Legal Briefs

Happy New Year and welcome to Legal Briefs for HR! This email update on issues that matter to employers is sent as a service of the SHRM Texas State Council, which I serve as Co-Director of Legislative Action. Feel free to forward this to anyone who might benefit . . . all are welcome to join this FREE service with over 2700 subscribers.

Here’s the scoop, to get your new year started on the right foot:

1. Hup Two Three Four – The U.S. Dep’t of Labor released final regulations interpreting the military leave law, USERRA, and an amended notice of rights poster for employers to display and/or distribute to their employees. While it’s worth a complete read by anyone who’s responsible for administering military leaves, a few gems contained within the rule are [1] confirmation that supervisors may be personally liable for violations of the law; [2] clarification that third-party administrators who provide more than mere ministerial services to employers are, themselves, employers and subject to USERRA liability; and [3] pre-employment inquiries into applicants’ military status “may constitute evidence of unlawful discrimination.” For a copy of the final reg and the amended notice of rights and duties, go to www.gpoaccess.gov/fr/ and type “USERRA” in the Quick Search box. The first two docs are what you need.
   
   
2. Raising a Racket, Part 2 – In Legal Briefs for HR #5-2005, it was reported that the 11th Circuit allowed a class of employees to pursue claims against their employer under the federal racketeering law, RICO. They claimed the employer, staffing agencies and recruiters had a “common purpose” of providing illegal workers so that the employer could keep its costs low. The U.S. Supreme Court has taken the issue up and will have the final word on this one. Mohawk Indus. v. Williams (U.S. 12-12-05) Stay tuned!
   
   
3. Lunch Money – A CA jury just served Wal-Mart a $172 million reminder that state law requires employees be given meal and rest breaks. Savaglio v. Wal-Mart Inc. (Cal Super. Ct. 12-22-05). The fact that similar claims are pending against the employer in 30 states serves as a good reminder to everyone that many states (not including Texas) require a meal and/or rest period for employees who work a certain number of hours. Some states even specify the timing, frequency and length of the break. The federal law (FLSA) doesn’t require breaks, but it does weigh in on the issue of compensability, depending on the length of the break and whether workers were truly relieved of their duties. The next time you update your employee handbook, make sure that these issues have been researched and addressed.
   
   
4. Can You Keep a Secret? – Step One: Employees sign noncompete agreements while employed by Company A. Step Two: Company A is acquired by Company B. Step Three: Employees are unhappy with Company B’s wages and quit, going to work for Company C. Step Three: Company B sues the employees (to enforce the noncompetes) and Company C (for tortious interference). Company B loses. Why? [1] The “trade secret” customer information it sought to protect was readily available on Company B’s website, in unlocked file cabinets in their office and in computer files that weren’t password protected; [2] Company A’s noncompete agreement did not contain assignment language so the agreement to not compete did not extend to Company B; and [3] there was no evidence that Company B’s relationships with its customers had been damaged. The devil is in the details . . . make sure your agreements are up to snuff and that “secrets” are, in fact, kept secret. ENV Servs. Inc. v. Alesia (NY Sup Ct 11-28-05).
   
   
5. Cutting Edge in CA – The Los Angeles, CA City Council has OK’d the first-ever ordinance that requires supermarkets to retain employees for at least 90 days following a change in ownership. Citing its police power to issue laws that impact public health and safety, the Council added that any terminations of employment during the 90-day transition must be “with cause.” The measure is due to take effect 30 days after the mayor signs it. The CA Grocers Association is weighing its options to fight the measure.
   
   
6. Mans’ Best Friend – The EEOC settled an ADA dispute with an employer who refused to hire a qualified, blind applicant because it would not accommodate her guide dog. The employer will pay $200,000.00 in back pay and compensatory damages and must [1] post notices of the settlement in its IN and IL locations; [2] train managers, supervisors and HR staff on the ADA; [3] distribute its EEO policy to all employees and applicants; and [4] recruit qualified applicants through a Lighthouse for the Blind group. EEOC v. Americall Group Inc. (N.,D. Ill. 12-1-05).
   
   
7. A Taxing Situation – Have your employment agreements, option plans, change in control agreements, severance plans, SERPs, defined contribution plans and other non-qualified deferred compensation (NQDC) arrangements been reviewed in light of Section 409A of the Internal Revenue Code? Mistakes can be very costly to plan participants . . . non-compliant deferrals are subject to a 20% penalty and interest at the underpayment rate plus 1%. And to add insult to injury, these amounts are included in the participant’s current year’s gross income and are taxable. Ouch.
   
   
8. New Year, New Laws – Several states have raised their minimum wage rates, effective 1-1-06, including CT ($7.40), FL ($6.15), NY ($6.75; $7.15 eff. 1-1-07) and VT ($7.25). Dependent kids in CO can stay covered under their parents’ health insurance until age 25. IL and MN have banned anyone under the age of 18 from talking on a cell phone while driving (think delivery drivers).
   
   
9. E-Filing Requirement – Effective 1-4-06, employers wanting to hire workers on H-1B visas must file their labor condition applications (LACs) via the DOL website. Alternate means of filing will be made available for employers with physical disabilities or who lack Internet access, upon a written request to waive the requirement.
   
   
10. Are You Ready to BOC? – The Texas Business Organizations Code, which took effect 1-1-06, codifies multiple Texas laws governing corporations, partnerships, LLCs, professional associations and corporations, non-profit entities and other business organizations. It applies to all entities formed on or after 1-1-06 as well as to foreign filing entities registering to transact business in TX on or after that date. Existing entities are governed by the existing law until 12-31-09 unless they opt in to the BOC by filing a form with the TX Secretary of State.
    
    
11. Celebrate! – Congratulations to T.G.I.Friday’s on receiving the Catalyst Award during People Report’s Annual Best Practices conference. The award is given annually to a company that shows the greatest improvement in their people practices in the foodservice industry.
    
    
12. New Years Resolutions for HR – Please join me at the Jan. 10 Dallas HR meeting, where I’ll be presenting a “things to do” list for 2006 along with practical tips for getting them done. On-line and printable registration forms for the luncheon meeting are available at www.dallashr.org. And don’t forget to bring a donation for the Texas Food Bank!

Audrey E. Mross
Labor & Employment Attorney
Davis Munck, P.C.
900 Three Galleria Tower
13155 Noel Road
Dallas, TX 75240

972.628.3661 (direct)
972.628.3616 (fax)
214.868.3033 (cell)

amross@davismunck.com
www.davismunck.com