With Halloween around the corner, what better time than now to see if there are dead, useless or even dangerous provisions lurking in your Employee Policy that can come back to haunt you?  Business owners or executives already know that the employer/employee environment continues to dramatically change.  This is true not just in Texas but throughout the US.

A few areas of change that employers should know about include:

  1. NON-COMPETES: Many business owners I meet still believe non-competes are unenforceable.  This is wrong.  In Texas, the law has evolved over the last 5-10 years and provides that a non-competition provision will be enforced if it is reasonably tailored as to scope, duration and geography; and otherwise complies with the non-compete statute – Texas Business and Commerce Code Section 15.50.  This means, for example, that your long-time sales executive privy to all kinds of valuable business information can be prevented from immediately jumping ship to the competitor.  There’s been a great deal of case law on this subject in recent years, and nationally non-compete agreements are subject to rather persistent criticism.  As I have written on in the past, many businesses should avoid blanket policy wherein all employees sign non-competes. It’s just not appropriate for all employees. The takeaway here is that Courts, including Courts throughout North Texas, routinely enforce compliant non-compete agreements.  When properly done, the non-compete can be a powerful tool for many businesses.  Don’t be afraid to include in your policy, just be sure to do it right.
  2. ARBITRATION: For businesses that have an employee policy or other agreement containing an Arbitration provision, there is a growing divide throughout the country on whether certain arbitration provisions are enforceable.  Particularly, are employer/employee arbitration provisions containing class or collective action waivers enforceable?  This is an increasingly important issue to employer businesses because many legal claims, including minimum wage and OT (or FLSA) claims, have collective action potential.  As this National Law Review article summarizes, the National Labor Relations Board (NLRB) found a few years ago that an arbitration agreement which precluded class or collective actions was an unfair labor practice.  What has followed is a series of conflicting appellate court findings, or split, wherein some have found such arbitration provisions enforceable and others not.  For suits here in Texas, which the Fifth Circuit court of appeals controls, such class or collective action waivers in employer-employee arbitration agreements remain enforceable.  The Supreme Court will likely resolve these conflicting lower court decisions in the not too distant future so stay tuned.
  3. CONFIDENTIALITY: In recent years, the NLRB has also been active in protecting employees’ free speech rights. Most businesses prevent workers from disclosing trade secrets and other confidential business information, and routinely have policy that restrict what employees can say to co-workers and others outside the company.  However, when the restrictions in the confidentiality policies are too broad, they may violate collective bargaining rights according to the NLRB – aiming to protect an employee’s right to speak to another, whether it be a co-worker or worker employed elsewhere, seeking to enlist support on a matter of shared employee concern. The NLRB has pursued enforcement actions against employers for this violation.  Here is a good article from accountingweb on recent NLRB findings and examples on this subject, emphasizing the intricate policy road employers must carefully follow. The policy (eg. the social media policies of the business) should be specific and thoughtfully tailored, to prohibit disclosure of confidential information of the business such as proprietary customer information, and avoid restrictions on other protected speech of the employees.

The Employee Policy of any business can be a vital tool used to establish a productive company culture, and set a framework of expectations for workers to understand and follow.  If left unattended to the changes in the law, however, the policy can also become an unenforceable piece of paper that exposes the business to employee litigation or regulatory enforcement.

With all the changes in employment law effecting businesses these days, don’t leave your Employee Policy stranded.  You may find there is more trick and less treat if you do.

The Department of Labor (DOL) just announced an updated regulation that increases the salary threshold for paid overtime of employees from less than $455 per week to $913 per week. Before this recent change, salaried workers were only entitled to paid overtime if they made less than an annual salary of $23,660. Now, employees who earn yearly salaries of $47,476 or less will be entitled to paid overtime if they work more than 40 hours a week.

It’s estimated this change will make about 1/3 of salaried full-time employees eligible for overtime. That is a huge increase from the less than 10% that were previously eligible. This equals major changes for many businesses and will be especially true in Texas (and the south in general), where salaries are frequently lower than other parts of the country.

Similarly, it’s expected the change will have widespread impact across many industries and professions. Mashable recently shared an interesting graphic giving perspective as to who this increased salary threshold may benefit the most.

Employers have several ways to comply: (a) raise the workers’ salaries to make them exempt from the overtime threshold, (b) pay the required time-and-a-half overtime for those who do work more, or (c) make sure the employees aren’t working overtime.

Here are Four (4) things Employers should do now:

  1. Identify Employees Who Need to be Reclassified.  For many Businesses, employees will need to be reclassified.  ID and classify all employees correctly, this is key.
  2. Evaluate Salaries & Calculate Feasibility.  Doubling an employees salary just to comply with the new regulation may not be in the cards.  Could increased part-time workers be the answer?
  3. Develop Administrative Controls to Ensure Compliance.  Evaluate handbooks, guidelines or other policy to see if revisions are needed.  Many contain provisions relating to pay that may be impacted by the changes.
  4. Review Time-Keeping Methods.  Make sure timekeeping practices are sufficient for the new employees that will be required to use it.

The impact of the new OT regulations will play out over the coming months. Employers can and should be proactive in evaluating the impact of the overtime rules. Despite the changes, some employees may still be “exempt” from the overtime, timekeeping and other Fair Labor Standards Act (FLSA) requirements.

 

By now, most business people are coming to realize that Texas courts regularly enforce non-compete agreements.

Assuming the non-compete has reasonable limits, such as to time and scope, it will likely pass muster.  That being said, as a business owner, it should be considered whether the non-compete is worth it.  A little over a year ago, restaurant chain Jimmy John’s came under scrutiny for requiring all employees, even entry-level sandwich makers, sign non-compete agreements.  Moreover, it was reported these multi-year non-competes prohibited Jimmy John’s employees from working for any business which made 10% or more of its revenue off sandwich sales within three miles of any Jimmy John’s location.

JJ

This set off a fire storm and made national headlines – it even drew boycotts of the chain and a congressional investigation.  A question to ask is: what was Jimmy John’s seeking to protect with these non-competes?

Was this just a misguided blanket inclusion in their hiring process…

With executives and other workers that are exposed to protected business information, the need for a non-compete is easy to see.  For entry level workers far removed – not so much.  Even if the restriction could ultimately be enforced in court, the lesson here is to use caution when placing such restrictions on all your workers – does it protect a legitimate interest of your business, and is it worth it?

Pursuant to the Fair Labor Standards Act (FLSA) employers must maintain accurate timekeeping and pay records for nonexempt employees in order to track and pay overtime.   This article from ADP is a good introduction to the basics of employee timekeeping.

As I have written about previously, the FLSA is a common vehicle by which many former and current employees can bring minimum wage and OT claims against their Employer.  Over the last decade, FLSA claims have increased dramatically.  This is true not just in North Texas, but nationwide.

With the Department of Labor’s focus on classifying more workers as “employees”, a topic to be left for another discussion, one can be reasonably certain the FLSA and diligent employee timekeeping will remain at the forefront of Employer’s minds.