FIRM SEMINAR ANNOUNCEMENT

Mark Your Calendars! On Wednesday, April 13, 2005, at 1:00 p.m., we will be hosting a firm seminar. We will discuss the role and responsibilities of employers, non-governmental contractors and governmental contractors alike, when dealing with the various federal and state agencies concerning your employment and compliance issues. Whether it is an EEOC investigation of a discrimination charge, a DOL investigation of a wage and hour or safety issue or a compliance review of a government contract, at some point in time, employers will have to interface with federal and/or state agencies. Bryant Banes, who is with us in an of counsel role to assist on government contract issues and other complex litigation matters, spent 2004 in Bagdad as the Chief of Procurement, Fiscal and Environmental Law. He will be speaking on not only the labor standards applicable to government contracts but also how to procure those contracts. Linda Evans will be speaking on how to handle an EEOC investigation and Grae Griffin will provide guidance on what to do when a wage and hour investigator knocks on your door. So, this is a seminar you won't want to miss! To hold your spot, clip the registration form at the end of this newsletter and return by mail or call Tiffany Alexander. Admission is $50 per person.

I. TITLE VII

Guidance Needed: Don't Say We Didn't Warn You! After the tragic events of September 11, 2001, we warned you about the importance of continuing to enforce your harassment policies, especially the ones prohibiting religious and national origin discrimination. Some employers were not so careful and their cases are now making their way through the court system. One such example involves a school that seemed to take a recess from common sense and policy enforcement. A guidance counselor at the school, a native Iranian, was incorrectly believed to be a Muslim and began experiencing negative treatment and comments from coworkers. Ultimately, his contract was not renewed and he brought discrimination claims. The employer's motion for summary judgment was denied and the court will decide whether the school unlawfully terminated him on the basis of his national origin and his perceived religion. It may prove to be an expensive lesson for the school!

Sticks And Stones And Words Can Hurt An Employer. As a way to motivate one another, do your employees call each other derogatory terms like "wetback" and "dork?" According to one employer sued for allegedly creating a sexually hostile work environment, this type of name-calling was commonly exchanged between male plant workers as a way to get their "blood going" and thereby increase production. However, this kind of "motivational" tool may land the employer in court. One of the male employees alleged that he was subjected to repeated same-sex harassment and then constructively discharged by his employer after it failed to remedy the sexually hostile work environment. The employee was a production worker for a manufacturing plant. On a daily basis, his male coworkers would engage in sexually explicit conversations about women. The employee would object to such conversations and refuse to participate. On one particular occasion, a coworker commented that the employee was a virgin because he would not join in the discussions.

The employee complained to his supervisor, plant manager and union president about the conduct. Thereafter, the employer conducted a 15-minute meeting with the members of the department in order to resolve the problem. During the meeting, the employer addressed its sexual harassment policy. According to the employer, the harassment ceased. The employee claims that after the meeting, his co-workers deliberately tried to make his work more difficult by speeding up the assembly line. Approximately three weeks later, he was constructively discharged because allegedly his employment conditions were so intolerable that he was forced to quit.

The employee then filed a Title VII lawsuit against his employer, claiming that he was a victim of same-sex harassment designed to harass, emasculate, and humiliate him because he did not conform to the stereotypical view of masculinity. The employer argued that the employee's same-sex harassment claim was not viable. However, the court disagreed. The court noted that several federal circuits have recognized nonconformance with gender stereo-types as a viable theory of sex discrimination – either same-sex or between sexes – under Title VII in accordance with the Supreme Court ruling in Price Waterhouse (which held sex stereotyping impermissible under Title VII). Accordingly, the court recognized the employee's theory of liability under Title VII and determined that a jury could find that a reasonable person in the employee's position would have felt compelled to resign. As a result, the employee was provided the opportunity to present his claims to a jury.

Desperate, Not Disparate, Housewives. It's no surprise that office romances can create problems for employers. So what's the employer to do? In a recent case, the employer terminated the female employee after her husband found out about her extra-marital affair with a coworker and threatened to make lover-boy's life miserable. The company was concerned about disruption in the workplace and decided only one of the lovebirds could stay. They chose the male because he was the better employee. The female employee then claimed sex discrimination. While the court found in this instance the employer's reason for keeping the male employee was valid, it warned that it would have been a no-no for the employer to terminate the female because of notions that women carrying on adulterous affairs should be punished while men may be excused. A good point to remember if you have hanky-panky issues at your company!

Tattletales Need Protection Too. What should employers do when an employee complains about harassment, and her coworkers treat her like a tattletale? Well, if an employer does not protect her from coworker harassment, she may have a valid retaliation claim.

There seems to be a split in authority as to whether a hostile work environment created by an employee's coworkers constitutes a retaliatory adverse employment action. As you will recall, an adverse employment action usually involves an ultimate employment decision such as hiring, granting leave, discharging, promoting, compensation, etc. Nevertheless, the majority view, as evidenced by a recent First Circuit decision, holds that a hostile work environment created in response to a complaint of discrimination constitutes a retaliatory adverse employment action, just like the aforementioned items.

The plaintiff reported an incident in which her supervisor unhooked her bra, ripped it from her body and hung it on a city-owned van. (How'd he do that?) The company took prompt remedial action and disciplined the supervisor. However, in a show of support for the supervisor, the plaintiff's coworkers began harassing her about the complaint. Consequently, she endured false accusations of misconduct, harassing insults and taunts, a near miss by a city van while she was on company premises and a general shunning by her peers. Given that all of this conduct led the plaintiff to seek treatment from a doctor for physical and psychological problems, the court found that a retaliatory hostile environment existed.

What is so strange is there was no tangible employment action taken by the employer. Thus, there was no retaliation in the legal sense of the word. Nevertheless, the court allowed her to proceed under a retaliatory theory.

Conversely, the Fifth Circuit does not recognize this as a cause of action. In the Fifth Circuit, a hostile work environment cannot constitute a retaliatory adverse employment action. Thus, a colorable claim for retaliation would require an ultimate employment decision of the ilk listed above.

Although the Fifth Circuit does not recognize a retaliatory hostile environment as an adverse employment action, it would likely recognize harassment based on an internal sexual harassment complaint as illegal. (Likely as a violation of the opposition clause of Title VII.) That precise issue, however, has not been decided. The moral of the story is that employers should be vigilant in protecting employees that have recently complained of a Title VII violation from coworkers that want to antagonize them for making the complaint. Yes, "tattletales" would seem to be a protected class too.

II. FLSA

Sick Leave – Beware Of Being Too Nice. Some employers have provided for sick pay with a specified number of days if their employees are ill and can't come to work. Others have added a provision that gives employees all or some of the unused sick pay to the employee at the end of the year as a reward for not using it. A recent lawsuit affirmed the Wage and Hour Division's position that such a formal cash pay out policy on unused sick leave is, in effect, giving employees a non-discretionary bonus to encourage good attendance. Accordingly that "bonus" must be added into the employee's regular rate of pay for any week during the year that he/she worked over 40 hours. For example, a $10 an hour employee who didn't use any of the 10 days of sick leave during the year, and who under the terms of the plan got all unused sick leave back at the end of the year, would get an $800 bonus. The bonus prorated over the year would amount to about a 40-cent per hour increase in the regular rate. This would then require the employer to recalculate the overtime payment due for any week in which overtime was paid during the year.

III. FMLA/ADA

Timing Is Everything! Sometimes it's not what you do, but when you do it that gets you in trouble. An employer recently found that out the hard way. An employee gave a verbal resignation because she thought her husband was getting a new job in another city. However, her husband didn't get the job and she informed her employer she would be staying after all. It seems the employer really did want her to resign, so persisted in asking for her written resignation. The employee then requested a transfer and the employer reiterated the need for her to resign first before she could become eligible for a transfer. Ultimately, she was denied three other positions with the company and terminated. She then sued the employer. At this point you may be asking where's the employee's beef – an employer can terminate an at-will employee at any time, right? And the answer is yes, but it also depends on what else was going on at the time of the termination. And, in this case the employee had taken two different leaves under the Family and Medical Leave Act (FMLA) before and after the time she first started talking about resigning. While the employer contended the reason for the termination was the employee's resignation, the employee claimed it was because of discrimination against her because of her health problems that prompted her to take the FMLA leave and in retaliation for exercising her FMLA rights. The court agreed with the employee. The moral of the story is to be careful when terminating or disciplining an employee who has just taken FMLA leave. Your reasons for terminating may be perfectly legitimate, but they will get a closer look if you're in the right place at the wrong time!

Does The Early Bird Get The Worm? Most of the time employers are happy to have employees return early from leave. But in a recent case at a car manufacturing plant the employer was caught off guard when an employee returned three weeks early from FMLA leave and it did not have a position available for her for almost five weeks. To further complicate the matter, there were also ADA issues because the employee required accommodations for physical ailments and the plant had substantially changed its production line while she was gone. In this case the court killed two birds with one stone and said 1) the employer should have restored the employee to her position after receiving two business days' notice that she was ready to return to work (the regulations give the employer the two days); and 2) the right to restoration under the FMLA is not changed just because accommodations under the ADA are needed. We question the second point, but you need to keep these points in mind when dealing with your own FMLA/ADA issues!

IV. ARBITRATION

Employers, Finish What You Start! We've often said some arbitrator's decisions defy common sense and this next case is a good example. A grocery store employee complained about a male manager who had made inappropriate sexual comments while in the break room. The employer began an investigation and disciplined the manager by requiring him to review the company's sexual harassment policy. Meanwhile, the company continued its investigation and discovered several other employees were also involved in the conversation and a female manager was terminated for her participation. As more facts unfolded, the company learned that the male manager had also disobeyed the company's requirement that the investigation be kept confidential. At that point the company terminated him and he filed a grievance. In a strange twist of reasoning, the arbitrator in this case ruled that once the employer gives discipline, such as here when it required the employee to review company policies, it can't come back and impose additional discipline for the same incident even if it finds out later that the employee committed other policy violations. To paraphrase an old saying, "discipline in haste, repent at your leisure."

V. STATE LAW CASES

Promises, Promises. A Houston company recently took quite a hit to the tune of nearly $3.7 million in an executive agreement suit. The executive claimed several causes of action including breach of contract, fraudulent inducement and wrongful termination. He had been encouraged by his boss to enter into a new, less-secure employment agreement and shortly thereafter, the executive determined that his new position had little real power. When his position was eliminated a short time later, he sued. While the executive's wrongful termination claims were dismissed and the jury found the company had not breached its employment contract, it did find that the executive had been fraudulently induced to sign the new agreement. The executive got $2.2 million in actual damages and almost $1.5 million in punitive damages. Ouch!

Non-Compete Agreements: Confusion Reigns Supreme In Texas. As most people know, Texas law disfavors covenants not to compete as restraint on trade. Nevertheless, Texas statutory law permits these agreements as long as they are reasonable as to "time, geographical area and scope of activity to be restrained," and it "is ancillary to or part of an otherwise enforceable agreement at the time the agreement it made." Well, when does a covenant not to compete become "ancillary to an otherwise enforceable agreement?" This question has confused employers, not to mention legal practitioners, for quite some time. Making matters worse, the Texas Supreme Court held that a covenant not to compete is ancillary to an otherwise enforceable agreement when an employer gave an employee confidential or proprietary information or trade secrets at the time that an employee offered his promise not to compete. Given that most employers did not provide such information when they asked their employees to sign the non-compete agreement, few were held valid. Thus, it seemed, most covenants not to compete weren't worth the paper on which they were printed

Since then many courts have struggled with whether the non-compete agreements were valid or not. For instance, the Austin Court of Appeals held, as above, that confidential information had to be given to the employee simultaneously with the signed agreement before it was enforceable. Conversely, the Beaumont Court of Appeals up-held the enforceability of a non-compete agreement despite the fact that the employer did not provide any confidential information until after the agreement was signed. The court reasoned that the non-compete obligated the company to provide confidential information and they did, in fact, provide such information. Accordingly, the agreement was mutual and enforceable.

In November, the Texas Supreme Court has decided to revisit the issue by hearing the Sheshunof case. Most people feel that the Texas Supreme Court will side with the Beaumont Court of Appeals, finding that the whole idea of giving the information immediately to the employee is not only inconvenient; but rather, a silly notion. Thus, the clouds could break and employers would be able to enforce the agreements they entered into with their employees.

VI. USERRA

Camouflaged COBRA. On December 10, 2004, President Bush signed into law amendments to the continuation coverage requirements in the Uniformed Services Employment and Reemployment Rights Act (USERRA). USERRA mandates that eligible employees who are called to military active duty must be provided the opportunity to continue group health coverage for themselves, spouses and dependents for a maximum of 18 months. The new law extends the maximum amount of continuation coverage to 24 months. This extension is only applicable to individuals who elected coverage beginning on or after December 10, 2004. For any individuals who elected continuation coverage before December 10, the 18-month maximum coverage period still applies. Additionally, the recent amendment mandates that employers provide an annual notice of USERRA rights and obligations to employees. An employer can satisfy this notice requirement by posting a notice in the location where it customarily provides general notices to employees in the workplace. This general notice does not replace the general notice of rights and obligations the employer must provide individually to each employee when he or she becomes covered by a group health plan. Enclosed with this newsletter is a copy of the general notice that must be posted, which can also be found online at: http://www.dol.gov/vets/programs/userra/poster.pdf

It is also important to note an employee's call to military duty would constitute a qualifying event under COBRA. Therefore, the employer's plan would be subject to both COBRA and USERRA's continuation coverage, notice and election requirements. An employer must also remember to provide notice of continuation coverage rights under COBRA and USERRA to qualified beneficiaries.

BEFORE THE NLRB

Oops! There Goes Another Clinton Board Decision. During the end times before W took office, the Clinton Board went wild with overruling long established precedents on a variety of issues: the right to representation for non-union employees in disciplinary investigations; the right of contractor's employees to be included in bargaining units with other employer's employees; etc. Many of those have since been reversed by the new Board. One of the decisions occurred where three employees in a 500-plus man bargaining unit testified that their supervisor expressed concern of a plant shutdown if the union won an election at the facility. Two of the employees said they told no one of "the threat," but the other employee said she told everyone on break at that time. No other evidence was introduced to show how many employees were on break or that the employees generally were aware of the comment. The union lost the election by 85 votes and filed challenges to it. The Clinton Board reversed a long line of cases to hold that it would be presumed, absent proof by the employer to the contrary, that comments of that kind would be disseminated throughout the plant. The new Board has just reversed that precedent holding in a similar-sized bargaining unit where a similar com-ment was made to one employee who related it to two other employees. In a three to two decision, with the two holdover Clinton appointees joining in a dissent, the majority reversed the earlier case saying that the burden of proof to establish that the statement was widely spread throughout the bargaining unit should rest on the party who seeks to change the results of the election. The majority also pointed out that if dissemination was inevitable (as the Clinton Board had concluded) then direct proof of that fact by some of the other employees who heard should be very easy to obtain. Finally, it would be virtually impossible for an employer to prove the negative. Hopefully, there will be more reversals to come.

Union Organizational Activity Since Our Last Newsletter. Two petitions for certification have been filed by unions. Two petitions for decertification have been filed by management. Five elections have been held, two of which have been won by management.

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The Quarterly Update is a newsletter providing recent items of interest to our clients in the various areas of employment law. While the Update is to alert you to potential new problem areas or changes in the law, it is not to be considered legal advice or a legal opinion. Such can only be given after careful consideration of the facts unique to any situation. The contents of this newsletter are copyrighted and may not be used without express written consent of Neel & Hooper, P.C.

** Neel & Hooper, P.C. is a member of WORKLAW Network.  WORKLAW Network is comprised of independent law firms that devote their entire practice to representing management in all facets of labor and employment law.  Formerly known as LABNET, the network was founded in 1989 to provide employers with access to high quality law firms throughout the U.S. specializing in labor and employment law matters.

WORKLAW Network firms meet stringent quality standards, and are evaluated not only for their labor and employment law expertise but also for their professional integrity.  They are committed to providing employers with high quality and cost-effective advice along with personal attention.

Member firms are linked by e-mail and share a computerized database containing research memoranda, briefs, election campaign materials and other pooled resources, allowing for more efficient representation of clients.  All WORKLAW Network firms represent employers in employment litigation and labor relations.  Several firms also represent employees in employee benefits and workers’ compensation.