Texas Employment Hiring Checklist

startupbusiness_hiregoodpeopleWhether a new business is preparing to hire its first employee or is revisiting its already-existing hiring procedures, making sure that the on-boarding process is done correctly and consistently will result in significant long-term benefits in terms of reducing stress associated with hiring new employees, decreasing legal risks arising out of improper hiring procedures, and ensuring that the business is protected if an employee happens not to work out and must be terminated.  The following guide provides a basic list of forms that any Texas business should make part of its employee files.*

1. Employment Application.  Every employee should fill out and sign an employment application. Make sure to keep an electronic copy of all employment documents and keep them confidential.

2. I-9 Form. Every employer must obtain an I-9 form and the appropriate employment eligibility verification documents from each new employee.

3. Confidentiality Agreement.  Have every employee who has access to confidential information sign such an agreement. Make sure the agreement is enforceable in Texas and contains all the key provisions.

4. Non-Compete/Non-Solicitation Agreement. Have key employees execute non-competition and/or non-solicitation agreements.  Consult with an attorney to determine which agreement will best benefit your business and make sure that the agreement meets all the requirements under Texas law.

5. Criminal Background Check.  Run criminal background checks on employees, but make sure you comply with any “check-the-box” rules that might be in force in your geographic location.

6. Personnel Data Form.  Make sure all employees complete the form upon hiring.

7. Emergency Contact Form.  Have this form easily accessible in case of emergency (i.e. do not include it in a confidential file that only HR or owner may access).

8. W-4 Form.  Have all employees fill out this form required under federal law.

9. Employer Property Form.  If the company provides certain equipment to employees, such as mobile phones or laptops, make sure that employees sign a form acknowledging receipt of that equipment, so that when they depart, the company knows exactly what equipment must be returned. 

10. Employee Handbook Acknowledgement Form.  If a business has an employee handbook or manual, make sure that every employee signs a form acknowledging that s/he read the handbook and understands that s/he must comply with the rules described in the handbook.

11. COBRA Rights Notification.  Employers with 20 or more employees (full- and part-time) that maintain a Group Health Plan must provide the Initial Notification of COBRA Rights to each employee at the time the employee becomes covered by the plan, which is usually at the time of hire.

12. Anti-Harassment/Retaliation Training.  Have employees sign a form acknowledging the date of completion of such training.  If they complete the training online, make sure that the company receives a copy of the certificate of completion and saves it in the personnel file.

* For a complete list of hiring forms or to ensure an up to date compliance, consult with an employment attorney.

Leiza represents COMPANIES and INDIVIDUALS in business and employment litigation. If you need assistance with a business or employment dispute contact Leiza for a confidential consultation at LDolghih@GodwinLaw.com or (214) 939-4458.

Erasing Employer Files Costs Employee Severance Pay

vector-hands-with-pen-document-money_146647163The Fifth Circuit Court of Appeals, which presides over Texas, Louisiana, and Mississippi, recently held that an employer could deny employee his severance benefits under an ERISA benefits plan because the employee erased certain files from his computer before returning the laptop to the employer.  

In Gomez v. Ericsson, Inc., Gomez worked for telecommunications company for about three years before being laid off. Shortly after Gomez’s termination, the company presented him with a severance agreement. Under its terms, Gomez was required to waive certain claims against the company and return the company’s property in his possession. In exchange for doing so, the company promised Gomez severance pay pursuant to the terms of both its Standard Severance Plan and Top Contributor Enhanced Severance Plan of 2010.  

However, after the company received Gomez’s laptop, it determined that he had erased certain files from it. Consequently, the plan administrator for the company determined that the employee did not comply with a provision of his severance agreement requiring the return of all company property because work files were missing on the company laptop he returned.  The Court of Appeals agreed with the company. 

TAKEAWAY:    Most companies are not required to pay severance, but will offer it in return for employees agreeing to release their claims against the company and making certain promises to the employer, such as return of property or an agreement not to compete. Signing such agreements without understanding what they require can cost employees their benefits. Thus, before signing any sort of severance documents, employees should carefully read them and, where necessary, consult with an attorney.

Leiza represents COMPANIES and INDIVIDUALS in business and employment litigation. If you need assistance with a business or employment dispute contact Leiza for a confidential consultation at LDolghih@GodwinLaw.com or (214) 939-4458.

Texas Supreme Court Rules Competitors Can be Excluded from the Courtroom

cartoonUntil recently, companies suing for trade secret theft ran a risk of having to disclose to their competitors in open court certain aspects of their trade secrets in order to prove their claim. The companies often argued that they shouldn’t have to give up their trade secrets in order to pursue their legal rights.  On the other hand, defendants argued that they cannot defend against a claim when they don’t know what they are accused of taking. Last month, the Texas Supreme Court clarified how such dilemma is to be resolved. 

The Court ruled that a company suing for trade secret misappropriation may exclude its competitor’s representatives from the courtroom when their trade secrets are discussed, leaving only the lawyers and independent outside experts of the competitor to hear such testimony. This way, a defendant can learn the information it needs to defend against the claims brought against it, but the information cannot be used outside of the lawsuit. 

Under TUTSA, trial courts are required to take “reasonable measures” to protect trade secrets during litigation, including, among other things, “holding in camera hearings” i.e. hearings that are closed to the public because they will involve discussion of trade secrets.  TUTSA does not specifically define the term or explain exactly who may or may not be present during in camera hearings.  Recently, NOV and M-I Swaco battled in court over whether NOV’s corporate representative could be present at a hearing where M-I Swaco offered testimony about what trade secrets its former employee took from it and gave to NOV.

In In Re M-I, LLC d/b/a M-I Swaco, NOV argued that as a party to the lawsuit where it was accused of stealing trade secrets from M-I Swaco, it had a right to be present at a temporary injunction hearing and hear what trade secrets M-I Swaco claimed NOV misappropriated.  The Texas Supreme Court did not buy into this argument finding that in camera hearings could include hearings where a party or its representatives (but not its attorneys) could be excluded.

The Supreme Court explained that when a trial judge is faced with the decision on whether to exclude a corporate representative from the courtroom during testimony about trade secrets, which he might not already know by virtue of misappropriation, the judge must balance (1) the “degree of competitive harm” the party would have suffered from the disclosure of its trade secrets to the other party’s corporate representative and (2)  the degree to which a party’s defense of a trade secrets case might be impaired if its corporate representative is excluded from the courtroom.

To make this determination regarding the degree of competitive harm, the court must consider the relative value of the party’s trade secrets to its competitor as well as whether the corporate representative acts as a competitive decision-maker at his company.  If he does, disclosure of alleged trade secrets would “necessarily entail greater competitive harm” because, even when acting in good faith, the corporate representative would not be able to resist acting on what he or she may learn during the hearing. To determine whether a party’s defense might be impaired, the court should consider whether a corporate representative possess unique expertise that a party may not find in outside experts.

Takeway:  The Texas Supreme Court has made it clear that a company wishing to prosecute theft of trade secrets can do so without having to disclose its trade secrets to a competitor in an open court.  If the disclosure of such information in open court will harm the company, it may ask the judge to remove its competitor’s representatives from the courtroom when critical proprietary information is discussed, leaving it up to the other sides’ lawyers and experts to analyze the testimony or evidence.  While this will certainly increase the cost of trade secrets litigation, it will also ensure that a competitor cannot use the courtroom to get to the “secret sauce.”

Leiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and has advised hundreds of clients regarding non-compete and trade secret issues. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at LDolghih@GodwinLaw.com or (214) 939-4458.

A Texas Company Loses a Non-Compete Battle Against California Employees

Texas-vs-CaliforniaCalifornia and Texas differ in many respects, including how they treat non-compete agreements.  While Texas enforces non-compete restraints that are reasonable, California has declared such agreements unenforceable.  Recently, a company headquartered in Texas attempted to enforce its non-compete agreements against two California employees.  The agreements specifically stated that they “shall be governed and construed in accordance with the substantive laws of the State of Texas,” that the company is based in Irving, Texas, and that the agreements are to be partially performed in in Irving, Texas. Despite this language, the trial court and then the Dallas Court of Appeals applied California law and ruled the agreements unenforceable in Merritt, Hawkins & Associates, LLC v. Caporicci, et al.

The Court of Appeals explained that in a situation like this, where two states have a relationship with the parties and the transaction, i.e., employment, it will apply the law of the state that has “clearly more significant” relationship to the parties and the transaction. The court then concluded that the relationship to California was more significant than to Texas because: (1) both men interviewed for the jobs in California; (2) completed their employment agreements and the jobs in California; (3) the employees lived in California and traveled to Texas infrequently; and (4) the gist of their employment agreements was performance of services in California.

The Court of Appeals also looked at whether California or Texas had a “materially greater interest” in determining whether the non-compete agreements were enforceable.  Although the company was based in Texas, the two employees performed services in California, and after they left the company, it had to close its California offices.  Based on these facts, the Court of Appeals concluded that while Texas shared a general interest in “protecting the justifiable expectations of entities doing business in several states, that [did] not outweigh California’s interests in this case.”

Finally, the Court of Appeals concluded that the enforcement of the non-compete agreements would be contrary to a “fundamental policy of California,” which was the final nail in the coffin of the company’s argument that the agreements should be enforced under Texas law.

Takeway:  Although a company may state in its employment agreement that the law of a certain state will apply, Texas courts may choose to apply the law of another state if that state has a more significant relationship with the parties or the employment agreements.  The legal analysis depends on a multitude of factors and will vary depending on where the company is located, where its employees are located, what their job functions are, as well as the public policy of the other states in question.  Texas companies that have employees in other states should keep that in mind when hiring or recruiting executives in other states.

Leiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and has advised hundreds of clients regarding non-compete and trade secret issues. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at LDolghih@GodwinLaw.com or (214) 939-4458.

A Texas Court Enforces an 18-month, 50-mile non-compete against a Texas Veterinarian

noncompeteThe Fort Worth Court of Appeals recently upheld an injunction enforcing an 18-month, 50-mile non-compete against a veterinarian, who accepted a job with a competing veterinary clinic within the 50-mile radius of her former employer.

In Bellefuille v. Equine Sports Medicine & Surgery, Weatherford Division, PLLC (ESMS), the veterinary resident signed a non-compete and non-disclosure agreement with ESMS, which prohibited her from competing with the company within a 50-mile radius within 18 months after her residence ended. The agreement also prohibited her from using or disclosing ESMS’s confidential information.

When Bellefuille was told by ESMS that she would not get a job offer after her residency ended, she accepted a job offer with ESMS’s biggest competitor within the non-compete’s geographic area.  There, she proceeded to treat some of the same animals she had previously treated at ESMS.

After accepting the new job, the vet filed a lawsuit asking a court to declare her non-compete with ESMS unenforceable and/or that her new employment did not violate that non-compete. ESMS counterclaimed and applied for a temporary injunction order, which the trial court granted and ordered Bellefuille not to compete with ESMS or use its confidential information. The vet appealed, arguing that the injunction was overbroad, but the Fort Worth Court of Appeals found that the trial court’s injunction was proper after striking some language as being too overbroad and vague because it did not trace the language used in the non-compete agreement.

Takeaway:  There is no magic formula for enforcement of non-competes in Texas.   The statute simply says that the restraints must be “reasonable” and no greater than is necessary to protect a legitimate business interest.  However, what is a reasonable term or a geographic area for a non-compete varies from case to case and depends on many factors, including, but not limited to, the nature of the business, the industry in which the business operates, the type of job performed by the individual subject to the non-compete, whether other employees have non-compete agreements, and many other factors. In this case, the length of the vet’s employment and the specific language of the restrictions played an important role in the court’s decision to enforce the agreement.

Leiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and has advised hundreds of clients regarding non-compete and trade secret issues. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at LDolghih@GodwinLaw.com or (214) 939-4458.

Breaking News: Millions of Employees Will Be Entitled to Overtime Pay Starting This December

24976165_SAUnder a new rule announced by the White House yesterday, anybody making a salary of less than $47,476 ($913 a week) will automatically qualify for overtime pay when they work more than 40 hours a week.

The current threshold is $23,660 (or $455 a week).

The change will go into effect on December 1, 2016.

The new rule is intended to expand overtime pay for those employees who are paid little but are exempt from overtime because they perform some marginal managerial duties.

In determining whether somebody’s salary meets the new threshold, employers will be allowed to include their bonuses and commissions up to 10% of the threshold amount.

The change is expected to affect the retail and restaurant industries the most, but will affect other industries as well.

TAKEAWAY FOR EMPLOYERS: If you have not already done so, you need to analyze all of your exempt positions and determine how to comply with the new rules by December 1, 2016.

TAKEAWAY FOR EMPLOYEES: The new rules will affect only those salaried workers who make between $23,660 and $47,476, have some managerial duties, and are classified as “exempt” from overtime pay. Under the new rules, such positions will be entitled to overtime pay.  This means that your employer might limit your work hours or lower your hourly pay or make another adjustment by December 1, 2016 to meet the federal requirements.

Leiza Dolghih frequently litigates employment disputes, advises employers on regarding employment issues, and assists with responding to EEOC and DOL charges and investigations. For additional information, contact Leiza at LDolghih@GodwinLaw.com or (214) 939-4458.

Breaking News: President Obama Signs Trade Secrets Bill Into Law

Today, President Obama signed into law S. 1890, which will allow companies to sue entities in federal court over allegations of trade secrets theft. Previously, the Senate passed the bill 87-0 on April 4, and the House cleared it by 410-2 on April 27.

“Enacting the Defend Trade Secrets Act is the most significant intellectual property development in years, and it demonstrates that Republicans and Democrats can work across the aisle in seeking to advance important public policies that will benefit the American people and boost our nation’s economy,” Utah Sen. Orrin Hatch (R), the bill’s sponsor, said today in a statement. 

The federal trade secrets statute imposes certain new requirements on  all employers who use non-disclosure agreements with their employees. To make sure that your business is compliant, contact an attorney knowledgeable in this area. 

Leiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and has advised hundreds of clients regarding non-compete and trade secret issues. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at LDolghih@GodwinLaw.com or (214) 939-4458.

The Far-Reaching Claws of the Texas Non-Compete Statute

Wait-what-meme-rage-faceA recent case from a Texas Court of Appeals demonstrates that the Texas non-compete statute applies not only to the employment agreements or sale of business contracts, but to any contracts that contain provisions restraining trade.

In Wharton Physician Services, P.A. v. Signature Gulf Coast Hospital, L.P., the Corpus Christi Court of Appeals found that a liquidated damages clause in a recruiting contract was unenforceable under the Texas non-compete statute.

Gulf Coast hired Wharton to provide hospitalist services and to coordinate the hiring of individual physicians for Gulf Coast.  Their agreement contained the following clause that allowed Wharton to demand $100,000 in liquidated damages if Gulf Coast hired any of the physicians that Wharton had previously presented to Gulf Coast if the hiring took place within 6 months after Wharton’s contract’s termination:

If this Agreement is terminated by either party for any reason, then HOSPITAL [Gulf Coast] shall have the right to contract directly with all or some of the Hospitalist Physicians retained by GROUP [Wharton] to perform the services required by the terms of this Agreement . . . In the event that HOSPITAL, or any individual or entity otherwise affiliated with HOSPITAL, for work or services that would be provided at HOSPITAL, desires to contract directly with one or more of the HOSPITALIST physicians previously recruited retained, and presented to HOSPITAL by GROUP for hospitalist services at any time during the six (6) months period following the termination of this Agreement, HOSPTIAL shall pay to GROUP as liquidated damages in amount of $100,000 per physician.

The Court of Appeals applied the standard non-compete analysis to this liquidated damages clause finding that while the recruiting agreement itself was enforceable, the liquidated damages clause was not because it was a restraint on trade that was not supported by independent consideration.  The court explained its reasoning as follows:

“Gulf Coast promised to pay Wharton for services and Wharton promised to perform those services; however, none of those obligations amounted to additional consideration for Gulf Coast’s promise not to hire any physicians if the contract between Wharton and Gulf Coast was terminated.”

In sum, the court construed the liquidated damages clause “as a way to limit competition to Wharton from another company providing similar services.”  As such, it had to comply with the Texas Covenants Not to Compete Act’s requirements, which it failed to do.

Takeaway: When entering into a contract in Texas, the parties should consider whether any contract provisions may be viewed as a restraint on competition and an attempt to enhance or maintain prices.  If that’s the case, then such contractual provision might have to comply with the Texas non-compete requirements in order to be enforceable.

Leiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and has advised hundreds of clients regarding non-compete and trade secret issues. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at LDolghih@GodwinLaw.com or (214) 939-4458

 

At-Will Employment in Texas – What Does it Mean?

kkIn Texas, employment is presumed to be at-will. This means that, absent a specific agreement to the contrary, employment may be terminated by the employer or the employee for any reason at any time. An employer may modify at-will employment but only if it does so expressly and unequivocally.

A Houston Court of Appeals in Queen et al. v. RBG USA recently reaffirmed this long-standing Texas doctrine, stating that the burden is on the employee to “prove that the employer expressly, clearly, and specifically agreed to modify the employee’s at-will employment status.”

Employees will often attempt to bring a wrongful termination claim because they relied on an employer’s promise to keep them employed for a certain period of time or because they understood or believed that they would not be terminated without good cause. However, because of the at-will doctrine, such claims often fail where an employer’s promises are found to be too ambiguous, implied instead of express, or simply unclear.  

For example, oral assurances that an employee whose work is satisfactory will not be terminated without good cause have been previously found to be too indefinite to constitute oral employment agreement. Similarly, general statements about working conditions, disciplinary procedures, or termination rights are not sufficient to change the at-will employment relationship; rather, the employer must expressly, clearly, and specifically agree to modify the employee’s at-will status.

Takeway for Employers: If you intend to have an at-will employment relationship with an employee, i.e., be able to fire him or her at any time for any legal reason, you should include “at-will” language in employment agreements.  This will help ward off any arguments by employees that they were promised a definite-term employment. Consult with an employment attorney to make sure that you structure your employment relationships correctly under the Texas law and that your on-boarding documents consistently reflect that structure. 

Takeway for Employees: If your employment agreement states that your employment is at-will, oral assurances from the employer regarding the length or conditions of employment might not be sufficient to modify the written employment relationship. Consult with an employment attorney when in doubt about your employment status.

Leiza Dolghih frequently litigates employment disputes, advises employers on how to handle troublesome employees, and assists with responding to EEOC charges and investigations. For additional information, contact Leiza at LDolghih@GodwinLaw.com or (214) 939-4458.

Trade Secrets Litigation is About to Change with the Passage of the Federal Defend Trade Secrets Act

trade secrets label on folder

The federal Defend Trade Secrets Act (DTSA), that has been subject of rigorous debate over the past few years, is just days away from becoming the law of the land. 

On April 4, 2016, the Senate passed the DTSA bill with a vote of 87-0 (S-1890). Yesterday, the House passed the bill by a vote of 410-2. The bill will now move to the White House, but given that the Obama Administration has already voiced strong support in its favor, it is expected that President Obama will sign the bill into law in the next several days. 

The DTSA amends the Economic Espionage Act of 1996 to create a federal civil remedy for stealing trade secrets.  Currently, trade secrets are governed by a patchwork of 50 state trade secrets statutes.  The DTSA will provide an additional uniform federal statute that trade secrets owners may use to protect themselves and fill the perceived gaps in the state statutes. 

One of the most salient features of the DTSA that has received a lot of attention is a provision that allows a plaintiff in a trade secrets lawsuit to obtain an ex parte seizure order “only in extraordinary circumstances” of the “property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.”  I foresee many litigants in the future arguing over what constitutes “extraordinary circumstances” that justify seizure of somebody’s phone, computer, or other property, in order to prevent further dissemination of trade secrets. 

Stay tuned for a detailed analysis of the statute once it becomes the law…

Leiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and has advised hundreds of clients regarding non-compete and trade secret issue. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at LDolghih@GodwinLaw.com or (214) 939-4458.

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