Building a successful business usually takes a lot of hard work and time. An ill-timed lawsuit can cause significant damage to the business or even completely ruin it. Many lawsuits brought by disgruntled employees or rejected job applicants can result in double or triple damages under federal and state employment laws, thousands in attorneys fees, and can cause an irreparable damage to the business’ reputation. So why risk it?
In this post, I provide a quick reference list of the major Federal and Texas employment laws. Most of these statutes apply to all private employers, no matter the size or type of business; but some statutes apply only to businesses with a certain number of employees or volume of business.
As a business owner, knowing which laws apply to your company and complying with them can save you a lot of money.
Virtually all of the laws on this list also prohibit retaliation against employees who have complained about the violation of these statutes, filed a charge of discrimination, or participated in an employment investigation or lawsuit arising out of the violations.
During the last few years of tough economy, many companies have been tempted to save a penny by offering unpaid internships to the eager hoards of college graduates, who have often been forced to accept unpaid positions because of lack of paid work in their chosen field. While some of these unpaid positions offered true training and educational experience, others consisted entirely of menial tasks – ranging from stuffing envelopes and picking up dry cleaning to sanitizing door handles and sweeping bathrooms.
A publicized lawsuit by unpaid interns against the company that produced Black Swan and 500 Days of Summer filed in New York in 2011, began a rush of class and collective actions brought by interns under state and federal wage and hour laws. To avoid being part of this litigation trend, any company that offers unpaid internships in Texas needs to make sure that it complies with both federal and state wage and hour laws.
The Fair Labor Standard Act (FLSA) requires that an employer pays a minimum wage and overtime wages to anybody classified as its employee. The Department of Labor issued a Fact Sheet in 2010 describing six factors that are used to determine whether a worker should be qualified as an intern/trainee or an employee under the FLSA. If an employer offers an unpaid internship, it must make sure that the internship position meets the following criteria:
Texas does not have separate regulations at the state level regarding unpaid internships. Instead, the Texas Workforce Commission advises employers to adhere to the six-prong test established by the DOL. Additionally, the Commission has specifically clarified that the key fourth factor on the list – that an employer receive “no immediate advantage from the activities of the intern” – requires that an intern receive more benefits from the work then the employer.
Unpaid Internship Class Actions (examples of what has triggered litigation so far)
1. Glatt v. Fox Searchlight Pictures (NYSD, 2013) – interns “performed routine tasks that would otherwise have been performed by regular employees” such as obtaining documents for personnel files, picking up paychecks for coworkers, tracking and reconciling purchase orders and invoices, drafting cover letters, organizing filing cabinets, making photocopies, running errand, assembling office furniture, arranging travel plans, taking out trash, taking lunch orders, answering phones, watermarking scripts, and making deliveries. (held: the unpaid internship violated the FLSA).
2. Rabenswaay v. Kamali et al. (NYSD, 2013) – interns did photo retouching, photographed products, edited brand books, created visuals, signage, and labels, and other tasks requested by supervisors. The job involved no training (ongoing).
3. Ballinger et al. v. Advance Magazine Publishers (NYSD, 2013) – interns packed and unpacked accessories and jewelry, sorted through and organized accessories and jewelry, ran errands, filled out insurance forms, reviewed submissions, responded to emails, proofread, line-edited and relayed pieces between writers and editors (ongoing).
4. Bickerton v. Charles Rose (NY S. Ct. 2012) – interns performed background research for the show, escorted guests for interviews, assembled press packets, broke down the interview sets, and performed other productive tasks (settled for $250,000).
5. Wang v. Hearst Corporation (SDNY 2012) – interns coordinated pickups and deliveries of samples, provided on-site assistance at magazine photo shoots, managed reimbursement reports, etc. (dismissed due to lack of commonality).
CONCLUSION: In light of the rise of litigation related to unpaid internships, employers should modify their internship programs to comply with the DOL’s requirements described above. Although the above cases deal with the fashion and publishing industries, where unpaid internships have historically been the norm, the FLSA requirements apply to all industries and all businesses need to ensure that they are compliant.
Update (7/19): After running a quick search for unpaid internships on the local Craigslist, I have found a great example of a Marketing & Events Intern position advertisement that appears to violate the DOL requirements. In contrast, this unpaid internship for a Solutions Consultant seem to comply with the FLSA as long as they actually do offer the described training.
Update (7/25): And here is Dallas Observer advertising an unpaid Marketing Internship position with a description that on its face appears to violate the FLSA’s minimum wage requirements.
For more information, contact Leiza Dolghih.
On June 21, the Texas Supreme Court invalidated several state regulations related to home equity loans. The immediate effect of the Court’s ruling is that (1) the popular discount points offered by lenders will now be included in the calculation of the 3% cap on loan fees; and (2) borrowers will no longer be able to mail their consent to the place of closing or attend a closing through their attorney-in-fact. Both lenders and consumers need to be aware of the Court’s ruling in Finance Commission of Texas v. Norwood as it significantly changes the home equity lending rules.
The Background Regarding Home Equity Loans in Texas
Texas did not allow home equity loans until 1997 due to a historically strong protection of homestead in this state. Section 50 of the Texas Constitution regulates home equity loans and imposes strict requirements on lenders. Even an unintentional failure to comply with Section 50 can cause a lender to lose the right of forced sale of the homestead and forfeit the entire principal and interest on the home equity loan.
The Texas Finance Commission and the Texas Credit Union Commission (collectively “the Commissions”) have been authorized by the Legislature to issue regulatory interpretations of Section 50, which they have done over the years. In Norwood, the Supreme Court struck down some of their interpretations and the resulting rules.
3% Cap on Fees in Home Equity Loans
Pursuant to Section 50(a)(6)(E), home equity loan fees are capped at 3%, excluding interest. The Commissions defined “interest” the same way that Section 301.002(a)(4) of the Texas Finance Code defines it. The Supreme Court found that the definition was so broad that it would render the 3% cap meaningless and that Section 50(a)(6)(E) “interest” instead should be equal to “loan amount multiplied by the interest rate.” The Court further explained that “this narrower definition of interest does not limit the amount a lender can charge for a loan; it limits only what part of the total charge can be paid in front-end fees rather than interest over time.”
Practical Effect: Prior to Norwood, many lenders in Texas allowed borrowers to pay a lower interest rate if they pre-paid some of the interest during the closing. This points (or discounts points) system allowed a borrower to pay anywhere from 1 to 4 points – 1% to 4% of the loan principal – during the closing in exchange for receiving a lower interest rate on the loan. The lenders excluded these pre-paid points from the calculation of the 3% fee cap. The Norwood decision has changed that. Under the Supreme Court’s definition, the discount points are considered fees and not “interest” and must be included in the calculation of the fee cap. Moreover, some other charges that lenders have not been treating as interest might be now included in the 3% fee cap.
In the past two weeks, many lenders have increased their interest rates to account for the inclusion of discount points in the fee cap.
Closing the Loan Via a Power of Attorney
Section 50(a)(6)(N) provides that a loan may only be closed at the office of a lender, an attorney-at-law or a title company. The Commissions interpreted this provision to allow a borrower to mail a lender the required consent to having a lien placed on his homestead. The Supreme Court, however, held that “[e]xecuting the required consent or a power of attorney are part of the closing process and must occur only at one of the locations allowed by the constitutional provisions” – the office of the lender, an attorney, or a title company.
Practical Effect: Whereas prior to Norwood, a borrower could mail his consent and send his attorney-in-fact to the closing, now the borrower will have to appear at closing in person. Some title companies, however, have interpreted the Court’s ruling to allow them to accept a power of attorney or a mailed consent as long as a borrower provides additional evidence that the power of attorney was signed by the borrower at the office of the lender, an attorney, or a title company. Other title companies have refused to close home equity loans under a power of attorney at all. In light of the Court’s ruling, the title companies who continue to accept a power of attorney might be playing with fire since a finding that they have violated Section 50 by the Commissions might result in very harsh consequences.
Notice to the Borrower
Section 50(g) requires that a loan not be closed before the 12th day after the lender provides the borrower the prescribed home equity loan consumer disclosure notice. The Commissions interpreted this provision with a rebuttable presumption that notice is received, and therefore provided, three days after it is mailed. The Supreme Court upheld the interpretation as a reasonable procedure because it does not prevent the homeowner from insisting that the lender establish actual receipt of notice in each case.
For more information, contact Leiza Dolghih.
Earlier this week, in a rare move to strike down a federal law, the United States Supreme Court declared the Defense of Marriage Act (DOMA) invalid because it violated the Equal Protection and Due Process clauses of the United States Constitution. While the LGBT community has hailed the ruling in United States v. Windsor as a major victory, the Court’s decision will have very little, if any, effect on Texas (and 70% of the states that do not recognize same-sex marriages).
What is DOMA?
Bill Clinton reluctantly signed DOMA into law in 1996. The bill’s congressional sponsor – Don Nickles (R) – explained that DOMA’s purpose was to “to make explicit . . . that a marriage is the legal union of a man and a woman as husband and wife, and a spouse is a husband or wife of the opposite sex.” Thus, while the states remained free to recognize same-sex marriages, the federal government was choosing not to do so by passing this bill. According to the U.S. General Accounting Office, DOMA affected more than 1,138 federal statutes “in which marital status is a factor in determining or receiving benefits, rights, and privileges.”
The Court found that DOMA was unconstitutional because it violated “basic due process” principles and inflicted an “injury and indignity” of a kind that denied “an essential part of the liberty protected by the Fifth Amendment.” Justice Kennedy explained that the stated purpose of the law was to promote an “interest in protecting the traditional moral teachings reflected in heterosexual-only marriage laws” and its essence was to “interfer[e] with the equal dignity of same-sex marriages, a dignity conferred by the states in the exercise of their sovereign power.” Thus, DOMA ensured that if any state decided to recognize same-sex marriages, those unions will be treated as second-class marriages for purposes of federal law. In other words, DOMA wrote “inequality into the entire United States Code.”
Notably, the Court did not discuss what level of scrutiny should have applied to DOMA (rational vs. intermediate) under the Equal Protection Clause analysis, presumably, because it had already found a Due Process violation.
What Legal Impact Does the Court’s Decision Have in Texas?
The Supreme Court made it clear in Windsor that the federal government cannot deny benefits to those same-sex couples whom a state considers to be in a valid marriage. Texas, however, along with 70% of the states, does not recognize same-sex marriages. In 2005, Texas voters approved a proposition that amended the State Constitution (Art. I, Sec. 32) to define marriage as consisting “only of the union of one man and one woman. Moreover, Texas Family Code sec. 6.204(c) prohibits the state or any agency or political subdivision of the state from giving effect to same-sex marriages or civil unions performed in other jurisdictions. Thus, Windsor created no new rights or privileges for same-sex married couples that live in this state. They are still not entitled to any federal benefits under DOMA.
Although over the past several years, cities of San Antonio, Austin, Fort Worth, El Paso, and Dallas, Travis, and El Paso Counties, have independently passed their own rules providing health benefits for same-sex partners of their employees, Texas Attorney General, Greg Abbot, recently issued a legal opinion declaring such policies unconstitutional. He explained that if the Texas courts were to consider the constitutionality of such benefits, in his opinion, they would find that “Article I, section 32 of the Texas Constitution prohibits political subdivisions from creating a legal status of domestic partnership and recognizing that status by offering public benefits based upon it.” The cities and counties have responded by stating that they will continue to provide benefits to domestic partners.
Without a doubt, the fight for equality between same-sex and opposite-sex married couples, will continue in Texas in the near future, fueled by the Court’s decision in Windsor. Meanwhile, however, Texas will remain at status quo.
The Effect of DOMA in Those States That Recognize Same-Sex Marriages
If you end up moving from Texas to a state that recognizes same-sex marriages (Massachusetts, California, Connecticut, Iowa,Vermont, New Hampshire, New York, Maine, Maryland, Washington, Rhode Island, Delaware, Minnesota, and the District of Columbia), you can expect to receive a multitude of federal benefits that are not available in Texas, including:
1. Social Security Survivor Benefits – Partner widows and widowers will now be able to receive these benefits.
2. Immigration rights – U.S. citizens will now be able to sponsor United States residency for their partners.
3. Military Benefits – Military personnel will be able to obtain benefits for their partners, including health insurance, increased base and housing allowances, relocation assistance, and surviving spousal benefits. In fact, the Defense Department has already announced that it will immediately begin the process that will lead to providing benefits to spouses and children in same-sex marriages.
4. Federal Employees Benefits – Same sex married couples will now qualify for health insurance, pension protections, and dozens of other benefits the federal government provides to its employees and former employees and their families. You can find the whole list of them here. The Office of Personnel Management has already announced that it will be working closely with the Department of Justice to provide additional guidance to federal human resource officials and employees regarding the changes to come.
5. Federal Estate Taxes – Same sex married couples can now (1) file join income tax filings; (2) receive exemptions from federal estate taxes in the future; and (3) receive refunds for federal estate taxes already paid. 26 U.S.C 2056(a).
6. COBRA Spousal Health Benefits – employees’ partners will be eligible for the continued health insurance coverage under the employer’s group health plan. COBRA requires private employers with 20 or more employees to offer continued group coverage for a defined period to employees and their covered dependents under certain circumstances, including termination of employment and divorce.
7. Employer-Provided Health Benefits – Until now, the value of health benefits provided by employers to employees’ partners was treated as income and subject to federal income tax. This is no longer true.
8. Gift Tax – Same-sex couples will now be exempt from gift tax when transferring assets to each other. Under DOMA, any gift between same-sex spouses of more than $14,000 began adding up to a lifetime limit of $5.25 million — after which a 40% tax was assessed. They will no longer be subjected to this tax.
9. Hundreds of other benefits that until now have been available only to married couples of opposite sex and have been denied to same-sex married couples.
UPDATE (8/29/2013): On August 29, 2013, the U.S. Department of the Treasury and the Internal Revenue Service issued Revenue Ruling 2013-17, which states that a same-sex couple legally married in any jurisdiction will be recognized as spouses by the IRS for federal tax purposes even if the couple resides in a jurisdiction that does not recognize the validity of their marriage. This Ruling confirms, however, that unmarried domestic partners and civil union partners will not be recognized as married for federal tax purposes, whether the partners are the same or opposite sex.
UPDATE (9/27/2013): On September 18, 2013, the U.S. Department of Labor (DOL) issued a Technical Release No. 2013-04 that provides a guidance to employee benefit plans, plan sponsors, plan fiduciaries, and plan participants and beneficiaries on the definition of “spouse” and “marriage” under ERISA and the U.S. Supreme Court’s decision in United States v. Windsor. Consistent with the IRS Ruling, the Release defines “spouse” to include any individuals who are lawfully married under any state law, including individuals married to a person of the same sex who were legally married in a state that recognizes such marriages, but who are domiciled in a state that does not recognize such marriages. Similarly, the term “marriage” will be read to include a same-sex marriage that is legally recognized as a marriage under any state law.
For more information, contact Leiza Dolghih.
Last week, a unanimous U.S. Supreme Court held that human genes are not eligible for patenting and that patent claims to isolate genes from DNA are invalid.
WHY IS THIS A BIG DEAL? Because it prevents any one company from monopolizing testing for a particular gene mutation once they have discovered the gene, which is exactly what the defendant in Association for Molecular Pathology, et al. v. Myriad Genetics, Inc., et al. tried to do. The Court’s decision allows for a healthy competition between companies offering testing for genetic diseases. It also allows patients to obtain a second opinion regarding any genetic test results. If Myriad had prevailed, it would have been the only owner of the two genes it tried to patent and it would have paved the way for other companies to monopolize other genes that they had identified. The Supreme Court’s decision, therefore, is a great victory for all the people affected by hereditary conditions that require genetic testing.
In this case, the defendant, Myriad, discovered the precise location and sequence of two genes related to breast and ovarian cancer – BRCA1 and BRCA2. Using this discovery, it developed a battery of tests for detecting mutations in these genes in a particular patient and assessing the patient’s cancer risk. Myriad then filed several patent applications, which, if valid, would allow it to have an exclusive right to (1) isolate the BRCA1 and BRCA2 genes and (2) test them for mutations. Other laboratories offering genetic testing either had to abstain from testing for BRCA1 and BRCA2 because of Myriad’s patents or received cease and desist letters threatening litigation if they did not stop the testing of these two genes. The above lawsuit was filed seeking a declaration that Myriad’s patents were invalid under 35 U.S.C. §101. After percolating through the courts, the case ended up before the U.S. Supreme Court.
Section 101 of the U.S Patent Act provides: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” The U.S. Supreme Court has previously made it clear in Mayo Collaborative Services v. Medical Laboratories, et al., that “[l]aws of nature, natural phenomena, and abstract ideas are not patentable.”
Myriad admitted that it did not create or alter any genetic information encoded in BRCA1 and BRCA2. Nor did it create or alter the genetic structure of DNA. It’s sole contribution was uncovering the precise location and genetic sequence of the BRCA1 and BRCA2. The U.S. Supreme Court concluded that unaltered human DNA was a product of nature and could not be patented by Myriad. Moreover, the genes and the information they encoded are not patent eligible under §101 simply because they have been isolated from the surrounding genetic material.
The Court, however, clarified, that DNA that has been scientifically altered or modified and that is not naturally occurring can be patented. Specifically, Myriad’s patents for cDNA – a string of DNA where nucleotides that do not code for amino acids have been removed by a lab technician – were patent eligible because they were not a “product of nature.” The Court’s decision does not affect the companies’ ability to seek patents for methods of use of isolated DNA, manipulation of DNA or testing for gene mutations, and ends up striking the important balance between “creating incentives that lead to creation, invention and discovery” and “impeding the flow of information that might permit or spur invention.”
For more information, contact Leiza Dolghih.
Seems like a no-brainer, right? Well, a Texas District Court judge did not think so, so the Fifth Circuit Court of Appeals had to step in and set him straight in Equal Employment Opportunity Commission v. Houston Funding II, Ltd.
Back in February 2012, a Texas federal judge held that a woman who claimed that she was fired for seeking to use a breast pump at work had no viable claim under Title VII‘s prohibition against discrimination based upon pregnancy, childbirth or a related medical condition. He dismissed her claims on summary judgment stating that “lactation is not pregnancy, childbirth, or a related medical condition,” therefore, “firing someone because of lactation or breast-pumping is not discrimination.” Needless to say, the opinion caused an uproar and resulted in the Equal Employment Opportunity Commission (“EEOC”) filing an appeal with the Fifth Circuit.
The EEOC explained that “lactation discrimination” violates Title VII of the Civil Rights Act of 1964 (“Title VII”) as amended by the Pregnancy Discrimination Act (“PDA”) because lactation is a medical condition related to pregnancy. Furthermore, the disparate treatment on the basis of breastfeeding, an inherently female function, constitutes “the essence of sex discrimination” under Title VII. As stated in the EEOC’s appellate brief, “[l]actation is a female-specific function. Thus, firing a female worker because she is lactating (i.e., producing and/or expressing breast milk) imposes a burden on that female worker that a comparable male employee simply could never suffer. That is the essence of sex discrimination.”
The Fifth Circuit agreed with the EEOC and explained that a dismissal of a female employee motivated by the fact that she is lactating “clearly imposes upon women a burden that male employees need not – indeed, could not – suffer.” The Court held that “lactation is a related medication condition to pregnancy for purposes of the PDA,” and thus, cannot be used as a reason to fire or discriminate against an employee.
Additional Protections for Breastfeeding Mothers in Workplace
The Patient Protection and Affordable Care Act (“Affordable Care Act”), which amended Section 7 of the Fair Labor Standards Act (“FLSA”), requires employers to provide reasonable break time for employees to express breast milk for nursing children for one year after a child’s birth. The Act also requires employers “to provide a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which can be used by employees to express breast milk.” More details about this requirements can be found at the Department of Labor website here.
Texas does not have a similar statute. However, Texas Health Code §165.002 (1995) authorizes a woman to breastfeed her child in any location, which would include a work place, and Texas Health Code §165.003 et seq. provide for the use of a “mother-friendly” designation for businesses who have policies supporting worksite breastfeeding. (HB 340) The law provides for a worksite breastfeeding demonstration project and requires the Department of Health to develop recommendations supporting worksite breastfeeding (HB 359), which can be found at www.texasmotherfriendly.org.
Finally, the EEOC provides its Caregiver Best Practices Guidance (2011) for employers, in which it explains what employers can do above and beyond what is required by federal law in order to avoid discrimination claims and create a productive work environment.
BOTTOM LINE: In the day and age when women make up 46.9% of the total labor force, and 51.5% of management, professional, and related positions, and when 55.8% of all mothers with children under the age of 1 are in the labor force, employers can no longer afford to ignore pregnancy-related issues in the workplace and need to familiarize themselves with the relevant law or face unpleasant consequences.
For more information, contact Leiza Dolghih.
It is no secret that many Texas businesses employ Spanish-speaking employees. It is also no secret that many businesses in Texas require their employees to sign arbitration agreements, in which employees agree to arbitrate any disputes with their employers. What happens when an employee who only speaks Spanish is asked to sign an arbitration agreement in English? The Eighth Court of Appeals of Texas ruled that such agreement, when not explained to the employee, is unconscionable.
In Delfingen US-Texas, L.P. v. Guadalupe Valenzuela, Guadalupe Valenzuela was hired to work for Delfingen in El Paso, Texas. Following a company orientation that was conducted entirely in Spanish, Valenzuela signed a number of documents that were written in English including a “Dispute Resolution and Arbitration Policy and Agreement.” The agreement included a clause that required all disputes related to Valenzuela’s employment be submitted to binding arbitration.
After Valenzuela was terminated, she filed a lawsuit against Delfingen for wrongful termination. Delfingen then filed a motion to compel arbitration based on the agreement Valenzuela signed during the orientation. Valenzuela argued against arbitration by stating the agreement was “procedurally unconscionable” and said she was rushed to sign the agreement despite that it was written in English. She also alleged that the agreement was not fully explained to her. Delfingen challenged Valenzuela’s assertions and argued that her inability to read English did not invalidate the agreement. Following an evidentiary hearing, the district court found that Delfingen did not explain the agreement to Valenzuela and denied Delfingen’s motion to compel arbitration. The company then filed an interlocutory appeal.
On appeal, Valenzuela argued that the agreement was procedurally unconscionable because: (1) she was unable to read English and Delfingen failed to provide a Spanish translation or explain the agreement to her in Spanish; and (2) Delfingen affirmatively misrepresented the nature of the arbitration agreement. Because of the district court’s finding that Delfingen had not explained the agreement to Valenzuela at the orientation and because of Delfingen’s stipulation that Valenzuela spoke no English, the Court of Appeals found that the arbitration agreement was procedurally unconscionable.
In contrast, in a case involving a similar issue and decided by another Court of Appeals, the court found that an arbitration agreement was enforceable when a Spanish version of the agreement was provided to employees by their employer. See Superbug Operating Co., Inc. v. Sanchez (First Court of Appeals, 2013).
THE MORAL OF THE STORY? If you have Spanish-speaking employees, make sure that the translated versions of any agreements that they sign are available to them, to thwart any arguments of procedural unconscionability.
For more information, contact Leiza Dolghih.
In 2011, the Texas legislature passed the Texas Citizens Participation Act (TCPA), meant to curtail the Strategic Lawsuits Against Public Participation (SLAPP) often filed by businesses or other moneyed interests in retaliation for negative comments or complaints made by regular citizens. The goal of SLAPP lawsuits is not necessarily to win, but to force the defendants to withdraw their statements and to silence them under the threat of costly litigation.
The TCPA protects Texans’ right to free speech by allowing defendants sued for defamation, business disparagement, or other speech-related torts to quickly dismiss lawsuits before the costly discovery begins and automatically recover legal fees if they succeed. By passing the TCPA, Texas joined 27 other states that have similar statutes.
Last week, the First Court of Appeals applied the TCPA to dismiss a lawsuit brought by an assisted living facility against a newspaper that published a number of articles discussing regulatory compliance problems and government investigations into the facility. Newspaper Holdings, Inc. et al. v. Crazy Hotel Assisted Living, Ltd., et al., provides a great example of when and how the TCPA applies. See also Better Business Bureau of Metropolitan Dallas, Inc. v. Ward and Better Business Bureau of Metropolitan Dallas, Inc. v. BH DFW, Inc. discussing how negative ratings of businesses are protected by the TCPA.
In this case, the defendant newspaper published a number of articles about problems encountered at Crazy Hotel assisted living facility and the ensuing government investigations of such problems. Crazy Hotel filed a lawsuit for defamation, business disparagement and tortious interference against the newspaper and its source. The defendants filed a motion to dismiss the lawsuit, invoking their free speech rights under the TCPA. The trial court denied the motion to dismiss, but the First Court of Appeals reversed and remanded the case for dismissal.
The Court of Appeals explained that the purpose of the TCPA is to “encourage and safeguard the constitutional rights of persons to petition, speak freely, associate freely, and otherwise participate in government to the maximum extent permitted by law and, at the same time, protect the rights of persons to file meritorious lawsuits for demonstrable injury” and the TCPA was to be construed liberally to effectuate its purpose and intent fully. §§27.002, 011(b).
Motion to Dismiss Standard under the TCPA
In order to dismiss the lawsuit under the TCPA, the court must find that (1) the defendant has established by preponderance of evidence that the legal action is based on, related to, or is in response to the defendant’s exercise of the right of free speech, the right to petition, or the right of association; AND (2) the plaintiff has failed to show by clear and specific evidence a prima facie case for each essential element of its cause of action(s). TCPA §27.005(b), (c).
The TCPA defines “the exercise of the right of free speech” as “a communication made in connection with a matter of public concern,” which includes, among other things, issues related to “health and safety,” and “environmental, economic, or community well-being.” TCPA §27.001(7) (A), (B). Here, because the newspaper articles that gave grounds to the lawsuit related directly to Crazy Hotel’s obligations to fulfill the licensing requirements and standards applicable to the assisted living facilities under the Texas Health & Safety Code, the Court of Appeals found that they related to a matter of public concern.
The Court of Appeals also found that Crazy Hotel failed to introduce clear and specific evidence that any of the statements made in the newspaper articles were false or that the newspaper was negligent in making such statements, thus failing to show prima facie evidence in support of its claims.
Commercial Speech Exemption from the TCPA
Crazy Hotel argued that the TCPA did not apply to the statement made by the newspaper because it was a commercial and not non-profit organization and because the statements constituted commercial speech not protected by the TCPA. TCPA §27.001(b). The Court of Appeals, however, found that because the articles did not “arise out of the sale of lease” of newspapers, the commercial speech exemption did not apply, and to interpret the statute otherwise would defeat the purpose of the TCPA.
If you are facing a defamation, business disparagement, or tortious interference lawsuit, or if you are considering filing one, make sure you consider how the TCPA will affect the claims. As a general rule, any statements regarding matters of public concern are likely to be protected under the TCPA. On the other hand, statements made in connection with the sale or lease of goods, services, or an insurance product or a commercial transaction intended for potential buyers or customers are not protected. A claim that the TCPA applies will necessarily lead to compliance with strict procedural requirements set out by the statute.
For more information, contact Leiza Dolghih.
In the past two weeks, both the United States Supreme Court and the Fifth Circuit Court of Appeals have rendered decisions that will add roadblocks to certain employee lawsuits. Last week, the Supreme Court decided Genesis Healthcare v. Symczyk, which I have previously identified as a case to watch in 2013 (here).
In Genesis Healthcare v. Symczyk, the Court held that when an employee brings a collective action under the Fair Labor Standards Act (FLSA) against an employer, and the employer makes an offer of judgment to the employee under Federal Rule of Civil Procedure 68 prior to class certification, if such offer fully settles the employee’s individual claim, the collective action becomes moot as well.
In this case, Symczyk, a nurse, brought a collective action on behalf of herself and “other employees similarly situated” and alleged that the medical center violated the FLSA by automatically deducting 30 minutes of time worked per shift for meal breaks for certain employees, even when the employees performed compensable work during those breaks. When Genesis Healthcare answered the complaint, they simultaneously served upon Symczyk an offer of judgment under Rule 68.
The District Court found that this offer of $7,500 provided Symczyk a complete relief on her individual damages claim, and, since no other individuals had joined her lawsuit, the case was rendered moot. The Third Circuit Court of Appeals reversed the District Court and held that while the individual claim had become moot, the collective action had not. The Court explained that allowing defendant employers to “pick off ” named plaintiffs with strategic Rule 68 offers before class certification, would frustrate the goals of collective action under the FLSA.
The Supreme Court, however, reversed the Third Circuit Court of Appeals and found that where a judgment offer under Rule 68 completely satisfies the named employee’s individual claim, and the class has not yet been certified, both the individual claim and the collective actions are rendered moot.
HOW WILL THIS AFFECT EMPLOYERS AND EMPLOYEES?
Now, anytime an employee brings a collective action under the FLSA against an employer, all the employer has to do to get the collective action dismissed, is to make a Rule 68 judgment offer prior to the class certification, and the collective action will be mooted, if the district court finds that the amount of the judgment offer fully satisfies such employee’s individual claim. Note, however, that the federal circuit courts are split about the question the Supreme Court did not decide: whether an unaccepted offer of judgment moots the named plaintiff’s FLSA claim (and thus the collective claim). The four dissenting members of the Court said “no.” The Rule 68 offer strategy will work only in those judicial circuits that find an unaccepted offer of judgment to moot the claim.
The Court’s decision makes it more difficult for employees to bring the FLSA collective actions because they are now forced – prior to class certification – to either identify a sufficient number of class members or claim a sufficiently large amount of damages so that the employer is not willing to make a Rule 68 offer or the employer’s offer is not large enough to satisfy all the individual claims.
The Court specifically pointed out that the judgment offers under Rule 68 might not work in class actions governed by Federal Rule of Civil Procedure 23. Thus, employees might want to try to bring lawsuits that allege both a collective action under FLSA as well as Rule 23 class actions, or bring only state-law claims as class actions.
It will be interesting to see if, as a result of this decision, the Congress attempts to amend the FLSA to close the loophole created by Rule 68 offers that many employers are now sure to use to dismiss collective actions brought under the FLSA.
For more information, contact Leiza Dolghih.
In a long-awaited decision in Strickland v. Medlen, the Texas Supreme Court ruled that pet owners can be compensated only for their animal’s market worth – not their sentimental value – even when a pet’s death is caused by somebody’s negligence. So, for those owners who have adopted no-breed mutts, such market value might be less than the cost of a new cellphone.
The facts of Strickland, much publicized in the media, were such: the Medlens’ dog, Avery, escaped from their backyard and was picked up by animal control. The Medlens went to the animal shelter to retrieve Avery, but did not have enough money to pay the fees. They were told to return a week later and a “hold for owner” tag was placed on Avery’s cage. Several days after the tag was placed, Carla Strickland, a shelter employee, put Avery on the list of dogs to be euthanized and he was put down. When the Medlens returned for their dog, they learned of his unfortunate fate. The Medlens then sued Strickland for negligence, claiming damages to compensate them for the unique sentimental or intrinsic value that Avery had.
Texas has long recognized that dogs are considered personal property. Typically, you cannot recover emotional damages for destruction of personal property – only the market value. However, where personal property is one-of-a-kind or irreplaceable and carries with it a sentimental value (e.g., old family photographs or heirlooms that have little market value), the damages for the destruction of such property might take into consideration the “feelings of the owner.” The Medlens argued that this body of law allowed them to recover sentimental value associated with their dog. The trial court rejected their argument, but was reversed by the Second District Court of Appeals. Strickland appealed.
On appeal to the Texas Supreme Court, the Texas Veterinary Medical Association, submitted an amicus curiae brief to the Court arguing that “awarding sentimental damages for the death of an animal may ultimately harm pets by driving up the basics costs of pet ownership placing it out of reach for some.” Additionally, Texas Municipal League, Texas City Attorneys Association, and City of Arlington submitted a joint amici curiae brief arguing that recognizing sentimental value damages arising out of pets’ deaths would elevate the duties of parties who deal (voluntarily and involuntarily) with other people’s pets, and the associated costs will be passed on to taxpayers and pet owners. American Kennel Club, Cat Fanciers’ Association, Animal Health Institute, American Veterinary Medical Association, National Animal Interest Alliance, American Pet Products Association, and Pet Industry Joint Advisory Council also filed a joint amici curiae brief arguing against allowing emotion-based damages for pet deaths because of the impact it would have on the costs associated with pet care. Even Texas Civil Justice League, a non-profit association of Texas businesses, health care providers, and professional and trade associations, chimed in with its own amicus brief reiterating the same arguments.
After considering the Medlens’ and Strickland’s arguments, as well as the amici curiae briefs, the Texas Supreme Court reversed the Court of Appeals and held that non-economic damages rooted solely in an owner’s subjective feelings about the dog were NOT allowed under Texas law.
The Court noted that while “losing man’s best friend is undoubtfully sorrowful,” dog owners cannot recover emotion-based damages for their loss even when their companions are negligently killed.
WHAT DOES THIS MEAN for DOG OWNERS: If your beloved Buddy runs away from the dog daycare and gets run over by a car because an employee forgot to lock the door, or your vet prescribes Buddy a wrong medication that causes his death or he botches Buddy’s surgery, or (insert a multitude of negligent pet care scenarios, including the one in Strickland), all you can recover as the pet owner is the market value of your dog.
If it’s a pure-bread and you have a receipt for his/her purchase, you can probably recover the purchase cost. If it’s a trained dog that provides certain services, you can probably recover the value of such services. However, if it’s “just” a family mutt, with no recognized pedigree or special skills valued in the market, you might be getting next to nothing in damages from a pet care provider, even if s/he were found negligent.
WHAT DOES IT MEAN for PET CARE FACILITIES. The law remains at status quo. Nothing will change until Texas passes a statute akin to the wrongful death statute that allows people to recover emotional damages for deaths of their immediate relatives. Given the amount of amici curiae briefs filed in this case and the lobby interests of the pet care industry, a passage of such statute in the near future is highly unlikely.
For more information, contact Leiza Dolghih.