Trump’s Tax Reform Affects Settlements of Sexual Harassment Claims, But Training Remains the Best Answer

sexual harassmentJust days before we rang in 2018, in the wake of the #MeToo movement, the Tax Cuts and Jobs Act became the law, including the special clause titled “Denial of Deduction for Settlements Subject to Nondisclosure Agreements Paid in Connection with Sexual Harassment or Sexual Abuse.”

Prior to this statute, the law allowed companies to claim tax deductions for settlements of sexual harassment and abuse claims and for attorney’s fees incurred in defense of such claims, even if the settlement agreements were confidential, which they usually were. 

Now, if a settlement agreement prevents a harassment or abuse victim from publicly sharing details about the claim, then the company paying the settlement cannot deduct from taxable income the amount of the settlement or the attorney’s fees incurred in reaching the settlement agreement. 

However, while the title of the section declares a lofty goal, its implementation and the practical effect remain less than clear.  In particularly, the following questions remain:

  1. Where the settlement agreement settles more than just a sexual harassment or sexual abuse claim, can the company still claim the deduction?
  2. Will this law encourage the companies to segregate attorney’s fees between sexual harassment allegations and other types of discrimination or claims alleged by the settling employee?
  3. Will this law incentivize employees to add a sexual harassment/sexual abuse claim to other claims simply to put additional pressure on the company?
  4. Will this law drive the companies to misclassify the types of claims that are being settled or seek a general release of all employment claims (without specific mention of sexual harassment/abuse claim) in order to get the deduction?
  5. Will a general release of all claims against the employer result in its inability to get a deduction because sexual harassment and abuse claims are included in such a release?
  6. Will this law result in more companies attempting to litigate the sexual harassment / sexual abuse claims rather than reach settlement agreements, especially on those claims that are weak and/or not supported by evidence – the so-called “nuisance claims”?

This law goes into effect on January 1, 2018 and will not affect the 2017 taxes.  Until the implications of this statute come into focus, companies should consult with their attorneys regarding whether to include a non-disclosure provision in a settlement agreement if any claim of sexual harassment or sexual abuse was made by the claimant.

While the uncertainty of the answers to the above questions remains, the best course of action for companies is to keep investing into quality anti-discrimination and anti-harassment training so as to avoid the sexual harassment claims in the first place. 

Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice Her practice includes commercial, intellectual property and employment litigation.  You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108 or fill out the form below.

 

 

The Fifth Circuit Reminds that the Interactive Process Under ADA Is a Two-Way Street

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The Fifth Circuit recently found in favor of the City of Austin for firing a disabled employee because he did not attempt to perform his new lighter-duty job in good faith.  After the employee was injured on the job, the city offered him an administrative position as an accommodation because he could not perform manual labor required by his prior job.  

The employee accepted the new job, but began missing work, played computer games and surfed internet, slept on the job, made personal phone calls and applied for other positions within the city while at work.  He also refused to participate in any training that would have helped him perform his new job.  

After he was fired, he sued the city alleging discrimination based on disability and failure to provide him with reasonable accommodation. The Fifth Circuit found no discrimination and emphasized that “terminating an employee whose performance is unsatisfactory according to management’s business judgment is legitimate and nondiscriminatory as a matter of law.”  It further explained the boundaries of the interactive process between an employer and an employee who requests an accommodation for his disability.

Once an employee requests an accommodation based on a disability, the employer and employee must work together in good faith, back and forth, to find a reasonable accommodation. The process does not end with the first offer of accommodation but continues when the employee asks for a different accommodation or where the employer is aware that the initial accommodation is failing and further accommodation is needed. Thus, the process is a two-way street.  In this case, once the employee accepted an administrative position, he had to make an honest effort to learn and carry out the duties of his new job with the help of the training that his employer had offered to him. He certainly had an obligation not to engage in misconduct at work.   Once he had shown no desire to try to succeed in that position, the city had no duty to offer him another job. After all, the ADA provides a right to reasonable accommodation, not the employee’s preferred accommodation.

Takeaway: When an employee requests a reasonable accommodation due to disability, the employer must engage in an interactive process with that employee to determine what reasonable accommodation will help the employee perform his or her duties. Employers should always document the process so that they have proof of engaging in it in good faith.  Employees should also engage in the process in good faith, which means that if an accommodation is granted to them, they should try to take advantage of it. At the end of the day, an employer is required to provide reasonable accommodation, but not necessarily the accommodation requested by the employee.

Leiza is a business and employment attorney in Dallas, Texas. If you need assistance with a business or employment dispute contact Leiza for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.

 

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 Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.

Timing Isn’t Everything in a Pregnancy Discrimination Claim

pregnant-worker-375x250The Fifth Circuit Court of Appeals recently joined the Second, Sixth, and Tenth Circuits in holding that where an employer shows that it had legitimate non-discriminatory reasons for firing a pregnant employee (e.g., non-performance), a mere fact that the employee was fired shortly after telling her employer that she was pregnant, doesn’t defeat employer’s stated reasons for termination.

In this case, the employee had a documented history of poor work performance and multiple write ups. Two months after she told her supervisor  she was pregnant, she was terminated for poor performance.  The employee argued that poor performance was just a pretext, but that she was really fired for being pregnant. The employer argued that pregnancy had nothing to do with it and that it had legitimate non-discriminatory for firing the employee.  The employee claimed that another management-employee told her during a social lunch that she was fired for being pregnant, but the court excluded this evidence as hearsay.  So, the only evidence of pregnancy discrimination that the employee could point to was the timing of her termination, which happened shortly after she told the employer she was pregnant.  The Fifth Circuit found that this fact alone was not enough to establish that the employer’s stated reasons for termination were just a pretext. Thus, theemployee must have other additional evidence to support its pregnancy discrimination claim.

TAKEAWAY: Where an employer shows it had legitimate non-discriminatory reasons for firing a pregnant employee, the fact that the employee was fired shortly after telling her employer she was pregnant, without more, won’t be sufficient to establish that employer’s stated reasons for termination were a pretext.

Leiza Dolghih represents both COMPANIES and EMPLOYEES in employment litigation and arbitration proceedings.  If you are facing an actual or a potential employment dispute, contact Ms. Dolghih for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.

 

Steve Sarkisian Files Wrongful Termination Lawsuit Against USC Trojans; Claims Discrimination Based on Alcoholism

downloadIn early October, the University of Southern California fired Steve Sarkisian, its head football coach after an incident where he appeared drunk during a speech at a USC event. Copies of hotel and bar receipts allegedly showing Sarkisian’s alcohol consumption far exceeding the norm spread like a wildfire on the internet

Yesterday, Sarkisian admitted that he is an alcoholic in a lawsuit that he filed in California Superior Court.  He alleged that the university discriminated against him based on his disability (alcoholism), failed to engage with him in an interactive process to accommodate such disability, and retaliated against him for his request to accommodate his alcoholism. While Sarkisian’s claims are based on violations of California state law, the Americans with Disabilities Act (ADA) covers alcoholism as disability as well, so whether you are in California or any other state, here are the basics that you need to know about providing accommodations under the ADA to employees who are alcoholics:

  • Alcoholism is considered a disability under the Americans with Disabilities Act
  • Thus, just as with any other disabled employee, employers are required to provide accommodation to alcoholics who can perform the essential functions of the job with or without a reasonable accommodation, unless doing so would create undue hardship for the employer (e.g., allowing an employee flexible work schedule to attend AA meetings or attend a rehab facility);
  • According to the EEOC, “regardless of coverage under the ADA, an individual’s alcoholism or drug addiction cannot be used to shield the employee from the consequences of poor performance or conduct that result from these conditions”; 
  • Furthermore, “an employer will always be entitled to discipline an employee for poor performance or misconduct that result from alcoholism or drug addiction”;
  • Employers can prohibit the use of alcohol and drugs at work, but must apply that rule to all employees and not just alcoholics; 
  • Employers are no permitted to tell coworkers that an employee with a disability is receiving a reasonable accommodation.

Conclusion: While an employer may strictly (and uniformly) enforce a no-drug/no-alcohol policy in the workplace, when it comes to handling employees who are recovering or recovered alcoholics or drug addicts, employers may be required to allow them certain accommodations as prescribed in the Americans with Disabilities Act.

Leiza Dolghih represents both COMPANIES and EMPLOYEES in employment litigation and arbitration proceedings.  If you are facing an actual or a potential employment dispute, contact Ms. Dolghih for a confidential consultation at at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.

Where CEO Drinks and Sleeps with Employees, A Company Is Not Required to Allow Him to “Cure” His Behavior Before Termination

MadMencocktailsIn Duncan v. Woodlawn Manufacturing, Ltd.the company fired the CEO after he became intoxicated at a work dinner charged to a company credit card and asked a subordinate employee to kiss him. The CEO sued the company for breaching his employment agreement, which required a company to provide him with a 30-day written notice of a specific action so that he could cure, i.e. fix it, before terminating him.

During the litigation, the following facts came to light about the CEO:

  • He had a drinking problem, which his mother, who also worked for the company, helped him cover up;
  • He had sexual relations with multiple female company employees;
  • He hired a prostitute on a company business trip when he was a CEO;
  • He entertained company clients at a strip club;

At trial, the CEO argued that because the company did not provide him with a 30-day “notice and cure” period specified in the employment agreement, it could not terminate such agreement. In his defense, he also argued that his conduct occurred away from the workplace and was not precluded by his contract or company policy (i.e. no morals clause or fraternization policy), and it did not impair his work performance. In fact, the plant’s sales increased from 17 million to 22 million during his tenure as the CEO.

The Court of Appeals rejected Duncan’s arguments after finding that the evidence showed that giving Duncan a 30-day period to cure his behavior would have been futile, “and the law does not require the performance of a futile act.”  With respect to his alcohol problem, he had been counseled for it prior to his termination without success, and by his own admission, he did not recognize that he had a problem with alcohol until three months after his termination when he finally came to the conclusion that he was an alcoholic.  Thus, the Court of Appeals concluded that “[a] jury might have believed that a letter from the company would not have resulted in an earlier solution of this problem, i.e., would have been futile.

Similarly, with respect to Duncan’s sexual escapades with employees, even if he could have ended them upon the receipt of a written demand from his employer to do so, he could not cure the effect of the rampant rumors around the plant, undo the perception of the favoritism garnered by those who had sexual relations with him, or eliminate the possibility of a sexual harassment claim from the employee whom he had attempted to kiss at a company dinner. Furthermore, the company’s owners believed that his efforts to hide these issues from them “completely” broke their trust in him  and there was nothing he could do to cure his lack of integrity or breach of such trust.

Thus, the Court of Appeals concluded that Duncan’s employer did not breach the employment agreement by failing to give Duncan notice prior to his termination.

TAKEWAY: Many executive employment agreements have a detailed description of what constitutes a termination “for cause” and what notice and cure period an executive must be provided before he can be terminated.  Such provisions are often negotiated by both parties to the agreement, ensuring that should an executive fail to meet his or her performance goals, he or she is allowed a certain time period to improve the performance before being terminated.  Having a clear definition of “good cause,” any “notice and cure” steps the company must follow before termination an employees, and an unambiguous statement of exceptions to such provisions is key to avoiding an expensive wrongful termination lawsuit and bad publicity.

The Duncan v. Woodlawn Manufacturing, Ltd. opinion highlights a simple proposition that a breach of employer’s trust by a high-level executive who owes fiduciary duties to the company, simply cannot be cured.  The determination of whether a particular act by an executive rises to the level of an incurable breach of trust depends on the facts of each particular case. Thus, a company considering termination of an employee “for cause,” or an employee who is facing or has been terminated “for cause,” should consult with an employment attorney to determine the best course of action.

Leiza Dolghih represents both companies and employees in litigation and arbitration proceedings in state and federal courts.  If you are facing an actual or a potential employment dispute, contact Ms. Dolghih for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.

Is Sales Commission Part of an Employment Agreement? Make it Clear and Put it in Writing. This Goes for Employers and Employees.

moneyA recent case from the Houston Court of Appeals demonstrates how failing to document the exact terms of a sales commission arrangement can result in a loss of such commission for an employee and a costly legal dispute for an employer.

In Colter v. Amkin Technologies, the company hired Colter as a sales director to sell portable drilling rigs. His offer letter stated that he would get $4,000 a month salary and a commission, the structure of which would be determined at a later time.  The parties never drafted or executed a written agreement detailing the terms of the commission structure.

After Amkin terminated Colter’s employment citing his lack of productivity, Colter sued the company for breach of contract claiming that after he was hired, Amkin’s president orally agreed to pay Colter 3% commission on each sale he made.   Not surprisingly, the president denied making such a promise and testified that based on the commission arrangements made with other sales directors, he would have never offered Colter a guaranteed 3% commission.  Furthermore, the history of commission payments to Colter showed that he got 3% on some sales, but less than 3% or nothing on others.

At trial, the jury was presented with employer’s president’s testimony, employee’s testimony, and documents showing that the employee did not consistently receive 3% commission on each sale he made at Amkin. Based on this evidence, and lack of a written agreement, the jury found that Amkin never agreed to pay Colter 3% commission on each sale.

Colter appealed, claiming that the jury got it wrong and that their finding was not supported by the evidence, but the Court of Appeals affirmed the original judgment stating that the jury was fully within its rights to find Amkin’s president’s testimony more credible than Colter’s testimony that the parties had an oral agreement regarding the commission structure.

TAKEAWAY FOR EMPLOYEES: When entering into an employment agreement, make sure that all parts of your compensation are clearly spelled out in the agreement. Otherwise, you might end up in a situation where it’s your word against the word of your employer, and a jury of your peers will be deciding on who they believe more.  Furthermore, if you believe that you have an agreement, insist on employer complying with its terms.  Failure to insist that the employer pays you what you believe you are owed, can result in a waiver of your rights and significantly hurt your case down the road if you decide to take it to court.

TAKEAWAY FOR EMPLOYERS: Employers also have a direct interest in writing down the precise terms of the compensation. If Amkin here had a written agreement that stated that Colter’s commission was discretionary, Amkin could have probably avoided the lawsuit.  While it might be tempting to rely on an oral agreement when a working relationship is new and going well, remember that when things go sour between an employer and an employee, their memory of what the terms of the oral agreement are, may diverge significantly.

Leiza Dolghih litigates employment and business disputes. She advises employers and employees on how to minimize the risk of litigation before it occurs and pursues and defends their rights in courts and arbitration.  For more information, contact Ms. Dolghih for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.

Lunch Invitations Are Not Sexual Harassment – Says the Texas Supreme Court

lunchLast week, the Texas Supreme Court reversed a $1 million award to a former San Antonio Water System (SAWS) employee, who claimed that she was terminated because she confronted a male vice president about his repeated lunch invitations to two female employees outside his department. The Supreme Court in San Antonio Water System v. Nicholas, held that “no reasonable person could have believed” that the lunch invitations constituted sexual harassment in this case.

Under the Texas Commission on Human Rights Act (TCHRA), an employer may not retaliate against an employee who opposes a discriminatory action (such as sexual harassment), makes or files a charge, files a complaint, or testifies, assists, or participates in an investigation, proceeding, or hearing. Tex. Lab. Code §§ 21.051, 055(1).  However, the employee’s actions must be based on a good-faith reasonable belief that discrimination is taking place, even if a later investigation shows that no such discrimination actually occurred.

The question in this case was whether Nicholas’s belief that sexual harassment had occurred was a reasonable good-faith belief? If so, then firing her for complaining about the VP’s conduct would have been retaliation and would have violated the TCHRA.  However, if her belief that the lunch invitations constituted sexual harassment was not reasonable, then she was not entitled to damages under the statute.

The Supreme Court concluded that Nicholas’s belief that the lunch invitations equaled sexual harassment was not reasonable:

“Flores’s lunch invitations may have been unwelcome, but no reasonable person could believe they constituted sexual harassment actionable under the law. We do not mean to say that lunch invitations can never be a component of a viable sexual-harassment claim, but under the facts of this case the lunch invitations were not so severe or pervasive as to alter the conditions of employment or create an abusive work environment.”

The Court then compared the facts of this case to other instances where offensive but isolated conduct by employees was found to be insufficient to form the basis of good-faith reasonable belief that the law had been violated, and noted that this case “paled in comparison” to the following claims of sexual harassment that the Court had previously rejected:

  • a single incident of male employee reading aloud sexual innuendo contained in a psychological evaluation, at which he and another male employee chuckled, could not reasonably been seen as violating the law;
  • a single instance of male employee entering women’s restroom and “gawking” at undressed women could not create objectively reasonable belief that claimants suffered illegal sexual harassment;
  • a female employee could not reasonably believe she had been sexually harassed when male supervisor commented on her underwear being visible under her uniform;

The Court concluded that because Nicholas could not have reasonably believed that Flores’s lunch invitations constituted an unlawful employment practice, her retaliation claim against SWAS failed.

TAKEAWAY FOR EMPLOYERS: Sexual harassment claims, even those that are baseless, can cause significant business disruption, lower morale, and cost a lot in attorney’s fees. Having the following at your workplace can significantly reduce such claims: (1) sexual harassment training; (2) having a process that allows employees to report their complaints; (3) documenting the complaints and subsequent investigation properly; and (4) reacting to those complaints that have merit.

The above case went all the way to the Texas Supreme Court because the three key persons involved in the investigation – the CEO, the general counsel, and Nicholas – had different memories about what the female employees told them about the lunch invitations.  It is possible, that Nicholas’s claim could have been shut down much earlier if the investigation notes contained a uniform and consistent account of what occurred.

TAKEAWAY FOR EMPLOYEES:  To make out a statutory sexual-harassment claim, an employee must prove more than that she found the harassment offensive.  Sexual harassment is actionable only if it is so severe or pervasive as to alter the conditions of the victim’s employment and create an abusive working environment.  Offhand comments and isolated incidents, unless extremely serious, typically will not amount to discriminatory changes in the “terms, conditions, or privileges of employment.”

Leiza Dolghih frequently advises employers on how to handle troublesome employees, assists with responding to EEOC charges and investigations, and litigates employment disputes. For more information, Ms. Dolghih for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.

An Employee Claiming Unlawful Discharge Based on Religious Beliefs Must Show That the Management and not Coworkers Knew About Such Beliefs – Explains the Fifth Circuit

The Fifth Circuit Court of Appeals is notorious for being pro-business and pro-employer, and its last week’s ruling in Nobach v. Woodland Village Nursing Center, Inc., et al. does little to change that reputation.

In this case, Kelsey Nobach, a nursing home activities aide was discharged by Woodland Village Nursing Center after she refused to pray the Rosary with a resident, which was a regularly scheduled activity when requested.  She sued Woodland for violating Title VII of Civil Rights Act of 1964 by unlawfully discharging her because of her religion. The jury found in Nobach’s favor and awarded her $69,584 with $55,200 being for emotional distress and mental anguish, but the Fifth Circuit Court of Appeals reversed.

On September 19, 2009, a certified nurse assistant (“CNA”), a non-supervisory employee with no responsibilities over Nobach, told Nobach that a resident requested that the Rosary be read to her. Nobach told the CNA that she could not read it because it was against her religion.

The resident complained to management, and five days later, the Woodland’s activities director called Nobach into her office and told her she was fired for failing to assist a resident with a prayer.  She told Nobach: “I don’t care if it’s your fifth write-up or not. I would have fired you for this instance alone.” Nobach—for the first time—then informed the director that performing the Rosary was against her religion, stating: “Well, I can’t pray the Rosary. It’s against my religion.” The director’s response was: “I don’t care if it is against your religion or not. If you don’t do it, it’s insubordination.” After Nobach was fired, she explained that she was a former Jehovah’s Witness and still adhered to many of their beliefs.

The Court explained that Title VII makes it unlawful for an employer to discharge an individual “because of such individual’s . . . religion.” 42 U.S.C. § 2000e-2(a)(1). An employee may prove intentional discrimination “through either direct or circumstantial evidence.” Nobach argued that she offered direct evidence of Woodland’s discriminatory animus that motivated her discharge, which was evidenced by Woodland’s acknowledgement that she was fired for not praying the Rosary with the resident, and the Woodland’s director’s statement that she did not care if performing the Rosary was against Nobach’s religion, she still would have been fired because to refuse to perform the Rosary was insubordination.

The Fifth Circuit, however, found that Nobach failed to provide even one piece of evidence that showed that Nobach ever advised anyone involved in her discharge that praying the Rosary was against her religion. Nor did she claim that the CNA told any of Nobach’s supervisors that her refusal was based on her religion. The only time that Nobach actually advised her supervisor that her refusal to perform a job duty was motivated by her religious beliefs, was after she had already been discharged. As the Court said, “[i]n sum, she has offered no evidence that Woodland came to know of her bona-fide religious beliefs until after she was actually discharged.”

TAKEAWAY FOR EMPLOYEES:  When requesting a religious accommodation such as a deviation from a job duty that would violate their religious beliefs, employees must convey their request to their supervisors or the management and not just other coworkers.

TAKEAWAY FOR EMPLOYERS: When firing or letting go an employee, saying less is almost always better. It is possible that if the director who discharged Nobach used less inflammatory language instead of telling Nobach that she didn’t care if reading the Rosary was against her religion, Nobach would have been less likely to file a lawsuit. Firing an employee can get emotional, especially if there is a troubled history with the employee, however, it is important to remain cool and collected and not make any statements that the employee can later use as an ammunition to bring an unlawful discharge claim.

Leiza Dolghih frequently advises employers on how to handle troublesome employees, assists with responding to E.E.O.C. charges, and litigates employment disputes. For more information, e-mail Leiza.Dolghih@GodwinLewis.com.