Monthly Archives: April 2009

Weathering the Recession Without Extra Burden of Litigation

Termination

As an employment lawyer, I frequently am asked the question that all business people are asked these days: “How is your business faring in these troubled economic times?” I am personally happy that I can say, “My business is booming.” What I am not happy about is the reason for my current volume of business: more companies are being sued by their former employees, probably because the recession has created more “former employees”.

There are two approaches I recommend to prevent becoming just another company involved in expensive and frustrating employment litigation during this economic downturn:

  1. Don’t cut back on the practices that help prevent employee lawsuits. That means keeping your policies updated, training all of your managers annually on employment law issues like discrimination, continuing to use progressive discipline, and carefully documenting every employee interaction, particularly ultimate employment actions such as hiring, promotions, demotions, reduction in force and terminations. You’ll find lots of postings on this blog giving you more information about how to take these measures if you are a Texas employer.
  2. Prevent lawsuits by using severance agreements when you have to terminate employees. That’s what I want to discuss today.

Texas law is supportive of severance agreements, which are contracts between the exiting employee and the company giving the employee more pay than he is due in exchange for a release of most possible employment law claims. In 2008, 93 percent of U.S. companies who paid any additional severance pay to a departing employee required that employee to sign a release, according to a new study by consulting company Lee Hecht Harrison.

The study found that the traditional idea of severance pay based on tenure (one week for every year worked, for example) is being replaced by packages negotiated by the employees themselves, sometimes before they are even hired. The study found that nationwide, the minimum number of weeks paid in 2008 for all executive employees was 13 and the maximum was 38.

These figures are higher than what I see in the Texas Panhandle. I find that generally my clients are willing to pay 3-6 months of severance to key executives who are departing, while 4-12 weeks of severance compensation is much more commonly paid to lower-level employees when the company doesn’t want to mess with litigation.

Not every departing employee needs to be paid severance compensation, because you do not need a release from every terminated employee. If you have paid attention to the preventative actions described above, have strong written policies, used progressive discipline and documented everything, you may be able to terminate a low-performer without fear of litigation.

However, there are many instances where the firing is not so neat and clean, where the employee is known to be litigious, or where your gut (or your lawyer) just tells you that you need an extra measure of protection when letting a particular employee go. That’s when the severance agreement is helpful.

A severance agreement is a contract which has certain legal requirements to make it enforceable. So kids, don’t try this at home. Call an experienced employment attorney in the state in which the employee is located to help you draft an agreement that will relieve your company of liability and protect the business from the cost and burden of a lawsuit.

Beware New ARRA Whistleblower Law

Management, Termination, Training

More than just Big Brother is watching you. Your employees are watching too, and can use the protections of a new whistleblower law to protect their jobs if they report any kind of wrongdoing by your business.

The new whistleblower law is included as a tiny piece of the massive American Recovery and Reinvestment Act (“ARRA”). Employees of any company that is a recipient of any stimulus money provided by ARRA are protected from job terminations if the employee discloses a problem involving stimulus funds to a supervisor or an enforcement agency. The protection applies when the employee reasonably believes he/she is disclosing a problem related to stimulus funds, such as:

  • Mismanagement or waste; or
  • Danger to public health or safety; or
  • Abuse of authority; or
  • Violation of a law or regulation governing a grant or contract relating to stimulus funds.

Companies that may receive stimulus funds include healthcare companies, especially technology providers in the healthcare field, airports, alternative energy companies, contractors rebuilding infrastructure, companies retrofitting closed industrial facilities, medical researchers, scientists, libraries, schools, shelters, and many other businesses. Therefore the employees of these companies may have a new and unprecedented level of employment protection from the ARRA whistleblower regulations.

What should a company expecting to or already receiving stimulus funds do in response to this whistleblower liability?

  • Hire and train a quality control expert or contract administrator to oversee the efficient and safe use of the stimulus funds.
  • Prepare ethics guidelines for the handling of funds and the work to be accomplished and have every employee sign off on them.
  • Train your managers and supervisors to immediately report any complaints about efficiency, public health, contractual violations, etc. from their employees to the quality control officer.
  • Be very careful about terminating employees. Document all reasons for terminations. If an employee has made complaints inside or outside of the company, talk to an employment lawyer about your company’s exposure to whistleblower liability before you terminate the employee.

COBRA Changes Affect Employers

Benefits
  • Do you provide group health, dental or vision insurance or a Health Reimbursement Account to your employees?
  • Do you have at least 20 employees, whether they are on the group health insurance or not?
  • Have you laid off or fired any employees since September 1, 2008?

If you answered these 3 questions “yes”, you are required to act immediately under the American Recovery and Reinvestment Act of 2009 (“ARRA”) to notify your former employees of subsidies available for their COBRA premiums (and those of their dependents). In addition, you as an employer have to advance that subsidy and then recoup it through payroll tax deductions.

If you have a knowledgeable group health insurance agent like my great friend, Julie Hulsey at Neely, Craig & Walton, LLP, in Amarillo (who supplied me with all of the information for this post), you probably have already been contacted about complying with these COBRA subsidy requirements.

If not, here is some very basic information that you need to digest quickly and an action plan for complying immediately (for example, Friday, April 18, 2009, is the deadline to mail notices to your former employees and their dependents).

Continue reading COBRA Changes Affect Employers →

Is There a Union in Your Future?

Employee Rights, Management

Across the country, approximately 8% of the workforce is unionized. Speculation is that if the Employee Free Choice Act (“EFCA”), the union-backed legislation making its way through the Democratic-controlled Congress, passes, that number could double.

This is causing concern for many employers, who fear that a unionized workforce makes the company less flexible, innovative and responsive to a rapidly-changing global economy, in which customers only care if your product is feature-packed and low-priced. Union contracts and the rigid rules they impose can possibly turn a company into a slow-moving and out-of-date giant like GM or Chrysler.

How would the EFCA increase your chances that your workers would be unionized? The bill would allow workers to sign cards with a check-off box saying that they want to be represented by a union. If 51% check off the “yes” box, then you will have a union in your workplace. This method is currently allowed, but employers don’t have to recognize the check-cards and can demand a secret ballot election, which provides the employer time to counter the unionization attempt. Requiring an employer to recognize the check-card election alone as controlling does increase the chance that a union will start representing your workers in negotiating all terms and conditions of employment.

The EFCA would also require the company and the union to submit to binding arbitration if a union contract could not be negotiated in 90 days. This provision could increase the chance that a National Labor Relations Board arbitrator will be determining your wages, vacation policies, attendance policies, etc., instead of you as the owner or manager of the business.

The chance of passage of the EFCA in the Senate decreased in late March when moderate Republican Sen. Arlan Spector announced that he would not support the legislation with his swing vote in these difficult economic times. However, there will probably be some sort of compromise bill that passes, so you can’t totally ignore the possibility that a union may soon be coming to a workforce near you.

If you want to decrease your chances of ever facing a union election in your business, here are some proactive steps that you can and should take right now:

Continue reading Is There a Union in Your Future? →

Paying for Employee Training Time

Compensation, Training

Dow Chemical’s plant in Freeport, Texas recently had to pay a $861,647 settlement for back wages to 648 operating engineers who claimed they were not compensated for hours spent studying during mandatory training. The Department of Labor (“DOL”)investigated and found that the engineers should have been paid for the time spent in training required by the company.

If you want to make sure that you don’t get hit with penalties for the way in which you pay your employees for training and meeting times, here a few guidelines for paying your employees correctly :

  • The basic regulation states “”Attendance at lectures, meetings, training programs and similar activities need not be counted as working time if the following four criteria are met: (1) attendance is outside of the employee’s regular working hours; (2) attendance is in fact voluntary; (3) the course, lecture or meeting is not directly related to the employee’s job; and (4) the employee does not perform any productive work during such attendance.”
  • Unless you can prove that the meeting or training course that your employee attends meets all four of these criteria, you must compensate the employee for the time in the meeting or the training. Most business meetings and trainings will not meet these criteria, so you will have to compensate your employees for them.
  • An example of meetings that would not have to be compensated would be nonprofit board meetings, which could benefit your employee’s career in the long run, but are usually voluntary on the employee’s part and not directly related to your business. Also “meetings” such as happy hours after work or playing on the company softball team, while indirectly involving working relationships, fit these criteria so do not have to be compensated.
  • On the other hand, a lunch time meeting to talk about staff assignments, a Saturday session for employees to pack up to move the business to a new location, or a nighttime cocktail hour to entertain prospective clients of the company are all the types of meetings that would require you to compensate your employees.
  • The DOL takes the position that training that is required by law to allow the employee to work for you, such as the 15 hours of annual training required of child care workers every year in Texas, is compensable because the training is directly related to the job and is not voluntary because the employee cannot work in that job without it. Interestingly, it is the DOL’s position that mandatory annual continuing education for professionals, such as accountants and lawyers, is of general applicability and is “portable” in that profession. Therefore, the employer doesn’t have to compensate the professional for that training time. Of course, the professional is probably exempt from the overtime requirements and paid on a salary, so no extra compensation would be due anyway.
  • If an employee decides to go back to college or trade school on his own initiative, the employer does not have to pay the employee for that time even if the courses are related to the employee’s work because the employer did not require the employee to go back to school or otherwise make going back to school a job requirement. The employer can even agree to reimburse those college courses that apply to the employee’s job, as long as the employee is voluntarily attending school on his own accord.