Thank you Fox Rothschild LLP’s Steven Ludwig for forwarding this to me.

Yes, there are other developments going on with the Trump Administration that have nothing to do with Russia, Twitter, and fake news.

Today the Department of Labor withdrew its 2015 and 2016 informal guidance on joint employment and independent contractors.  Why is this important, you ask?  Because during President Obama’s eight years in office, the DOL and its state counterparts upped the efforts to investigate and identify companies that were improperly classifying individuals as independent contractors.  The increased enforcement efforts led to the DOL taking a more expansive view of joint employment, and a higher standard for employers to meet to establish independent contractors.  These enforcement efforts culminated in the DOL’s 2015 and 2016 informal guidance on joint employment and independent contractors.  Under the Obama Administration’s independent contractor test, the key inquiry was whether the independent contractor was economically independent.  For joint employment, the Obama Administration’s DOL investigators looked at whether one employer exercised indirect control over the individual.  Today’s rescission of the Obama Administration’s tests returns the DOL to pre-Obama standards.  Thus, the DOL is reinstating the direct control test for joint employment (as opposed to the more expansive indirect control standard) and  right of control test for independent contractors (instead of the more liberal economic independence test).

Bottom Line:  The DOL still will investigate the classification of workers as independent contractors, and whether one employer can be held liable for another employer’s violations.   However, with today’s rollback to pre-Obama tests for joint employment and independent contractors, it may be easier to classify individuals as independent contractors, and it will be more difficult to hold one employer liable for the employment law violations of another employer.

 

 

The Texas Supreme Court has rejected the theory of defamation by compelled self-publication.  Say what? you ask?  Compelled self-publication occurs most often in the employment context, where a terminated employee is compelled to inform subsequent potential employers why the employee was terminated from the employee’s last job.  As the theory goes, if an employer gives untrue defamatory reasons for terminating an employee, it should recognize that such conduct creates an unreasonable risk that the defamatory matter will be communicated to prospective employers.  By rejecting the theory, the Texas Supreme Court was concerned about creating an actionable tort any time an employee disagrees with the employer’s reason for firing the employee.   By refusing to recognize a tort based on compelled self-publication, the Texas Supreme Court reemphasized Texas’s long-standing tradition of employment at-will.

We invite you to read Part 1 and Part 2 in a series of posts by Fox partner Dori K. Stibolt, regarding the new trend in ADA Title III litigation involving web access for the visually impaired.

Many of these cases have focused on travel, hospitality and financial services companies.  However, here in Texas, there has been a micro trend of these web site accessibility cases naming dentists and physicians.

I get questions all the time about the enforceability of noncompetes in Texas.  I have to respond in the most-irritating lawyer-like way possible: I say that the enforceability of any particular noncompete all depends on the language of the noncompete and the facts of the case.  That response predictably results in a long period of silence.

There is ample Texas case law enforcing noncompetes against former employees to prevent former employees from competing.  In these cases the employers successfully have demonstrated that there is a threat to the employers’ business interests through the disclosure of confidential information or damage to company good will.  There also is a lot of seemingly irreconcilable Texas case law where the courts have refused to enforce noncompetes to prevent former employees from competing where the employers offered proof that former employees had confidential information and were in a position to use the confidential information to the employers’ detriment.

Legally speaking, Texas has a statute that allows an employer to enforce a noncompete when what would otherwise be a restraint on trade is necessary to protect a legitimate interest of the employer.  In Texas, a legitimate interest of the employer could be (1) preventing the disclosure of confidential or proprietary information; or (2) protecting company good will.  Contrary to what a lot of people believe, the enforceability of a noncompete is not dependent on the employer paying the employee compensation that is tied to the noncompete, and is independent from the reason that the employee’s relationship with the employer ended.

In my practical experience I have found that judges in general do not like noncompetes.  They do not like the idea of putting a person out of work, unless the facts particularly justify the extraordinary step of entering a injunction.  You can get a sense of the courts’ uneasiness with noncompetes in the Dallas Court of Appeals recent decision affirming a trial court’s denial of the employer’s request for a temporary injunction in BM Medical Management Service, LLC v. Turner.

Turner had a one-year noncompete that prohibited him from working in a competing business, soliciting BM Medical’s clients, recruiting or hiring BM Medical’s employees, or disclosing BM Medical’s confidential information.  BM Medical fired Turner, and a month later he went to work for a competitor.  Despite having access to BM Medical’s client list of over 1600 customers, the trial court denied BM Medical’s request for a temporary injunction to prevent Turner from soliciting BM Medical’s clients.  The court found that BM Medical failed to prove that Turner “possessed, used or disclosed any confidential information and if failed to prove that Turner was soliciting its clients.”  One BM Medical client did follow Turner to his new employer, but the Dallas Court of Appeals noted that this single client was a “good friend of Turner’s whom Turner had known before he went to work for BM Medical.”

Notably, BM Medical only sought to prevent Turner from contacting BM Medical’s clients (and not enforcement of the outright ban on any competition), and from disclosing BM Medical’s confidential information. But even limiting its request for relief was not enough to satisfy the court.  Presumably the result would have been different if BM Medical had established that Turner actually solicited BM Medical’s clients, or if BM Medical had shown that the information that Turner had was particularly sensitive to BM Medical’s business interests.

Based on the court’s conclusion, I get the impression that neither the trial court nor the court of appeals thought that Turner was a threat to BM Medical’s business interests.  So if you want to enforce a noncompete in Texas, here are some important considerations to maximize your chances of having the judge agree with you:

  • Spell out for the judge the actual threat that the former employee poses to the business interests of the employer.  The degree to which an employer wants to restrict a former employee from competing is directly related to the actual threat that the former employee poses to the business’s legitimate business interests. For example, a sales employee who is terminated for poor performance probably does not pose an actual threat to the employer’s existing sales.
  • Explain to the judge what relief you need to address the actual threat posed by the former employee.  The restrictions that the employer seeks to enforce against a former employee must be tied closely to the actual threat to the employer’s legitimate business interests.  An employer’s desire to restrain all competition is not a legitimate business interest, and an outright ban on all competition everywhere rarely is closely tied to the actual threat posed by the former employee to the employer’s legitimate business interests.
  • Judges do not like noncompetes.  When asking for temporary relief, give the judge way to overcome this dislike of noncompetes by asking for the bare minimum of what you need to address the actual threat.  If you can ask for relief that allows the former employee to continue to work, even better.  As an example, courts seem more willing to restrict a former employee from soliciting actual clients with whom the former employee had contact as a result of the employer, but not so willing to restrict a former employee from soliciting any and all of the company’s customers regardless of whether the former employee knew about the customers.

And if you ask me if noncompetes are enforceable in Texas, I will probably say “It depends…”

 

Over the weekend the Washington Post reported that France has enacted a new law that allows employees to ignore work emails outside typical working hours.   According to the Washington Post, the purpose behind the new French law is to reduce the impact of the stress of work on people’s personal time.  While the new French law received a lot of attention over the weekend, how to handle after hours emails is not a new issue.

In the United States employees are either exempt or nonexempt.  Nonexempt employees are entitled to overtime and minimum wage for all hours worked.  The Wall Street Journal reported here back in 2015 that there have been several lawsuits across the United States over whether nonexempt employees under the Fair Labor Standards Act who are answering emails or texts after working hours are entitled to compensation under the FLSA, including overtime in the appropriate circumstances.  Under the FLSA, compensable time is any time that the employee is “permitted” to work by the employer.  This means that if a nonexempt employee is answering emails after hours and the employer does nothing to stop it, then the nonexempt employee is working and entitled to compensation.  According to the Department of Labor, “time spent doing work not requested by the employer, but still allowed, is generally hours worked, since the employer knows or has reason to believe that the employees are continuing to work and the employer is benefiting from the work being done.”

The implications of allowing nonexempt employees to answer emails or texts after hours is that the employees have the right to expect to receive compensation for “all hours worked” at the applicable minimum wage, and to have the time spent answering emails or texts after hours included in the weekly total to determine whether the employees are entitled to overtime.  The practical problems for the employer with allowing employees to answer emails or texts after hours is that the time spent by employees is difficult to document and monitor.

As for all the exempt employees under the FLSA, these employees still may have to answer after hours emails and texts, or face whatever consequences may arise from not answering after hours emails or texts.  But even exempt employees may benefit from the DOL’s position on after hours emails when it comes to calculating compensation and deducting full days missed for personal reasons.  As a general rule, if an exempt employee performs any work during the workweek, he or she must be paid the full weekly salary amount.  Under the DOL’s position, an exempt employee answering emails could transform unpaid leave into paid leave.

France’s approach is to give the employees the right to ignore after hours emails.  In the United States nonexempt employees might be able to demand payment for the time spent answering after hours emails, and exempt employees might be able to claim that they were working to avoid a full day deduction.

If employers do not want to get caught up into whether answering after hours emails and texts constitutes work, they should implement very clear rules prohibiting employees from answering after hours emails and texts, and then strictly enforce those rules to avoid “permitting” nonexempt employees to work after hours.

 

Texas case law is clear.  Employment is at will, terminable at any time by either party, with or without cause, absent an express agreement to the contrary.  Fed. Exp. Corp. v. Dutschmann, 846 S.W.2d 282, 283 (Tex. 1993).  This means that unless there is an agreement limiting an employer’s right to terminate, an employer in Texas can fire an employee for good reason, bad reason, or no reason at all, provided that the employer is not violating a specific statutory or common law exception to the at-will employment doctrine.  The statutory exceptions are the federal statutes and state law equivalents that protect against discrimination and retaliation.  In Texas, there is only one common law exception, and it is that an employer cannot fire an employee because the employee refuses to engage in an illegal act.

But what about handbooks and offer letters?  The Dallas Court of Appeals issued an opinion this week discussing the interplay between the employment at-will doctrine and contradictory statements in the employer’s handbook and disability policies.  The opinion makes it clear that if an employer has a handbook, the employer needs to make sure that the handbook contains a disclaimer that negates any implication that a personnel-procedures manual places any restrictions on the employment-at-will relationship.

If you are interested in maintaining the employment at-will relationship, and you have a set of employment policies and procedures, then it makes sense to bundle them up into a single handbook, bound with a disclaimer that nothing in the handbook alters or restricts the employment at-will doctrine.  If you already have a handbook, then you need to review the handbook to make sure that the handbook contains the same disclaimer.  Finally, when you draft an offer letter or memorandum of employment, you need to include language in the letter or memorandum that nothing in the letter or memorandum is intended to modify the employment at-will relationship.

 

I have been writing on this blog about how Dallas County juries have shifted over the years from pro-defense to pro-plaintiff, or at least to a point where most prospective jurors in Dallas County don’t necessarily consider lawsuits a bad thing.  In the era of tort reform, this attitude among prospective jurors in Dallas County is very interesting.  My previous posts are here, here, and here.

But why do we care about juries anyway?  There are the constitutional reasons, and the traditions in our legal system that are tied inextricably to the jury trial process.  There are the defenders of the jury trial as the last line of defense against oppression.  And these are good reasons to care about the juries.

But my focus on why juries matter is more practical.  In Texas, juries matter because once a jury renders a verdict it is extraordinarily rare for the jury’s verdict to be overturned.  It happens, but not very often.  This is because legal and factual sufficiency challenges to a jury verdict are judged against very high standards.

The Dallas Court of Appeals just released a decision in Adams v. Bellas affirming a jury verdict where the court went through the standards for legal and factual sufficiency challenges to a jury verdict.

To overturn a jury verdict on legal sufficiency grounds, the court must first credit any evidence favoring the jury verdict if reasonable jurors could disregard contrary evidence if reasonable jurors could not.  If more than a scintilla of evidence supports the jury’s verdict, then the court has to uphold the verdict.  There is no weighing of the evidence on one side or the other.  The court simply looks at whether there is some evidence that would “enable reasonable and fair-minded people to reach the verdict under review.”

To overturn a jury verdict on factual sufficiency grounds, the jury’s verdict must be against the great weigh and preponderance of the evidence.  This means that the jury verdict will be set aside “only if it is so contrary to the overwhelming weigh of the evidence as to be clearly wrong and manifestly unjust.”

Taken together, the high standards for legal and factual sufficiency protect the philosophical value that we place on the role of the jury in our legal system. We have assigned the jury the role of weighing the evidence and resolving any conflicts or inconsistencies in the evidence.  We then shield the jury’s verdict from second-guessing by creating high standards for overturning the jury’s verdict.

So why do juries matter?  Because under our system, once the jury delivers its verdict it is procedurally and practically very difficult to overturn the verdict.  Oh, and also for all those constitutional reasons and tightly-held traditions long associated with our legal system.

Late last month a federal judge in Texas issued a nationwide injunction against implementation of the Obama Administration’s new overtime rules under the Fair Labor Standards Act.  The new rules were supposed to go into effect on December 1, 2016, and would have resulted in substantially more employees becoming eligible for overtime under the FLSA.  Recently the United States Court of Appeals for the Fifth Circuit declined to interfere with the trial court’s injunction.

I previously wrote about the new rules here.  The new rules would have raised the salary threshold for the professional, administrative, and executive exemptions from $455 per week to $913 per week ($47,476 annually).  The new threshold would have been indexed so that it likely would have gone up every three years.  In my prior post, I speculated that the Texas federal judge would not enter an injunction.  I got that part wrong.

For six months I have been working with clients to evaluate how best to approach the new overtime rules.  The problem was that some positions at some workplaces have been entrenched for years. Some decided to redefine job positions with new responsibilities.  Others decided to accept the new rules and prepare for paying employees by the hour who previously were paid a weekly salary.  Some were unsure of how to proceed.  Even with the injunction in place, there is uncertainty about what will happen next.

The injunction does not invalidate the Obama Administration’s overtime rules.  It merely puts a hold on the implementation of the new overtime rules until the court reaches a final decision on the legality of the new rules.  The court has requested briefing on the issue and could render a final decision as early as January 2017.  If the court concludes that the Obama Administration acted appropriately in formulating the new overtime rules, then the effective date of the new overtime rules could roll back to December 1, 2016.  Yikes.  This would result in reclassification of employees as exempt or nonexempt, and make the classification retroactive to December 1, 2016.  Employees reclassified as nonexempt could be entitled to overtime dating back to December 1, 2016. Double yikes.

And also in January, the new administration takes over and Congress is back in session.  With Republicans occupying the White House and having the majority the House of Representatives and the Senate, Congress or the new administration could step in to make changes to the new overtime rules.  Given the rhetoric of the election season, I don’t know where the new overtime rules are on the Republicans’ list of things to undo from Obama’s Administration.

So we will watch and see if the Texas federal judge issues a final ruling. Or whether the new administration and Congress steps in to act. Stay tuned…

From Tressie McKeon in our Dallas office comes the following guest post:

Contracts are important and “the devil is in the details.” Too often I see business owners and experienced entrepreneurs come to me as first time clients with a serious problem. But when we go to review the contract that is at the heart of the issue, I often find that the contract was not professionally drafted, does not address many issues that should have been addressed or simply does not make sense in the context of the transaction.

Unfortunately, once a problem arises, it is almost always after the ink is dry and the writing is on the wall so to speak. In short, you’re stuck trying to enforce, or defending against, a contract that simply does not say what your new client thought that it said.

I recently had a new client come to me with a problem. He had invested hundreds of thousands of dollars into the purchase of a business. This client is an experienced entrepreneur with numerous successful business ventures. However, he did not have an attorney review the purchase documents prior to closing. The client sheepishly admitted that it was because he thought he would save himself some money in legal fees. In short, after the deal closed, the client learned that the business he had purchased was not worth even close to what he had invested in it.

While not a handshake deal, my client had trusted the people that he was dealing with to be forthcoming and truthful. Unfortunately, that was simply not the case. To add insult to injury, the contract documents were extremely vague and one sided in favor of the seller—not my client.

In this situation, if the client had invested roughly $3,000-5,000.00 in legal fees on the front end, it could have saved him hundreds of thousands of dollars. Unfortunately, this client’s story is not unique. Many investors and entrepreneurs avoid hiring an attorney to review their agreements related to their business transactions to save time and money. Similarly, many businesses are working with old outdated contracts.

If you are entering into a new business venture, or contract of any kind, have an attorney review the documents. A small investment now may save you a great deal of time, money and heartache later.

 

I recently had a trial that caused me to think long and hard about what is the best evidence at trial.  I concluded that documents, photos and videos beat witness testimony hands down. I believe that a case built around documentary evidence is stronger than a case build on witness testimony.

I think the reason is simple.  With documentary evidence, jurors can look at documents and form their own opinions about what the documents say and mean.  Jurors are savvy enough nowadays to suspect that the lawyers in the case will try to bamboozle the jurors into concluding that the documents say something that the documents don’t say.  If the jurors’ conclusions about the documents are consistent with the trial lawyer’s arguments, the jurors will form other conclusions consistent with the trial lawyer’s argument.  If the jurors’ conclusions about the documents conflict with the trial lawyer’s arguments, then the jurors will conclude that the lawyer is trying to trick them and they will be suspicious of the lawyer for the rest of the trial. I believe that jurors form conclusions about the documents, photos, and videos in the case, and then evaluate the witnesses and lawyers against those conclusions.

Witness testimony is inherently unreliable.  Countless studies show that two witnesses can view the exact same incident and come away with two different versions of what happened.  Jurors already know this.  Neither witness is lying, but unlike documentary evidence that does not change, inconsistency in witness testimony means that the jurors will have to decide which witnesses’ testimony is consistent with the jurors’ own perceptions of what happened.  Also, witnesses are subject to cross examination.  If the jurors trust the lawyer, then an effective cross examination can be brutal.  If the jurors do not trust the lawyer, then cross examination can generate juror sympathy for the witness.  Witness testimony comes to the jurors through the questions and answers provided by the lawyers and the witnesses.  In the end jurors have to evaluate the witnesses’ testimony against other witnesses, the lawyers, and the jurors’ conclusions drawn directly from the documents.

Documents, photos and videos that are entered into evidence go back to the jury room and jurors are encouraged to review all the evidence during deliberations.  Live testimony depends on the ability of the jurors to recall what was said among several witnesses and at times several days ago.  Like everyone else, two jurors may not remember the testimony the same way, and now the jurors must resolve the their own  inconsistent memories.  I believe that instead of resolving these inconsistencies, jurors tend to focus on the documentary evidence that they have with them in the jury room.

So back to my recent trial.  In that case, there were emails that on their face were not good for my client’s case.  We knew that we could explain our side of the emails, and we had great witnesses to do just that.  The other side had witnesses who testified consistently with the emails.  After the trial the judge permitted us to talk to the jurors.  All 12 of the jurors told us that they liked our witnesses, but that the jurors felt that the emails told the story.  There was no mention of the other side’s witnesses.  Our witnesses were good, but not good enough to overcome the jurors’ conclusions about the emails.

What is the best evidence at trial?  Documents.  Jurors can touch them, look at them, and reach their own conclusions about them.