Thursday, October 18, 2012

Texas Employment Law Basics for Employers: Employee Discipline

Employers face the unenviable task of determining when and how to discipline employees for violations of the company’s policies or federal/state laws. Inevitably, the employer must consider whether taking disciplinary action will result in a claim by the employee of discrimination, harassment or other legal claims.

As an employer, you will never be “bulletproof.” But there are a few things that you can do to help minimize risk and maximize your defense when you must take appropriate disciplinary action.

First, make sure that you have communicated your policies and procedures to your employees in writing, preferably with a signed acknowledgment of receipt by each employee.  This should include your workplace rules and expectations concerning attendance, safety, employee conduct, and how you will address theft or other violations of criminal law, violations of non-discrimination and anti-harassment laws, and violations of workplace rules.

A progressive disciplinary policy is recommended, with a range of discretionary measures from an oral or written warning to immediate termination depending on the gravity of the violation. But if you do implement such a policy, be aware that you must BE CONSISTENT. No exceptions or exemptions for your favored or star employee should be allowed without a compelling and urgent (and reasonable) business necessity.

Make sure that the employee knows what your next step will be if the violations continue.

When you decide to take disciplinary action - document, document, document. Conduct an impartial investigation, obtain written statements from witnesses, make notes to the personnel file, and have the employee sign the warning or other disciplinary action.

Don’t act in haste or while emotions are running high. Take some time for reflection and consider all of the options available to you before deciding on a course of action.

When in doubt, run your proposed disciplinary action past another person. If you cannot articulate a neutral and compelling argument for taking that action, under these circumstances, you may wish to consider another alternative.

By: Cynthia W. Veidt,

Monday, October 1, 2012

Texas Law Basics for Employers: General Recordkeeping Requirements

What records should Texas employers keep in an employee’s human resources file? And for how long should you keep them?

Each employee should have a separate human resources file which contains, as a general rule of thumb:

  • their job application / resume, 
  • any background checks or test results that are related to their job duties (see our previous blog post on this topic), 
  • a description of their essential job duties and functions, 
  • their I-9 form with copies of accompanying identification documents proving eligibility for employment, 
  • any offer letters or contracts detailing their compensation structure, 
  • signed acknowledgement forms for any company policies and procedures and/or employee handbook, 
  • their W-4 form, 
  • any applications for benefit programs offered to your employee, 
  • records reflecting the hours worked each week by that employee, as well as all paid holidays and all leave or vacation time (paid or unpaid) used by that employee (see separate blog post on FLSA requirements for calculation of overtime pay due to non-exempt employees), 
  • performance evaluations, 
  • disciplinary actions, and 
  • payroll records.

Federal and Texas state laws require that you maintain many of these records for at least two, and sometimes three years.  However, because the statute of limitation for many employment-related claims can be four years from the date of an incident, you may wish to maintain these records for a five-year period. 

Monday, August 27, 2012

Texas Employment Law Basics for Employers: Avoiding Illegal Workers

You will be required to complete an I-9 form and other state-approved forms to report each new employee in Texas’ “new hire directory” (maintained by the Texas Workforce Commission) within twenty (20) days of that employee’s start date. This process will help ensure that your employees are eligible to work in the U.S., and is also used to track and collect social security, federal income taxes and other government-authorized deductions from that employee’s paychecks.

The confirmation process is usually pretty straightforward, but issues sometimes occur. For example, you’ve hired a new employee, but he or she refuses to disclose their social security number or claims not to have one. What should you, the new employer, do in this situation?

According to the U.S. Department of Homeland Security, you cannot legally require that the employee disclose their social security number (SSN). Although a social security card is the most common method of demonstrating that the employee is eligible to work in the United States, it is not the only method for proving eligibility.

This causes some problems for the new employer in Texas. You will be required to complete a “new hire” report form on which you must provide the employee’s SSN. Although there is little guidance from the various federal and state agencies, it appears that you may be able to avoid compliance issues by submitting an affidavit stating that the employee does not have an SSN or refuses to provide it.

You and the employee should each complete a Form P-1 (a privately-prepared form captioned the “Reasonable Cause Affidavit by Payor for Not Obtaining Payee’s Identifying Number”) which you can find via a quick internet search. Refusal by the employee to complete this form, in addition to his or her refusal to provide an SSN, may be grounds for termination. In addition, courts have stated that an employer is not required to hire someone who refuses to provide an SSN on his or her job application.

If this situation occurs, please consult with someone well versed in employment law to determine what rights and obligations/liabilities you may have as the new employer.

By: Cynthia W. Veidt, attorney

Wednesday, August 1, 2012

Texas Employment Law Basics for Employers: Hiring – Employees or Independent Contractors?

Many employers would prefer to consider their workers to be “independent contractors” rather than “employees.” Using independent contractors reduces payroll taxes and tax reporting requirements, provides some measure of insulation from potential liability, and eliminates the need to provide employee benefits. However, you should be very careful; simply calling someone an “independent contractor” will not protect you from potential liability. 

With increasing frequency, employers have found themselves on the wrong end of an investigation by state or federal agencies which determined that their workers do not meet the legal test to be considered independent contractors. Those employers must pay back taxes, penalties, and interest related to their newly-designated employees.

There is a test with about twenty (20) factors used by the government and Texas courts when determining whether someone is an independent contractor. It’s a very fact-specific analysis, in other words – it depends on each individual situation. But in general, a true “independent contractor” works independently of the employer’s control, and is usually able to work for more than one employer at any given time. If you dictate when, where and how the work is to be performed, you set the hours of work, you require full-time devotion to your business, and the worker has no ability to work for others in the same field of competition, you probably have an “employee.” 

By: Cynthia W. Veidt, Attorney

Tuesday, July 17, 2012

Texas Employment Law Basics for Employers

Let's say you’ve started a business in Austin and it has now grown to the point where you need to employ someone other than yourself or your immediate family.  Congratulations!

But now you have to think like an “employer.”  That means you need to familiarize yourself with at least some basic employment law and human resource management principles.  In this blog, we’ll periodically post topics that can help guide you, but here are a few initial considerations:

Hiring – Employees or Independent Contractors?
Salary – Who is Eligible for Overtime Pay?
Job Applications – What Can I Ask, and What Should I Avoid?
Avoiding Illegal Workers
General Recordkeeping Requirements
Employee Discipline
Firing / Terminating Employees – Creating a Paper Trail
Avoiding a Discrimination Claim
Avoiding a Retaliation Claim
How to Handle an Unemployment Claim

Most employers have a pretty good handle on the day to day operation of their business once armed with basic information.  When in doubt, if something feels “wrong” on a gut level, it’s always a good idea to check with someone well-versed in employment law before taking any action which you may later regret.

ADA and the Online World

Excellent post on our friend Ryan Garcia's Social Media Law Blog (SoMeLaw Thoughts ) about the intersection of the Americans with Disabilities Act and online commercial websites.  In particular, there is a lawsuit by an organization (National Association of the Deaf) wanting the court to order Netflix to offer closed captioning for movies on their streaming site.  Excellent history of the regulations related to closed captioning is provided, and it is worth the read.  It is written by Curtis Edmonds, an attorney and writer from New Jersey well versed on the topic.

Thursday, July 5, 2012

Locating Lease Space for your Business in Texas: Things to Consider when searching for Commercial Lease Space

When searching for commercial lease space there many things to take into consideration such as, just to name a few, expenses, the lease term, parking and permitted uses and restrictions.

The total monthly cost of the lease is usually the primary concern for tenants and is determined by the type of lease you agree to.  There are two main types of leases – gross leases and triple net leases. Under a gross lease the tenant pays a set amount specified in the lease agreement while the landlord pays for all of the operating costs.  Under a triple net lease the tenant pays the set amount specified in the lease agreement plus its pro rata share of the operating expenses, which may include repair costs, insurance premiums, taxes, and utilities.  It is important for the tenant to determine up front what the anticipated expenses will be and understand that expenses could increase for various reasons such as maintenance issues or increases in taxes or utility rates.  There are also ‘hybrid’ leases that combine elements of the gross and triple net lease.

Many commercial leases will contain a personal guaranty, which means that the individuals signing the lease are also agreeing to be personally liable for all amounts due under the lease agreement.  Even though your business entity is the tenant, you will be personally responsible for the rent as well.  Some landlords may negotiate with prospective tenants if they can show a good rental history or are willing to put up collateral.

Most commercial lease space will need to be altered in some way to meet your needs, or in other words, the space will need to be “finished-out.”  The cost of finish-out may be paid by the landlord, may be the tenant’s sole responsibility, or the landlord may provide the tenant with a budget, and any extras will be charged to the tenant.  It is also important to determine whether the landlord requires that you use certain contractors for finish-out.

Other concerns will depend on the type of business you intend to operate.  Prospective tenants need to ensure there are no restrictions against operating their type of business, and they may want to ask the landlord for a restriction against other businesses similar to yours in the future to prevent competition from moving in next door.  You may need reserved parking or a sign; prospective tenants should determine in advance what they will need to operate their business and ensure the landlord will address these issues.

While commercial leases can be long and confusing, it is important to read and fully understand the lease agreement to ensure the space will meet your business needs and to prevent problems for years to come.

Prepared by Eric Rupe.  Edited by Sarah Berry, Attorney

Wednesday, June 27, 2012

Contract Cases Fare Better Than Torts Claims in Texas Appeals

Given the nature of tort reform laws in Texas, it is not surprising to find that cases on appeal related to contract disputes fared much better than cases based on tort claims.  During the Sept. 2010 to Aug. 2011 time frame, Texas Courts of Appeal reversed almost half of the lower court’s judgments based on tort claims (49%) versus a reversal rate of only one third (32%) in contract disputes.

Although this may seem like a fairly small variance, it is actually more significant than it appears at first blush. Due to enactment of Texas’ tort reform laws, the total number of tort claims has dropped significantly, as plaintiff’s counsel now choose to take more compelling cases to court. The Office of Court Administration in Texas has reported a 12% drop in the number of “injury or damage” cases filed from 2002 to 2010. So even the “better” tort claims have even odds of being reversed on appeal.

In summary, creditors should take extra pains to obtain signed agreements documenting the terms of the deal and should include a contract-based claim whenever possible. 

Source: Liberato & Rutter, “Reasons for Reversal in the Texas Courts of Appeal,” 48 Hous. L. Rev. 993 (2012).

Wednesday, June 20, 2012

What is the registered office?

The address listed for the Registered Agent is referred to as the “registered office.”  The registered office need not be a place of business for the entity.  Generally speaking, the registered agent must be capable of being served at the registered office.  For organizations serving as the registered agent, Texas law states explicitly that there must be an employee on hand during normal business hours in order to receive any process, notice or demand that is sent to the organization.  While the statute does not impose the same explicit requirements on a person serving as the registered agent, Texas law nevertheless imposes a general requirement that the registered office be a “street address where process may be personally served on the registered agent” (See Texas Business Organizations Code Section 5.201(c)(1)).

Post by Iain A. Berry, Attorney