring firearms to the workplace – but only if the firearms are kept locked up in their cars. Such a statement will allow the employer an opportunity to reiterate that they are still forbidden from bringing a firearm on business premises.

Hey now, you stole my employee!!

In Employment, Legal, Texas Law on March 15, 2011 at 1:45 PM

Texas is known as a “right to work” state, and Texas’ laws generally promote the free practice of a trade or the ability to work.  Emergent under Texas law, however, is a body of law devoted to covenants not to compete.  Businesses want to protect those things it finds critical to its success—including its employees.  Texas law is beginning to recognize the importance of human capital to business. As this law has grown, some employers have sought to put their current employees under a covenant not to compete.  Some, however, have run into a huge roadblock in enforcement of their agreement: consideration.

 Under Texas law, an existing employee who signs a covenant not to compete must be given new confidential information as consideration.  Powerhouse Productions v. Scott, 260 S.W.3d 693, 697 (Tex. App.—Dallas 2008, no pet.); see also, Alex Shesnunoff Management Services, L.P. v. Johnson, 209 S.W.3d 644, 651 (Tex. 2006).  This new confidential information serves as consideration for the agreement.  Of course, for any agreement to be binding, there needs to be consideration. This is a really tricky area. It is tough to give an existing employee—one that may be in the employ of the business for years something new and confidential.  Texas law, however, is not sympathetic.  Some new and unique information must be given.

 What is considered confidential information is not fully defined.  The Texas Supreme Court in In re Bass, 113 S.W.3d 735, 739 (Tex. 2003), however, gave us some indications of what may qualify.  The Texas Supreme Court gave six non-exclusive factors to determine if a trade secret, or confidential information, exists:

 (1) the extent to which the information is known outside of his business;

(2) the extent to which it is known by employees and others involved in his business;

 (3) the extent of the measures taken by him to guard the secrecy of the information;

 (4) the value of the information to him and to his competitors;

 (5) the amount of effort or money expended by him in developing the information; and

 (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. 

In re Bass, 113 S.W.3d at 739. 

 Employers need to be careful if they want their existing employees to sign covenants not to compete. Signature alone does not mean there is a valid and enforceable contract. New confidential consideration must be given—otherwise, all you have is just a piece of paper.