Dallas / Houston / Austin
Presented By
Employment Law Update
CPA Firm Management Association
2017 National Practice Management Conference
June 21, 2017
Devon D. Sharp
Agenda
Dallas / Houston / Austin
Tips for Employers / Pitfalls to Avoid and "party favors" for you to bring back to your business!
1. Written acknowledgement regarding former employment: Avoiding tortious interference claims
2. Deductions from wages: Obtaining employee consent
3. Payment of wages under the FLSA: Safe harbor policy
4. Independent contractor arrangements: Correct classification and sample form of agreement
5. Basic separation and release agreement: Nuts and bolts
6. Defend Trade Secrets Act: Language to include in all confidentiality and non-disclosure agreements
7. Arbitration agreements for employees: Key components and sample form of agreement
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Recent Employment Law Developments / Issues on the Horizon
DOL’s withdrawal of employee classification and joint employer guidance
Fate of the DOL federal overtime rule Title VII – sexual orientation discrimination
F-word Facebook firing case
Other issues to watch for on the horizon
Written Acknowledgement Regarding Former Employment
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Written Acknowledgement Regarding Former Employment
Most of your new hires were employees or contractors elsewhere before coming to you.
You need to ensure they aren’t violating any confidentiality or other obligations to their former employers. – Why? Because if you don’t, you could easily get pulled into a
dispute.
Most common claim for the “new” employer: Tortious Interference
Other potential claims: Misappropriation of confidential information or trade secrets; conversion; civil conspiracy; aiding and abetting breach of fiduciary duty
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Written Acknowledgement Regarding Former Employment
Best way to prevent/defuse legal claims: – Obtain a comprehensive written acknowledgement from
the new employee at the outset of employment
– Obtain all confidentiality, non-disclosure, non-solicitation and non-competition agreements under which employee is bound BEFORE hiring them. Have your employment lawyer review them.
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Sample Form of Acknowledgement
Deduction from Wages
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Wage Deductions: Obtaining Employee Consent
Rules vary from state to state. But most states require advance written authorization
for most wage deductions.
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Wage Deductions: Obtaining Employee Consent
Generally, an employer may only make a deduction that is either: – Legally authorized, or
– Voluntarily authorized by the employee, and for the employee, not the employer’s, benefit.
Best practice: Obtain authorization for deduction of expenses at the time of hiring. – Authorization agreement shouldn’t be overly broad, but it should
adequately cover the likely deductions that and employer may need to make from the employee’s wages.
Remember that even if an employee agrees to the deduction, the deduction may not make the employee’s wages fall below the minimum wage unless authorized by the FLSA.
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Wage Deductions: Obtaining Employee Consent
In sum – Before making deductions: – First consider whether the deductions are authorized by
federal law or court order.
– If not, you must generally have an agreement signed by the employee.
– Finally, you must consider whether the deductions would result in the employee’s wages dropping below minimum wage.
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Sample Form of Texas Wage Deduction Authorization Agreement
Payment of Wages Under the FLSA
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FLSA Safe Harbor Policy
The DOL’s rules on the “white collar” exemptions from federal overtime and minimum wage requirements under the FLSA provide a “safe harbor” that may preserve an employee's exempt status in the event impermissible deductions are made.
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FLSA Safe Harbor Policy
Safe Harbor Rule – The salary basis component of the exemption test is not lost if the employer: – has a “clearly communicated” policy prohibiting improper
deductions, including a complaint mechanism;
– reimburses employees for any improper deductions; and
– makes a good faith commitment to comply in the future.
This safe harbor is not available if the employer willfully violates the policy by continuing to make improper deductions after receiving employee complaints
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Sample Form of FLSA Safe Harbor Policy
Independent Contractor Arrangements
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Independent Contractor Arrangements: Getting it Right
It’s critical to classify your workers correctly. The DOL and IRS have stepped up their enforcement
efforts in recent years – that might change now – to be discussed later
Standard is promulgated by the IRS.
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Independent Contractor Arrangements: Getting it Right
Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
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Sample Form of Independent Contractor Agreement
Basic Separation and Release Agreement
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Basic Separation and Release Agreement
When you need to end an employment relationship, a severance package coupled with a release agreement can serve both the employer and employee’s interests.
Not necessary or appropriate in every instance, but useful when risk factors are at play.
Typical provisions: – Amount and delivery method for severance
– Taxes and insurance
– Confidentiality
– Non-disparagement
– OWBPA language if 40 or older
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Basic Separation and Release Agreement
More critical elements of a release agreement: – Short; plain English; limit legalese
– Reference specific employment statutes, both by name and legal citation
– Statement that employee was given a reasonable period of time to consider
– Statement that employee was encouraged to consult with an attorney
– Statement that the release doesn’t restrict the employee’s right to file a charge with the EEOC or similar agencies, but it does restrict the employee’s right to recover damages as a result
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Sample Form of Separation and Release Agreement
Defend Trade Secrets Act
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Defend Trade Secrets Act
Amends the Economic Espionage Act by providing a civil remedy for trade secret misappropriation.
Effective May 11, 2016. Largely parallels the Uniform Trade Secrets Act
(adopted in 48 states). Does not preempt state law.
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Defend Trade Secrets Act
So how does it change things? – Allows suit in federal court
– Ex parte seizure orders carried out by law enforcement in extraordinary situations
– Potential extraterritorial reach
– Notice requirement to employees
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Defend Trade Secrets Act
What do employers need to do? – Notice regarding immunity provisions must be given “in any
contract or agreement with an employee that governs the use of a trade secret or other confidential information.” Only required in contracts entered into or updated after DTSA.
Includes agreements with consultants and independent contractors.
– Penalty for noncompliance: No attorneys’ fees or punitive damages.
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Defend Trade Secrets Act
What agreements must include the notice? – Offer letters or employment applications with contractual
language
– Employment agreements
– Restrictive covenant agreements
– Nondisclosure agreements
– Stock or incentive plans
– BYOD and computer use agreements
– Separation agreements
What if the employer has one slip-up?
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Defend Trade Secrets Act Language
Arbitration Agreements for Employees
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Arbitration Agreements for Employees
Benefits of arbitration: – Faster
– Less expensive
– Private
– No jury / Select an arbitrator with specific expertise
– Limited discovery
– More relaxed / No formal rules of evidence
– Right of appeal is limited
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Arbitration Agreements for Employees
Drawbacks of arbitration: – Typically no emergency injunctive relief
– Fewer dispositive motions
– Greater likelihood of award versus dismissal
– Limited discovery
– More relaxed / No formal rules of evidence
– Right of appeal is limited
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Arbitration Agreements for Employees
Mandatory class action waivers in employee arbitration agreements: – NLRB has said they are unenforceable.
– Seventh and Ninth Circuits have followed the NLRB.
– Second, Eighth and Fifth Circuits have rejected the NLRB’s ruling.
– U.S. Supreme Court is considering the issue now.
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Sample Form of Arbitration Agreement
Recent Employment Law Developments and Issues on the Horizon
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DOL Yanks Obama-Era Wage and Hour Guidance
BUT: – Democratic states may opt to step in and adopt rules similar
to those of the Obama administration.
– Just because the DOL may scale back its enforcement efforts doesn’t necessarily mean that state labor departments will.
– Many attacks on employee misclassification come through private lawsuits and class actions.
– The Browning Ferris case is still out there.
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DOL Yanks Obama-Era Wage and Hour Guidance
Takeaways: – Continue to analyze prospective independent contractor
relationships carefully and follow the IRS’s guidance.
– If you engage workers through a temporary or staffing agency, consider the language of your contract with the agency and try to take a “hands-off” approach with respect to the workers to the extent possible.
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Fate of the DOL Federal Overtime Rule
New overtime rule was set to take effect on December 1 but was blocked by a federal judge in Texas.
What’s next? – The DOL is deciding whether to continue pursuing its appeal
of the Texas litigation. New (extended) briefing deadline is June 30.
– Labor Secretary Acosta has acknowledged that the salary threshold needs to be increased, but believes that $47,476 was too much. He may support a threshold of ~$33,000.
– What the DOL will do regarding the rest of the proposed rule is uncertain.
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Title VII: Sexual Orientation Discrimination
Hively v. Ivy Tech Community College – On April 4, the Seventh Circuit ruled that sexual orientation
claims are actionable under Title VII.
– “Discrimination because of sex” includes discrimination because of sexual orientation.
Currently, almost half of the states in the country have laws prohibiting sexual orientation discrimination in employment. Some additional states protect state workers from such discrimination.
Consider local ordinances, as well.
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F-Word Facebook Firing Case
NLRB v. Pier Sixty, LLC – Second Circuit ruled that an employee who used a public
Facebook page to curse out not just his boss, but also his boss’s mother and entire family, should not have been fired from his job.
Bob is such a NASTY MOTHERF___ER don’t know how to talk to people!!!!!! F__k his mother and his entire f__king family!!!! What a LOSER!!!! Vote YES for the UNION!!!!!!
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F-Word Facebook Firing Case
NLRA prohibits employers from discharging an employee for concerted or union-related activity.
Was the Facebook post “so opprobrious as to lose the protection that the NLRA affords union-related speech”? – No, due to the circumstances. The subject matter of the Facebook
post “included workplace concerns: management’s allegedly disrespectful treatment of employees, and the upcoming union election.” Also, employer permitted managers and employees alike to use profanity in the workplace on a regular basis with few repercussions. Finally, statement was not in the immediate presence of customers, did not disrupt the catering event, and there was no evidence that the statement reached any customers or potential customers.
Dallas / Houston / Austin
F-Word Facebook Firing Case
Takeaway: Consult your employment attorney before firing someone based on a social media posting!
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Other Issues to Watch For
No action yet to fill vacant NLRB positions, but nominees will almost certainly be pro-employer/anti-union. – Prior NLRB precedent could go on the chopping block once a Republican
board majority is in place.
– But change will take time, because the NLRB tends to interpret the law through decisions rather than through rulemaking.
Within other federal employment law agencies (EEOC, DOL – Wage & Hour Division), although some of the top positions have been filled, none of the key policymaking decisions have been filled/replaced. So, many of those positions are still held by Democratic appointees.
The latest budget proposal out of the Trump administration keeps funding for these agencies steady, which will allow them to continue to operate at the level they operated at in the prior administration.
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Questions?
Devon D. Sharp Munsch Hardt Kopf & Harr, P.C.
Dallas / Shareholder 214.855.7539
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