BoyarMiller: News & Events

Law In the News - Houston Law Firm News - BoyarMiller

2009-09-04T00:00:00

Commercial Real Estate Markets - What's Ahead for 2010 Breakfast Forum

2009-12-04T00:00:00

Commercial Real Estate Markets
What's Ahead for 2010

On Friday, December 4, 2009, BoyarMiller presented the next in its series of breakfast forums. Panelists were:

Rudy Hubbard — Transwestern

Joel Marshall — Trendmaker Homes

Welcome Wilson, Jr. — GSL Welcome Group

Lance Gilliam — Moody Rambin Interests

2009: The Current State of The Capital Markets Breakfast Forum

2009-09-10T00:00:00

The State of the Capital Markets

On Thursday, September 10, 2009, BoyarMiller presented the next in its series of breakfast forums. Panelists were:

Tom Hargrove — GulfStar Group

Tom Fish — CBRE / Melody

Drew Kanaly — Kanaly Trust

Paul B. Murphy, Jr. — Amegy Bank of Texas

IABC/Houston Honors 2006 Executive Communicator of the Year - BoyarMiller

2006-08-25T00:00:00

Key Supporters of End Hunger Network - Houston Charities - BoyarMiller

2007-07-25T00:00:00

Chris Hanslik - Andrew Pearce - Unanimous Jury Verdict - BoyarMiller

2009-08-29T00:00:00

Forest River Lawsuit - Texas Deceptive Trade Practices Act - BoyarMiller

2009-06-01T00:00:00

Court Broadens Geographic Scope of Agreement

2009-09-15T00:00:00

Court Broadens Geographic Scope of Agreement
by Chris Hanslik
September 15, 2009

In Vaughn v. Intrepid Directional Drilling Specialists, Ltd. a Texas court of appeals considered whether an employee violated a covenant not to compete by arranging for his own newly-formed company to provide services on a project outside the geographic zone covered by the covenant. The covenant stated that the employee could not interfere "directly or indirectly, in any manner with any relationship between [the employer and] customers within the Restricted Territory." In upholding the injunction against the employee, the court ruled the provision could reasonably be interpreted to prohibit the employee from serving a customer located in the restricted territory even if the work in question was outside the protected territory.

This ruling provides employers with an advantage when trying to enforce non-compete clauses against former employees by expanding the geographic scope beyond the written terms of the agreement.

Supreme Court Finds Implied Promise Sufficient

2009-09-09T00:00:00

Supreme Court Finds Implied Promise Sufficient
by Chris Hanslik
September 9, 2009

In Mann Frankfort v. Fielding, the Texas Supreme Court has held that an employer does not have to make an express promise to provide confidential information for a covenant not to compete to be enforceable. The Court held that if the nature of the employment for which an employee is hired will reasonably require the employer to provide confidential information to the employee to accomplish their job duties, then the employer has impliedly promised to provide confidential information making the covenant enforceable as long as the other requirements of the Covenant Not to Compete Act are satisfied.

This ruling strongly favors employers seeking to enforce non-compete clauses against former employees.

Trade Secret Protection

2009-09-02T00:00:00

Trade Secret Protection
by Chris Hanslik
September 2, 2009

Companies with trade secrets should adopt a policy prohibiting and/or limiting the copying, disclosure, or dissemination of the confidential information. Recommended steps to protect the trade secrets are:

Mark your trade secret information as "confidential" or a similar label. Provide access to trade secret information only to people within the company who reasonably "need to know".
Ensure all employees or third-parties (such as consultants, independent contractors, clients or potential clients, or financial institutions) with access to trade secrets sign a non-disclosure agreement. Adopt as many security measures as possible (i.e. cameras, fences, use of visitor badges, "restricted area" signs . . .), including computer security precautions.
Make an inventory of your trade secrets and document any measures taken to protect its confidentiality (including location, security measures, and persons with access).

Going through this exercise will help a company accurately assess whether it truly has a trade secret that is capable of being protected in the event litigation arises in the future.

When Raising Money Through Sale of Private Securities - No Limit on Number of Accredited Investors to Whom You Can Sell

When Selling Private Securities - No Limit on Number of Accredited Investors

2009-10-27T00:00:00

When Selling Private Securities — No Limit on Number of Accredited Investors
by Steve Kesten
October 27, 2009

A client recently called concerned that, in connection with his efforts to raise money for working capital through the sale of units of membership interest in a Texas limited liability company, his company could only sell to 35 investors. To make matters worse, there were already 10 owners of the company holding membership units, so he could only sell to 25 more investors. I quickly dispelled him of his concerns.

There is a common misunderstanding that when selling private securities, an issuer is limited to selling to 35 investors. It is true that in order to maintain certain exemptions from having to register the sale of securities with the Securities and Exchange Commission, there is a limit in the number of investors to whom an issuer can sell, but such limitations only relate to unaccredited investors. Alternatively, there is no limit on the number of accredited investors to whom an issuer can sell securities provided the other applicable requirements are met relative to the exemption from registration that an issuer is pursuing.

So what is an accredited investor? Generally speaking, an accredited investor is a natural person, entity or institution that has a level of sophistication, net worth and experience in financial matters that the SEC believes does not require the same level of protection relative to the sale of securities than does someone without such traits. The list of qualifications of accredited investors can be found in Rule 501 of Regulation D, which is a regulation that was promulgated under the Securities Act of 1933.

Texas Recognizes New Entity: Series Limited Liability Company

2009-10-30T00:00:00

Texas Recognizes New Entity: Series Limited Liability Company
by Stephen Johnson
October 30, 2009

As of September 1, 2009, Texas recognizes a new entity called a "series limited liability company." This is a special form of limited liability company (LLC), originally permitted in Delaware, that allows owners to compartmentalize or isolate certain assets and related liabilities within the same limited liability company.

Here's how it works: Instead of forming a parent limited liability company as a holding company with subsidiary LLC's, or forming several sister LLC's, one can now form a limited liability company with designated series or cells. Each series or cell would own distinct assets and incur liabilities separate from other series within the LLC. As long as certain formalities are followed, the assets of each series are protected from the liabilities of any other series within the series LLC. In other words, the liabilities of a series are enforceable only against assets within that series and not against the LLC generally. This reduces the costs and administrative burdens of maintaining several separate LLC entities.

BoyarMiller Argues Before 5th Circuit

2009-11-03T00:00:00

Ryan Bardo joins BoyarMiller as Associate Attorney

BoyarMiller Wins Unanimous Verdict in Civil Suit

Kesten & Parker Present at The Entrepreneurship Institute President's Forum

2009-11-09T00:00:00

Ryan Bardo Joins BoyarMiller as Associate Attorney

2009-11-09T00:00:00

Insurance Alliance Acquired by Marsh & McClennan Agency

2009-11-13T00:00:00

2009-09-25T00:00:00

Federal Regulators Release New Policy Statement on Commercial Real Estate Loan Work-Outs

2009-11-06T00:00:00

Federal Regulators Release New Policy Statement on Commercial Real Estate Loan Work-Outs
by Bill Boyar & Tim Heinrich
November 6, 2009

On October 30, 2009, the Federal Reserve adopted a new policy statement on commercial real estate loan work-outs, replacing a prior policy statement from 1991. This new statement supports prudent commercial real estate loan work-outs. One of the most significant provisions of this statement is "renewed or restructured loans to borrowers who have the ability to repay their debts according to reasonable modified terms will not be subject to adverse classification solely because the value of the underlying collateral has declined to an amount that is less than the loan balance."

The primary focus of an examiner's review of a commercial loan is directed towards the borrower's ability and willingness to repay the loan, including any support by willing and able guarantors. As such, loans to sound borrowers that are renewed or restructured in accordance with prudent underwriting standards should not be adversely classified or criticized unless well-defined weaknesses exist that jeopardize repayment of the loan.

The policy statement includes a number of examples of commercial real estate loan work-outs, providing illustrations of prudent loan work-outs that would not be subject to adverse loan classification.

Click here for a full copy of the policy statement.

All Texas Entities to be Governed by the TBOC Effective January 1, 2010

2009-12-11T00:00:00

All Texas Entities to be Governed by the TBOC Effective January 1, 2010
by Forrest Gordon
December 11, 2009

On January 1, 2010, all entities organized in Texas prior to January 1, 2006 under statutes other than the Texas Business Organizations Code ("TBOC") will cease to be governed by the statutes under which they were formed and automatically, without any notice to or action required by the entity's owners and management, become governed by the TBOC.

What does this mean for pre-TBOC entities that have not taken any action to early adopt the TBOC?

Provided that the formation documents of the entity complied with the statute under which it was formed, no further action is required of the entity to bring it into compliance with the TBOC. Fortunately, the TBOC includes a list of synonymous terms so that any reference in an entity's governing documents to now obsolete terms such as "articles of incorporation" and "regulations" are treated as legally synonymous with their TBOC equivalents (which, for the above terms would be "certificate of formation" and "company agreement").

That being said, owners and management should be aware that all actions taken by their entity on or after January 1, 2010 will be governed by the TBOC, regardless of when that entity was formed. Additionally, the entity will be required to conform its articles of incorporation to the TBOC if and when it ever files an amendment to that document with the Texas Secretary of State.

BoyarMiller Garners AMA Houston Marketer of the Year Nomination

2009-12-09T00:00:00

BoyarMiller Attorneys Elected Texas Bar Foundation Fellows

2009-12-21T00:00:00

Creating a Social Media Policy

2009-12-28T00:00:00

Creating a Social Media Policy
by Chris Hanslik
December 28, 2009

In today's world of social media, every company with more than two employees should develop a social media policy. These policies serve several purposes, including, but not limited to: (1) educating your workforce on the various types of social media outlets; (2) determining how social media can be used to further your company's business interests; and (3) establishing guidelines for using social media consistent with your company's core values and/or code of conduct.

With this in mind, the best way to start is by not trying to recreate the wheel — several large institutions have social media policies in place that provide a good template for any company to draw from. You can find some of these policies at www.socialmediagovernance.com/policies.php

Armed with this information, you should form a small committee from different constituent groups within your company to evaluate the various policies. Establish a system to determine what portions of each policy will work for your company given the industry you serve as well as how your company operates. Part of the process should include interviewing your employees to determine which social media outlets they regularly use and how they think using social media can help or hurt the company's ability to accomplish its goals.

Obviously, before any policy is finalized you should make sure that the legal implications are addressed. For example, you want to make sure your employees avoid violating any advertising laws your company may be bound by, guard against employees making defamatory statements or infringing upon intellectual property rights of others, and address privacy concerns. The one legal issue all policies should cover is consequences for violating the policy. This will become an issue if an employee should be terminated because of their conduct on a social media outlet.

Finally, an important aspect of any policy is regularly evaluating whether it is still appropriate for your business. As fast as social media is evolving you will need to make sure your social media policy keeps up with the technology.

Firm Wins 2009 Marketer of the Year "Best of Legal Services" by AMA Houston

2010-01-05T00:00:00

ADA Amendments Act Expand Scope of Protected Disabilities

2010-01-20T00:00:00

ADA Amendments Act Expand Scope of Protected Disabilities
by Chris Hanslik
January 20, 2010

In 2009, Congress drafted the Americans With Disabilities (ADA) Amendments Act to address the increasingly narrow definition of "disability" that courts, including the U.S. Supreme Court, have applied in interpreting the original act for more than a decade. The Amendments Act took effect on January 1, 2010 (a similar amendment to the Texas Commission on Human Rights Act took effect on September 1, 2009).

The ADA Act's original definition of "disability" was "a physical or mental impairment that substantially limits one or more major life activities." Subsequently, the Supreme Court held that courts must take into account the effects of mitigating measures such as medication, hearing aids and prosthetic devices when determining if an individual has a substantially limiting impairment protected by the ADA. In the event such mitigating measures ameliorated the condition the individual was not considered disabled under the act. The Supreme Court also narrowed what could be considered a "major life activity" to something that was of "central importance to most people's daily lives."

The ADA Amendments Act broadens the ADA's coverage by specifically disapproving the Supreme Court's interpretation of "disability." As amended, the new law requires the term to be "construed in favor of broad coverage of individuals ... to the maximum extent permitted by the terms of this Act." But Congress did not stop there. The amended act also states that an impairment that is episodic or in remission qualifies as a disability if it would substantially limit a major life activity when active. In fact, courts are not to consider mitigating measures as a factor when determining whether an impairment substantially limits a major life activity.

Finally, the ADA Amendments Act expands the definition of "major life activities" by including a non-exhaustive list for courts to consider, including: seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, reading, communicating and working. These amendments make it more likely that courts will find impairments qualify as a "disability" under the law.

Beta International, Inc. Acquired in a Majority Recapitalization by Corinthian Capital Group, LLC

2010-01-20T00:00:00

Dresser-Rand Acquires Leading Edge Turbine Technologies, Inc.

2010-01-18T00:00:00

Chris HaChris Hanslik Serves On State of the Legal Market Job Forumnslik to Participate in State of the Legal Market Job Forum

2010-01-22T00:00:00

Social Networking Impersonation Now a Felony in Texas

2010-02-01T00:00:00

Social Networking Impersonation Now a Felony in Texas
by Matt Veech
February 1, 2010

The Texas legislature passed a new law effective September 1, 2009 that deals in part with impersonating another on a social networking website (Texas Penal Code Section 37.07-"Online Harassment"). This law makes it a felony to use the name or persona of another person to create a web page on or to post one or more messages on a commercial social networking site (1) without obtaining the other person's consent; and (2) with the intent to harm, defraud, intimidate, or threaten any person.

The law further provides that it is a misdemeanor for a person to send an electronic mail, instant message, text message or similar communication that references a name, domain address, phone number or other item of identifying information belonging to any person (1) without obtaining the other person's consent; (2) with the intent to cause a recipient of the communication to reasonably believe that the other person authorized or transmitted the communication; and (3) with the intent to harm or defraud any person.

This law could prove to be particularly helpful to employers who are presented with the issue of a disgruntled former employee posting or sending under the name of someone else disparaging statements about the employer's business, management, or other employees.

The law could also prove helpful to employers that are dealing with the task of effectively monitoring employee communications about company-related business on the various social-networking websites.

Houston Technology Center 2010 Celebration of Entrepreneurs

Texas Super Lawyers Names BoyarMiller Attorneys as 2010 Rising Stars

2010-03-17T00:00:00

Implied Warranty Recognized in Commercial Construction

2010-03-25T00:00:00

Implied Warranty Recognized in Commercial Construction
by Lee Collins
March 25, 2010

In an opinion and order issued March 12, 2010, Federal Court in the Southern District of Texas recognized, under Texas law, the existence of implied warranty of good and workmanlike performance in commercial construction.

In denying a motion for summary judgment filed against a BoyarMiller client, the Judge's accompanying opinion held that the implied warranty extends beyond ordinary vulnerable home buyers in the residential context to sophisticated entities in a commercial context, where the contractor failed to complete the work it was required to perform under the parties' contract.

BoyarMiller Represents Blackhawk Specialty Tools in Private Equity Investment

2010-02-24T00:00:00

Breakfast Forum Panelists Offer Insight into the Continuing Crisis in Healthcare

2010-04-05T00:00:00

Industry Experts Predict Ongoing Pain in Commercial Real Estate for 2010 and beyond

2009-12-14T00:00:00

BoyarMiller Law Clerk on Team that Wins 2010 National Ethics Trial Competition

2010-03-23T00:00:00

Sara Richey Wins Blakely Butler Moot Court Competition at the University of Houston Law Center

2010-04-05T00:00:00

Texas Supreme Court Clarifies Post-Arbitration Appeal Rights

2010-04-18T00:00:00

Texas Supreme Court Clarifies Post-Arbitration Appeal Rights
by Chris Hanslik
April 18, 2010

On March 12, the Texas Supreme Court overruled two previous court of appeal's decisions to settle a debate over the State's arbitration statute.

At issue in East Texas Salt Water Disposal Co. Inc. v Werline was whether a party could appeal a trial court decision to deny confirmation, vacate the award and direct a new arbitration to be conducted.

Werline won the underlying arbitration, but the company petitioned the district court to vacate, modify or correct the award while Werline counterclaimed for confirmation of the award. The trial court denied confirmation and vacated the award. However, the trial court did not stop there — it went on to make certain fact findings and ordered a new arbitration consistent with its findings. Werline then appealed. The company's position on appeal was that the appellate courts lacked jurisdiction because the trial court had vacated the award and ordered a rehearing.The specific statute at issue was Section 171.098(a) subsections (3) and (5).

The Texas Supreme Court found that the trial court's judgment was appealable because it fit under subsection (3). The court recognized that the right to appeal under Section 171.098(a) assures that a trial court does not exceed its authority in reviewing an arbitration award. It further noted that that purpose would be circumvented if a trial court's order for rehearing could not be appealed immediately. This opinion will help keep trial court's review of arbitration awards in check while protecting the parties' right to contract when they have agreed to "final and binding" arbitration of their disputes.

Logistics Data Points to Improving Economy

2010-04-16T00:00:00

Logistics Data Points to Improving Economy
by Gus Bourgeois
April 16, 2010

The commercial strength of logistics providers is often seen as a leading indicator of an expanding economy. The Council of Supply Chain Management Professionals recently reported that the March 2010 Supply Chain Index (SCI), a monthly index of accounts receivable activities covering approximately 350,000 businesses, dropped to 7.65 days beyond terms, its lowest level since August 2008.

"Payment behavior can been seen as a barometer of confidence in future sales and demand. And when payments between partners show this kind of improvement, it provides an indicator of overall optimism," says Jim Swift, CEO of Cortera, creator of the SCI. "It remains to be seen whether such optimism can be maintained, but it is clearly a positive development for businesses seeking what has been an elusive improvement in cash flow."

Employees May Have a Privacy Interest in Emails Sent from Employer-Provided Computers

2010-04-28T00:00:00

Employees May Have a Privacy Interest in Emails Sent from Employer-Provided Computers
by Matt Veech
April 28, 2010

Since the use of email and the internet have become a predominant method of communication, employers have established written policies governing their employees' use of email and access to the internet.

The typical practice for employers is to include a policy in the Employee Handbook that states all email and internet usage may be monitored at any time by the employer and that the employee should not expect any such usage to be private and confidential. However, in a recent ruling by the New Jersey Supreme Court, the court recognized that there are limitations to such monitoring by the employer. In Stengart v. Loving Care Agency, Inc., 2010 WL1189458 (N.J. March 30, 2010), the court stated that an employee has an expectation of privacy in email communications when corresponding with an attorney through a personal email account (i.e. not an email account provided by the employer) despite the employer's written policy stating that email communications should not be considered private or personal to any employee. Importantly, the employer's written policy did not clearly address whether the company would monitor internet-based email services accessed through the employer's computer system.

The Court framed the issue succinctly: "This case presents novel questions about the extent to which an employee can expect privacy and confidentiality in personal emails with their attorney which they accessed on a computer belonging to their employer". In conducting its analysis, the court noted that there were two principal areas involved: 1) notice provided by the employer's policy and 2) important public policy concerns of the attorney-client privilege.

Ultimately, the court held that the employee could reasonably expect e-mail communications with their lawyer through a personal account to remain private, and that sending and receiving email via a company computer did not eliminate the attorney-client privilege that protected them. Importantly, the court stated that its decision does not mean that employers are prohibited from monitoring workplace computers. Rather, employers can adopt lawful policies, enforce those policies, and discipline employees for violations of those policies when appropriate. However, the court expressly recognized that employers have no need to read the specific contents of privileged communications to enforce a company policy.

BoyarMiller a Finalist in the AMA Houston Chapter Crystal Awards Competition

2010-05-13T00:00:00

Bill Boyar Featured at the Houston Technology Center 2010 Celebration of Entrepreneurs

Bill Boyar Featured at the Houston Technology Center 2010 Celebration of Entrepreneurs Gala

2010-05-14T00:00:00

Obama Proposes New Taxation of Private Equity Fund Managers' Carried Interest

2010-06-23T00:00:00

Obama Proposes New Taxation of Private Equity Fund Managers' Carried Interest
by Steve Kesten
June 23, 2010

President Obama recently proposed to tax the income from so called "carried interest" as ordinary income rather than capital gains as it is under current law.

Currently, ordinary income is subject to marginal tax rates up to 35% (39.6% in 2011) while income from capital gains is taxed at a maximum rate of 15% (20% in 2011). Carried interest accrues to certain investment fund managers, including managers of private equity funds, hedge funds and venture capital partnerships. These managers often receive part of their compensation in the form of an interest in the partnership, which entitles them to a share of partnership profits. If the partnership earns a capital gain, the manager reports his share - the carried interest - as capital gain income. Obama's proposal would tax this income as ordinary income on the grounds that the income represents compensation for services, not a return on investment.

Texas Supreme Court Decides in Favor of Employers on Issue of First Impression

2010-07-01T00:00:00

Texas Supreme Court Decides in Favor of Employers on Issue of First Impression
by Matt Veech
July 1, 2010

In Waffle House v. Williams, the Texas Supreme Court was presented with an issue of first impression relating to the exclusivity provision of the Texas Commission on Human Rights Act (TCHRA). In Waffle House, the employee prevailed at trial on her claims of sexual harassment and negligent supervision and retention. The trial court entered judgment on the negligence claims under an election of remedies because the employee was able to avoid the TCHRA's statutory cap on damages.

After the Court of Appeals affirmed that judgment, the Texas Supreme Court granted petition to consider several issues, including an issue of first impression: "may a plaintiff recover negligence damages for harassment covered by the TCHRA?" In its June 11, 2010 opinion, the Texas Supreme Court recognized that the TCHRA is preemptive in nature, and as such, the Court held that the plaintiff could not recover on her negligence claims when the complained-of negligence is intertwined with the complained-of harassment. In its opinion, the Court stated:

The root of [the employee's] negligence claim is that Waffle House kept around a known harasser, but this claim does not arise from separate, non-harassment conduct; it is premised on the same conduct that the TCHRA deems unlawful.

As the complained-of acts constitute actionable harassment under the TCHRA, they cannot moonlight as the basis for a negligence claim, a claim that presents far different standards, procedures, elements, defenses, and remedies. It is untenable that the Legislature would craft an elaborate anti-harassment regime so easily circumvented.

The court's opinion is an obvious victory for employers. The opinion is particularly significant to employers when faced with employment discrimination, harassment or retaliation lawsuits that also assert claims of negligent hiring or negligent retention.

The Great Freight Recession

2010-07-21T00:00:00

The Great Freight Recession
by Gus Bourgeois
July 21, 2010

The Council of Supply Chain Management Professionals released a report in late June 2010 entitled "The Great Freight Recession", which stated that U.S. business logistics costs plummeted to $1.1 trillion in 2009, a decrease of $244 billion from 2008. In addition, the report noted that in 2009, "U.S. logistics costs as a percentage of Gross Domestic Product (GDP) hit a record low of 7.7 percent, the lowest point ever recorded in the 30 years that data has been collected. In the past, a low ratio signified that American logistics managers were doing a good job controlling costs and efficiently moving and storing goods. But last year, that number slipped for a different reason. As the volume of goods produced in the United States declined, so did the amount of tonnage to be shipped, thus dragging down logistics spending."

The fact of the downturn in logistics spending is certainly no surprise — but the depth of this downturn remains a major concern, not only for the transportation and logistics industry, but for the U.S. economy as a whole. Conventional wisdom holds that the Great Recession ended in late 2009 and that economic activity began to substantially rebound in early 2010, with manufacturing leading the way. However, unless shipping and logistics activities enjoyed a significant bounce in the first two quarters of 2010 — which appears unlikely, in light of recent downward GDP revisions for that time period — then, to paraphrase Mark Twain, reports of the death of the Great Recession may have been greatly exaggerated.

Damages from the BP Spill

2010-07-23T00:00:00

Damages from the BP Spill
by Chris Hanslik
July 23, 2010

The BP oil spill has adversely impacted the lives and businesses along the Gulf Coast and beyond. People have lost jobs and certain ways of life are gone for years if not generations. One of the first questions asked is who will be responsible for the harm caused by this disaster. While there are several companies who may end up being help accountable, the more appropriate question is will those affected be able to recover for the monetary damages they have suffered. The subject of damage caps has received a lot of attention recently because of the size and scope of the oil spill. While there are caps on damages under certain statutes they will not work to limit the ultimate liability of certain companies.

The primary statute at issue is the Oil Pollution Act of 1990 (OPA). The OPA was enacted in 1990 in response to the Exxon Valdez oil spill in Alaska. The principal purpose of the OPA is to compensate any party suffering damages from discharges of oil or hazardous substances. The OPA is designed to provide protection for the environment as well as to aid the victims of oil spills.

To establish liability under the OPA only two elements must be proven: (1) that there is a discharge of oil or covered oil-related substances, and (2) that the discharge either went into navigable waters or poses a substantial threat to navigable waters of the United States. If a plaintiff proves these elements, he will recover all damages covered by the OPA that result from the discharge.

The OPA provides four classes of damages:

1. removal costs;
2. damage to real or personal property owned or leased by the claimant;
3. damages to natural resources that the claimant used for subsistence; and
4. economic damages because of damage to property or resources even if the claimant did not own or lease the damage property (this covers damage to or impairment of earning capacity).

The OPA provides a cap on the damages against a responsible party relating to an offshore facility. The general rule is that the total liability of a responsible party is capped at the total of all removal costs plus $75,000,000.00. However, the OPA provides two exceptions to the cap on damages: (1) gross negligence or willful misconduct; or (2) the violation of an applicable Federal safety, construction, or operating regulation by the responsible party or someone acting on behalf of the responsible party.

In addition, the OPA does not preempt state law and the damages that flow from state law claims. Therefore, claims to recover damages resulting from the spill will not necessarily be limited to the caps set forth in the OPA.

Delaware Court Applies Entire Fairness Standard to Transaction Beneficial to Controlling Shareholder

2010-07-30T00:00:00

Delaware Court Applies Entire Fairness Standard to Transaction Beneficial to Controlling Shareholder
by Taylor Hayden
July 30, 2010

In Gentile v. Rossette, the Delaware Court of Chancery recently reaffirmed the duty of a board of directors of a closely-held corporation to establish the "entire fairness" of both process and price of a transaction that was likely to benefit the controlling shareholder.

In Gentile, SinglePoint Financial, Inc. had a two-member board of directors composed of Douglas Bachelor and David Rossette. SinglePoint owed Rosette a substantial amount of shareholder debt . The board of directors, in an effort to alleviate the resulting pressure on SinglePoint's balance sheet, approved the conversion of Rossette's debt into common stock at a rate of $0.05 per share. As a direct result, Rossette's equity interest in SinglePoint rose from 61% to 95%. While the $0.05 price per share was markedly lower than the per share price in other recent transactions, Rossette took the position that, and attained a concurring fairness opinion that, SinglePoint's untenable financial position required this transaction at this price.

A minority shareholder of SinglePoint sued Bachelor and Rossette, claiming breach of fiduciary duty. The defendants argued that the burden should be upon the plaintiff to prove unfairness "because Bachelor, as one member of a two-person board, was independent and received no benefit from the transaction." The Court rejected this argument, pointing out that Bachelor had neither the experience nor the assistance of independent counsel necessary to determine the appropriateness of the debt conversion. Additionally, the Court dismissed the fairness opinion, finding that it was not completed prior to Bachelor's decision and so could not have aided in validating his independence, and was completed without complete and accurate financial records.

Due to the foregoing, the Court shifted the burden to the defendants to prove the "entire fairness" of the transaction, looking for both fair dealing and fair price. The Court determined that the price was not fair and set the actual "fair value" of the shares for purposes of the debt conversion at $0.40 per share, and, consequently, the minority shareholders were determined to have suffered damages of $309,000.

Joseph "Trey" L. Wood, III joins BoyarMiller as Of Counsel

Joseph "Trey" L. Wood, III Joins BoyarMiller as Of Counsel

2010-08-02T00:00:00

Jennifer Hebert Elected Treasurer of Networking Group, Pearls & Pinstripes

2010-07-13T00:00:00

Back to School with SEARCH

2010-08-14T00:00:00

Back to School with SEARCH

BoyarMiller has partnered with The Tasting Room, Max's Wine Dive and BrandExtract for a month-long fundraising drive August 14 - September 15 to support the children and families of SEARCH Homeless Services.

Kick-Off Events

Saturday, August 14

The Tasting Room (Uptown Park)
1:00 - 4:00 pm

Monday, August 16
Max's Wine Dive (Washington/Shepherd)
5:00 - 8:00 pm

Attend either Kick-Off event and donate by:

Purchasing a wine tasting for $10 - all money benefits Search
Purchasing a bottle or case of wine - 15% of purchase benefits SEARCH
Purchasing a glass of wine - $1 benefits SEARCH

DURING THE MONTH-LONG CAMPAIGN
(and at the kick-off events)
Donate a new backpack at The Tasting Room for a free pizza or at Max's Wine Dive for a free Happy Hour appetizer!

CLICK HERE FOR MORE INFORMATION

BoyarMiller Partners with Client to Raise Funds for Back-to-School Supplies for SEARCH

2010-08-13T00:00:00

Managed Pressure Operations Raises Growth Capital

2010-08-19T00:00:00

Texas Courts Will Define “Prevailing Party” if You Do Not

2010-08-19T00:00:00

Texas Courts Will Define "Prevailing Party" if You Do Not
by Forrest Gordon
August 19, 2010

Recently, in Intercontinental Group Partnership v. KP Home Loan Star, L.P., the Texas Supreme Court was confronted with the task of interpreting what is commonly referred to as a prevailing party provision of a contract. A prevailing party provision is a boilerplate provision that can be found in most written agreements, regardless of subject matter, and typically provides that in the event of any litigation between the parties with respect to that agreement, the prevailing party will be entitled to reimbursement by the non-prevailing party for its attorney's fees and court costs. The definition of prevailing party may be set forth in the provision or may, as is more commonly the case, be absent all together. After all, most people assume that in the event that litigation actually occurs, one party will emerge as the clear cut "winner" and the other the "loser."

In Intercontinental, the parties had included a typical prevailing party provision in their contract, but "prevailing party" was not defined. A disagreement between the parties ensued and KP sued Intercontinental Group for breach of contract. KP sought lost profit damages in the amount of $1,000,000 as a result of the alleged breach. The jury found that Intercontinental Group had in fact breached the contract but found $0 in damages. KP sought attorney's fees as the prevailing party.

In its opinion, the majority of the Court declared that whether a party prevails turns on whether or not that party prevailed upon the court to award it something, either monetary or equitable. In this particular circumstance, KP recovered no damages, nor did it secure any declaratory or injunctive relief. As a practical matter, the Court pointed out that "no misconduct was punished or deterred, no lessons taught." In the end, the Court found that KB was not the prevailing party despite having successfully convinced the jury that Intercontinental Group had in fact breached the agreement in question.

When considering including a prevailing party provision in a contract, the parties to the agreement should understand that they can tailor the definition of prevailing party exactly to their expectations, but if they do not, the courts will define it for them.

Nursing Mothers: Give them a Break!

2010-08-20T00:00:00

Nursing Mothers: Give them a Break!
by Joseph "Trey" L. Wood, III
August 20, 2010

The Patient Protection and Affordable Care Act (PPACA) was one of the laws that was enacted as part of President Obama's healthcare reform initiative. Contained within the thousands and thousands of pages of the law's text is a provision that amends the Fair Labor Standards Act (FLSA), which governs wages and hours work, to provide a break time requirement for nursing mothers. This law provides that employers must provide reasonable break time for an employee to express milk for her nursing child for one year after the child's birth each time such employee has the need to express the milk. Employers with fewer than 50 employees are not subject to the law if compliance would impose an undue hardship. However, all employees who work for the employer must be counted — not just those at a particular work site. Also, employees who are exempt under the FLSA are excluded from the break time obligation.

Recently, the Department of Labor has attempted to provide guidance to employers on complying with the Act. Contained within one of the DOL's informal "Fact Sheets" it indicates that the law became effective when the PPACA was signed into law on March 23. While the DOL did not specify any minimum number, frequency or duration for the breaks, it does indicate that the employer must provide a place other than a bathroom as a location for the break. The location need not be reserved exclusively for a nursing employee's use and it may be a location that is temporarily created or converted for this purpose. The location must be:

Functional as a space for expressing breast milk;
Shielded from view; and,
Free from any intrusion by co-workers or the public.

Employers are not required to treat these breaks as compensable time, or hours worked. However, if the employer allows paid breaks, it must compensate a nursing employee in the same way it does other employees if she uses it for the purpose of expressing breast milk. Also, the time for the break must be paid if the employee is not completely relieved from duty during the break. So, for example, if the nursing employee is on a business telephone call while expressing breast milk, that time is compensable.

While this new law is untested, and the guidance provided by the DOL is informal, the prudent course of action is for all employers covered by the act to follow these pronouncements pending further developments of the law.

Follow-On Acquisition Made by Sunland Capital LLC

2010-08-24T00:00:00

Capital Markets Panel Predict Continued Economic Challenges with Few Bright Spots

2010-09-14T00:00:00

2010 Houston Cellar Classic

2010-10-23T00:00:00

The Houston Cellar Classic
October 21 - 23, 2010

BoyarMiller is a proud sponsor of Lasco
Enterprise's Houston Cellar Classic.

schedule of Events

Thursday, October 21, 2010
Bubble Bath
The Tasting Room (River Oaks)
6:30 - 9:00 pm

Friday, October 22, 2010
The ProSource Lunch
Max's Wine Dive
11:30 am - 1:00 pm

Friday, October 22, 2010
HBJ Cigar & Wine Tasting
The Tasting Room - Uptown Park
5:30 - 8:00 pm

Saturday, October 23, 2010
The HCC Grand Tasting Experience
The Tasting Room - Uptown Park
1:00 - 5:00 pm

CLICK HERE FOR MORE INFORMATION

A portion of all proceeds from HCC events will benefit the Juvenile Diabetes Research Foundation in memory of Ashley Fussell.

How Bullying Bosses Could Bring Liability

2010-10-19T00:00:00

How Bullying Bosses Could Bring Liability
by Joseph "Trey" L. Wood, III
October 19, 2010

Did you know that October 17-23 is Freedom from Workplace Bullies Week? While many still associate bullying with overgrown kids taking lunch money on the school playground, the issue of bullying in the workplace is also serious and prevalent. More than a third of American workers have been bullied at work, and nearly half — 49 percent — say they have been affected by bullying, either through experiencing it or witnessing it, according to a recent survey by The Workplace Bullying Institute.

Workplace bullying damages morale, can lead to workers' compensation claims, hampers productivity and can force high employee turnover. While employers have not often been taken to court for bullying behavior, since it is generally not illegal, that could change soon as several states consider legislation that would hold employers liable for allowing bullying on the job.

The liability could be even greater when employers tolerate, or at least ignore, bullying by bosses. And most bullying is done by bosses, according to the Institute. The survey found nearly three-quarters of those who bully at work are in supervisory positions, and they are most likely to bully the most vulnerable employees, the rank and file workers. When it comes to being bullied, non-supervisory employees account for 55 percent of those who are bullied. Those who are less dependent on an employer or who rank highest in an organization are less likely to be bullied, the survey found. Temporary employees and contractors represent only 5 percent of the bullied, and less than 5 percent of executives, board members and owners are among the victims.

Men are more likely to be bullies — 60 percent of bullies are men, and 40 percent are women. Women are more likely to be targeted for mistreatment, the survey found — 57 percent of victims are female, and 43 percent are male. "The bully boss stereotype is real," the survey's authors reported. "Bullies operate with confidence that they will not likely be punished because they enjoy support from higher-ups who can protect them if and when they are exposed." Workplace bullies do tend to get away with it, the survey found. In 62 percent of cases, employers either escalated the problem or did nothing at all when they learned about the bullying. Less than a third of the time did employers help the bullied employee.

The Workplace Bullying Institute defines bullying as repeated, health-harming mistreatment of one or more persons which takes one or more of the following forms:
verbal abuse; threatening, humiliating or offensive behavior/actions; and work interference — sabotage — which prevents work from getting done. Bullying may resemble such clearly illegal acts as discrimination and harassment; but in some ways is an even greater risk since it can be committed against any employee, not just those in protected classes, such as minorities and the disabled. Employers should begin to take bullying as seriously as the more recognized forms of harassment and discrimination, since at least 17 states have introduced legislation that would provide legal recourse for abusive workplace behavior.

States Taking Action
The bill that Washington State has considered but not yet passed offers one example. According to House Bill 2142 which was introduced in 2008, the state legislature intends, among other things to "provide legal redress for employees who have been harmed, psychologically, physically, or economically, by being deliberately subjected to abusive work environments..." The legislation would also offer legal incentives to employers to prevent and respond to their employees' mistreatment at work. The bill would hold employers liable for up to $25,000 in emotional distress even if the victim was not demoted, fired or otherwise suffered a "negative employment decision" as part of the bullying.

Besides Washington, other states that have introduced anti-workplace bullying legislation are New Jersey, Vermont, New York, Oregon, Illinois, Wisconsin, Utah, Nevada, Montana, Connecticut, Hawaii, Oklahoma, Kansas, Missouri, Massachusetts and California.

Are the Feds Next?
U.S. Senator Frank Lautenberg (D-NJ) said on Wednesday, Oct. 6 that he would introduce federal legislation requiring colleges and universities to adopt policies or codes of conduct that prohibit bullying and harassment in the wake of the suicide of a Rutgers University student, freshman Tyler Clementi, whose gay sexual encounter in his dorm room was streamed online by his roommate, Dharun Ravi and Molly Wei. However, at this point, no legislation has been introduced that would offer recourse against employers.

What Employers Should Do
While workplace bullying is not yet "illegal," it is easy to see how it may affect the morale of a workplace. In today's economy, employers should be doing everything they can to promote a productive environment in the workplace. By developing and enforcing strict policies and training, companies can better protect themselves from potential liability if they are ever faced with an accusation of workplace bullying. Employers should clearly define what types of behavior are unacceptable and cross the line into bullying. When it comes to workplace behavior, it's not always clear when a boss is simply aggressive or has become abusive. After all, any boss can have a bad day and become frustrated with an employee. The severity and consistency of behavior are identifying characteristics of a bully. If a supervisor makes a habit of screaming, insulting or intentionally putting down employees, that can indicate that bullying is taking place.

Employees who feel bullied should have a reporting process where they can register complaints; this is particularly important when an employee's immediate supervisor is the one doing the bullying. Employers should also outline specific steps to take when an employee has been accused of bullying and apply them consistently.

As they did on the playground, bullies in the workplace are often trying to exert their control, and they often target one or two specific people. Unlike the schoolyard bully, though, a bully boss will frequently publicly question the competence of the victim. Supervisors and managers should be trained to recognize when a boss's legitimate criticism crosses the line into bullying. Beyond having a policy, it is imperative that employers create a company culture that is free of any type of harassment and bullying. That will create a more productive workforce, and ultimately help stave off liability and litigation from unhappy employees.

All Atwitter Over Twitter (and other Social Networking Concerns)

2010-10-14T00:00:00

All Atwitter Over Twitter (and Other Social Networking Concerns)
by Joseph "Trey" L. Wood, III
October 14, 2010

When it comes to marketing a company and/or its products, employers want their employees to spread the word. But employees doing so via blogs, social-networking sites (like Twitter) may pose potential liability concerns for their employers. This is because recently the Federal Trade Commission (FTC), which has had little to do with the employer/employee relationship, has issued Guidelines which restrict the representations that may be made in on-line postings.

The New Guidelines
The FTC's new Guidelines establish that liability can be imposed on companies who fail to make required disclosures that exist between on-line posters and the companies upon which they were commenting. An obvious relationship that must be disclosed is the employment relationship between the on-line writer and the company. So, if an individual is misled by the on-line author into purchasing a defective or dangerous product or service, not only would the on-line author be liable, but also the Company, regardless of whether the communication was known or not. No industry is exempt from these guidelines.

Solving the Problem
One way to become more aware of what your employees are doing is to monitor their work activities and take action against those who use social networking sites in a way that could raise legal problems. Generally, employers may discipline employees who use company equipment (computers, smart-phones) inappropriately. Federal and state laws limit how far an employer can go to monitor their employees' social networking activities. For the most part, courts try to seek balance between the employer's interest in objecting to the employee's conduct (the potential harm to the employer) with the employee's expectation of privacy. A way to reduce this risk is to advise all employees in writing that the employees should have no expectation of privacy in using any company owned equipment and that their use of the equipment will be monitored.

An additional step should be the implementation of a "Blogging and Social Networking Policy." Such a policy should instruct employees that any on-line communications are subject to the company's policies and procedures. It should also prohibit employees from posting any confidential or proprietary information, forbid employees from using the name, trademark or logos of the company, and require employees to make it clear in their postings that the views and opinions they express about work-related matters are their own and not those of their employer. Finally, before disciplining or terminating an employee for use of social networking sites, consider the potential legal consequences of such actions.

Failure to Post May Lead to Lost Defense

2010-10-13T00:00:00

Failure to Post May Lead to Lost Defense
by Joseph "Trey" L. Wood, III
October 13, 2010

The Civil Rights Act of 1964 requires employers to post a notice describing the law's provisions in an accessible format. The posting must be conspicuously posted in the same place where other employee notices are customarily kept. The notice must also be prepared by or approved by the EEOC.

Failing to post such a notice may be mean that employers could lose a defense that untimely claims should fail. In a recent New York federal district court case, an employee of a hotel-casino in Atlantic City filed a complaint alleging that she had been discriminated against and fired because of her race, sex and/or national origin. The statute of limitations for filing such complaints is 300 days from the discriminatory act. The employee did not file her claim until 364 days following her termination. The employer, understandably, filed a motion to dismiss the claim as being barred by the statute of limitations. However, the employee countered this argument by stating that her claims were saved because the employer failed to post the required Title VII notices and that, therefore, she was unaware of her rights and responsibilities under the law. The Court found that the employer's failure to post the notice excused the two month delay.

The moral of the story: You can save your statute of limitations defense every easily and cheaply by complying with the mandatory notice requirements. You can go to http://www.eeoc.gov/posterform.html and order up to 10 posters in four different languages from the EEOC.

Classifying Outside Sales Staff: Do They Actually Make Sales?

2010-10-11T00:00:00

Classifying Outside Sales Staff: Do They Actually Make Sales?
by Matthew S. Veech
October 11, 2010

Employers that classify its outside sales people as exempt should make sure that those employees actually make sales.

In In re Novartis Wage and Hour Litigation, the U.S. Court of Appeals for the Second Circuit found that pharmaceutical sales representatives do not meet the outside sales exemption because the representatives' duties are not actually making sales but rather only promoting a product in an effort to convince doctors to prescribe certain pharmaceuticals. Additionally, the Second Circuit found that these sales representatives do not meet the administrative exemption because the representatives did not exercise discretion and independent judgment as to matters of significance to the employer because the representatives duties — answer questions from the doctors about the products — were merely the result of skills the representatives gained from training by the employer.

As always, the lesson here is that the employer should not rely on the employee's job title but instead should focus on the employee's duties. In the case of the outside sales exemption, the employer must make sure the employee is actually making sales and not just promoting a product or service.

Paycheck Fairness Act (Fair to Who?)

2010-10-10T00:00:00

Paycheck Fairness Act (Fair to Who?)
by Joseph "Trey" L. Wood, III
October 10, 2010

The Paycheck Fairness Act is back. Previously passed by the House of Representatives, the Act was introduced in the Senate in early 2009 but never came to a vote. Now, Senate Majority Leader Harry Reid (D-NV) has placed the proposed legislation on the legislative agenda.

Why should business owners worry? Well, for one, the bill would make employers liable for unlimited punitive damages under the Fair Labor Standards Act for even unintentional pay disparities, and eliminate current limits for back pay as well as for compensatory damages. It would also make class actions against employers much easier by eliminating a requirement under current law that employees must give their written consent to be included in a class action case. If passed, it would also hamper an employer's ability to compensate its employees based on criteria such as cost-of-living differences among geographic locations, different work responsibilities within similar job categories, or prior salary history.

The bill is being attacked by business groups including the U.S. Chamber of Commerce. One labor attorney giving testimony during hearings last March said the Act has the potential to cripple companies, particularly smaller businesses. This begs the question, if this legislation would have the effect of driving some companies out of business, displacing those employees, how fair is it?

UK Companies - Choosing a Legal Entity to Operate in Texas

2010-08-25T00:00:00

UK Companies — Choosing a Legal Entity to Operate in Texas
by Gary W. Miller
August 25, 2010

Once a UK company has decided to begin doing business in Texas, an important choice must be made as to what legal entity will be selected or created to operate in Texas. Options include:

qualifying the UK company to do business in Texas
forming a new corporation in one of the states in the US
forming an entity other than a corporation in one of the states in the US

In the US, forming an entity or qualifying to do business is done on a state-by-state basis. If an entity is formed in one state and conducts business in other states, it will be necessary to qualify that entity to do business in each of the states in which it is doing business. What constitutes "doing business" is a question of law. While just making an occasional sale into a state may not constitute "doing business" for purposes of requiring qualification, having an office in the state or maintaining employees in the state will generally constitute "doing business".

Most UK companies do not simply qualify their existing UK entity to do business in the US. They do not want to subject the "mother company" to liability in the US (too many fears about litigation in our court system), and they do not want the UK company to pay taxes in the US. Some UK companies may incorporate a "single purpose" UK company and then qualify that entity to do business in the US. Most UK companies operating in the US and primarily in Texas, however, will incorporate a new corporation under the laws of Delaware (famous for its pro business attitude) or Texas. Most UK companies do not form other types of legal entities such as limited partnerships or limited liability companies, since those entities are usually formed to achieve a tax status that flow through to the parent company. UK companies generally use a corporation that pays taxes in the US, and distributes its earning to the parent through dividends.

Sometimes, the first indication to a UK company of the requirement for qualifying or incorporating in Texas is the refusal of a Texas bank to open an account until this step has been taken. Qualifying a UK company to do business in Texas or forming —a new entity in Texas is not usually an expensive or time consuming project, but does take some advance planning and cooperation between your tax experts and US attorneys.

Litigation to Collect a Past Due Account

2010-08-24T00:00:00

Litigation to Collect a Past Due Account
by Jennifer L. Hebert
August 24, 2010

In this difficult economy, collecting receivables from customers can be challenging. This posting describes some of the litigation basics to collect past due receivables.

Demand Letter
Sending a demand letter from an attorney may spur the delinquent customer into making a payment - or at least spark a negotiation. Under Texas law, sending a demand letter may also (but does not automatically) allow you to collect attorneys' fees in the event you do file a lawsuit to collect the amounts owed (which is similar to the UK requirement to show that the lawsuit was necessary).

Lawsuits
Filing a lawsuit requires a petition prepared by an attorney and filed with the court. Often in collection cases, where the facts are not in dispute, the lawsuit can be a "suit on a sworn account" which may allow parties to dispense with a lengthy discovery process and lead to a speedier result if the debtor does not assert affirmative defenses.

Discovery Process
The discovery process allows the parties to learn more about the facts and the opposing party's case, typically through depositions (questions by the attorney asked of the witness under oath in front of a court reporter), requests for production of documents, requests for admission (written factual assertions that must be either admitted or denied), and interrogatories (written questions that must be answered under oath by the other side). This process is similar to the discovery process in UK litigation, but wider in scope and with the added burden of the deposition procedure.

Summary Judgment
A summary judgment motion is filed when a party believes the facts are not in dispute and, as a matter of law, the party should win. It is often used by creditors in collection cases where the debtor either does not appear in court or fails to state a credible defense.

Trial
If the creditor has not won on summary judgment, he may actually have to prove his case before a judge or jury in a trial. However, the vast majority of cases in Texas are settled prior to trial. The time from filing the lawsuit to judgment often ranges from six months to two years. Though most cases are not appealed, there is generally a two-stage appeal process in Texas, first to the Court of Appeals and thereafter to the Texas Supreme Court.

While courts in the US have a reputation for being slow and proceedings may be expensive as compared to courts in the UK, the collection process can proceed faster than other litigation when the facts are not in dispute. The most difficult part of a collection lawsuit can be collection of a judgment after the lawsuit is won. (This will be the subject of a future posting.) A crucial distinction from the UK system is that the filing of an appeal does not delay enforcement of a judgment unless the debtor posts security for the judgment amount.

Restrictions on Competition in Texas

2010-08-23T00:00:00

Restrictions on Competition in Texas
by Matthew S. Veech
August 23, 2010

In Texas, as well as in many parts of the United States, employers often expect their key employees to sign agreements not to compete that take effect once the employee terminates employment and moves on to a new job. Under the right circumstances, Texas courts and laws will favor the protection of a business by enforcing a covenant not to compete even at the risk of making it more difficult for the employee to earn a living. These covenants may be drafted to keep the former employee from soliciting business from a customer he worked with while under the agreement and/or restrict the employee from working altogether in the same type of business as his former employer.

Elements of an Enforceable Non-Competition Agreement in Texas
Among other requirements, a non-competition agreement in Texas must be reasonable in time (how long is the employee restricted), territory (where is the employee restricted from competing) and scope (what is the employee prohibited from doing). Drafting these restrictions properly is dependent upon the individual situation. Typical provisions will include:

a one-year time restriction
a prohibition in the geographic area in which the employer was doing business (which might be world-wide under the right circumstances)
limiting the employee from performing the same services for a new employer as he was performing for his old employer

A key to an enforceable non-competition agreement is the promise of the employer to provide the employee with confidential information in order for the employee to perform his job, and the employer actually making good on that promise (meaning the employer did provide the confidential information).

Non-competition agreements are often a key part of doing business for employers and their key employees in Texas. Drafting and enforcing these agreements requires an attorney who experienced in this arena and who keeps up with the ever-changing law and court decisions.

Independent Contractor or Employee: The Stakes Are Getting Higher

2010-10-18T00:00:00

Independent Contractor or Employee: The Stakes Are Getting Higher
by Joseph "Trey" L. Wood, III
October 18, 2010

The U.S. Department of Labor and the Internal Revenue Service are actively searching for and prosecuting companies which misclassify employees as independent contractors. The federal government claims that such misclassifications cost the government billions of dollars in revenue each year. In fact, Congress has recently re-introduced legislation seeking to increase the stakes for employers who continue with the practice. The Employee Misclassification Prevention Act seeks to deter employers from improperly classifying employees, including drivers, as independent contractors versus employees by:

Ensuring that employers keep records that reflect the accurate status of each worker as an employee or non-employee and clarifying that employers violate the Fair Labor Standards Act when they misclassify workers.
Increasing penalties on employers who misclassify their employees and are found to have violated employees' overtime or minimum wage rights.
Requiring employers to notify workers of their classification as an employee or non-employee.
Creating an "employee rights web site" to inform workers about their federal and state wage and hour rights.
Providing protections to workers who are discriminated against because they have sought to be accurately classified.

In addition to legislative efforts to curb this practice, the courts have been coming down hard on companies who misclassify employees. Last July, the Ninth Circuit Court of Appeals, which covers Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington ruled against EGL Inc. in a case in which EGL, a Texas corporation, classified its drivers as independent contractors. EGL even had written independent contractor agreements in which the drivers agreed that they were independent contractors and that any questions about the agreement were to be settled by Texas law. Some of the drivers claimed that they were actually employees who were entitled to overtime as well as benefits under the California Labor Code. If the language of their contracts ruled and Texas law were to be applied, they would not be able to recover. The Ninth Circuit ruled against EGL finding that the California Labor Code, not the contract, was at issue. The Court then found that under California's multi-faceted test for determining employee/contractor status that the drivers had produced enough evidence of an employment relationship to justify a jury trial on their claims.

What This Means for Employers
Companies that employ "independent contractors" will want to closely examine the true nature of their relationship to determine if they have been properly classified. This may mean reviewing and possibly revising independent contractor agreements and staying away from "form" agreements. Also, reconsider any automatic renewal/termination provisions in those agreements as they may be interpreted to more closely resemble an "at-will" employment relationship. Finally, you should carefully evaluate any forms, training materials, or policies that you provide to independent contractors to ensure independent contractor status.

The Inventory Effect

2010-07-30T00:00:00

The Inventory Effect
by Gus Bourgeois
July 30, 2010

U.S. Gross Domestic Product (GDP) was recently revised downward from a seasonally adjusted annual rate of 3.0% to 2.7% for the first quarter of 2010. Standing alone, this is sobering news for the U.S. economy, after an encouraging 5.6% reading during the fourth quarter of 2009. But this reduction has particular relevance to the transportation and logistics industry.

Looking behind the numbers that make up the downward revision for the first quarter of 2010, Tim Lacono, founder of the investment website Lacono Research, notes that "[t]he change for the first quarter was a result of downward revisions to personal consumption and net exports that more than offset upward revisions to inventory, which has been the primary driver for the U.S. economy since last summer."

That statement reflects two important points: first, one of the primary economic drivers of the U.S. economy in the last year has been the rise in inventories (which has obviously been very beneficial to the transportation and logistics industry). That fact shouldn't be surprising, considering the prolonged drop in inventory levels witnessed during the Great Recession — at some point, businesses deplete their inventories to "bare-bones" levels, and are forced to replenish or go out of business. This is a normal part of the "end-of-recession" cycle, and is generally followed by an increase in personal consumption and net exports, as the roots of the economic rebound take hold and consumer confidence increases — which feeds and extends the cycle of recovery and expansion, and returns transportation and logistics activities to more normal levels.

But Lacona notes that for the first quarter of 2010, "[t]he change in inventories alone accounted for a full 1.75 percentage points of the just revised first quarter growth rate of 2.7%." That ratio, coupled with the fact that the recent GDP reduction was based primarily on downward revisions to personal consumption and net exports, is troubling.

The recent inventory replenishment cycle has been just what the doctor ordered for the transportation and logistics industry, as business levels bounced off of the Great Recession lows, and transportation rates began to find some support. But at some point, businesses will have replenished their inventories from the depleted levels of the Great Recession, and will be looking for signs that the consumer is buying before continuing the cycle. The numbers behind the recent GDP revision suggest they aren't going to find it.

The Big Squeeze, Wal-Mart Style?

2010-07-19T00:00:00

The Big Squeeze, Wal-Mart Style?
by Gus Bourgeois
July 19, 2010

Wal-Mart announced in mid-June 2010 that it is considering pulling business from its outsourced transportation providers (including, potentially, Swift Transportation, Con-way Freight and Greatwide Logistics) with respect to delivery of goods from suppliers to its distribution centers, and instead moving that freight using its in-house private fleet, wherever it is cost-effective to do so. According to a Bloomberg report, Wal-Mart is in the processing of contacting manufacturers about this approach, with the goal being to lower costs for its suppliers, which in turn would lower the cost of goods to Wal-Mart.

The real question is whether this represents a serious effort by Wal-Mart to reduce costs by using its in-house resources (which aren't exactly sitting idle now, as anyone traveling any U.S. interstate this summer can attest), or whether this is merely the first move by Wal-Mart to force its outsourced transportation providers to cut their rates.

The larger question involves the effect of this move on the U.S. trucking industry. According to John Schulz of the Gerson Lehrman Group, "If Wal-Mart were to pull that freight off common carriage — or even threaten to pull it — that would result in tons of excess capacity at a time when the U.S. trucking industry is just recovering from a three-year freight recession."

I think it's reasonable to assume that forcing its outsourced transportation providers to cut their rates in order to keep the business would have a similar detrimental effect on the U.S. trucking industry, just at the time when many hoped that even a small recovery in U.S. manufacturing activity would at least offer support to current (already discounted) rates.

The Great Freight Recession

2010-07-05T00:00:00

The Great Freight Recession
by Gus Bourgeois
October 5, 2010

The fact of the downturn in logistics spending is certainly no surprise — but the depth of this downturn remains a major concern, not only for the transportation and logistics industry, but for the U.S. economy as a whole. Conventional wisdom holds that the Great Recession ended in late 2009 and that economic activity began to substantially rebound in early 2010, with manufacturing leading the way. However, unless shipping and logistics activities enjoyed a significant bounce in the first two quarters of 2010 — which appears unlikely, in light of recent downward GDP revisions for that time period — then, to paraphrase Mark Twain, reports of the death of the Great Recession may have been greatly exaggerated.

Back to School with SEARCH Drive Raises Awareness, Funds and Supplies for Educational Programming

2010-10-18T00:00:00

When an In-House Counsel’s Bar Membership Goes Inactive, the Attorney-Client Privilege May Go With It

2010-10-20T00:00:00

When an In-House Counsel's Bar Membership Goes Inactive, the Attorney-Client Privilege May Go With It
by Andrew Pearce
October 20, 2010

A New York magistrate judge recently ruled that an in-house counsel's inactive status in his state bar association resulted in the loss of the attorney-client privilege and therefore exposed his client communications to discovery by the opposing party. Gucci America, Inc. v. Guess?, Inc., No. 09 Civ. 4373 (SAS)(JL), 2010 WL 2720079 (S.D.N.Y. June 29, 2010).

In Gucci America, Inc. v. Guess?, Inc., Gucci sued Guess and others, asserting trademark infringement and related claims arising out of the defendants' use of certain trademarks, logos and designs. During the course of discovery, Gucci submitted a privilege log that included e-mail communications of its in-house counsel. Gucci's in-house counsel subsequently testified during his deposition that he was an inactive member of the California Bar and had been so for years.

Guess demanded that Gucci produce the in-house counsel's communications, arguing that they were not covered by the attorney-client privilege because, given his inactive bar status, the in-house counsel was not an attorney to whom the privilege would apply.

A New York federal court agreed with Guess, holding that the attorney-client privilege contemplates that the client communicate with an individual who is not simply trained in the law, but is actually authorized to engage in the practice of law. Because the in-house counsel did not possess the type of bar membership that authorized him to engage in the practice of law, Gucci's communications with him did not satisfy any standard of the attorney-client privilege.

Further, even though there was "strong evidence" that Gucci believed its in-house counsel was a licensed attorney, the court found that such a belief was not reasonable. In fact, the court held that although Gucci was plainly in a position to confirm the extent of its in-house counsel's qualifications as a legal professional, it failed to do so even though a simple search of the California State Bar website would have revealed that the in-house counsel had been an inactive member since 1996. Thus, the court concluded, Gucci itself bore responsibility for allowing its counsel to represent its interests without ensuring that he was authorized to do so.

Gregory N. Jones Joins BoyarMiller as Litigation Group Chairman and Shareholder; Edgar Saldivar Joins as Litigation Associate

2010-12-01T00:00:00

ADA Tool Kit

2010-10-26T00:00:00

ADA Tool Kit
by Joseph "Trey" L. Wood, III
October 26, 2010

Given the (over) breadth of the Americans with Disabilities Act Amendment Act (ADAAA), almost any given condition may be found to be a covered disability. The emphasis for employers now shifts to an inquiry as to whether the employee is a "qualified individual with a disability." In other words, can the employee perform the essential functions of the job with or without reasonable accommodation.

The Office of Disability Employment Policy (ODEP), which is part of the Department of Labor, has developed a "tool kit" to try and help employers (and employees) with ways to understand how to return employees back to work following an injury or illness that qualifies as a disability. The tool kit is especially helpful for employers who may be struggling to come up with ways to reasonably accommodate an employee. The tool kit also guides employers on how to increase the effectiveness of their return to work strategies by developing an integrated disability and absence management (IDAM) program, which the ODEP believes will enable an employer to reduce job-related injuries and accommodate employees. The employer tool kit also provides overviews of employers' obligations under workers' compensation laws, the FMLA, ADA, and the Rehabilitation Act of 1973.

To access the tool kit, click HERE.

Wait Before You Terminate: FMLA Lessons

2010-11-02T00:00:00

Wait Before You Terminate: FMLA Lessons
by Joseph "Trey" L. Wood, III
November 2, 2010

One of your employees calls in sick on November 6 and 7 saying she needed to care for her sick son. On November 8 and 9 she calls in saying that now she is sick and has an appointment with a doctor. She finally forwards to you a doctor's release indicating that she will return to work on November 14. That day comes and goes and the employee never shows up. On November 20 you call the employee to let her know that her job would be in jeopardy if she could not produce documents that confirmed her need to be off of work. She tells you that she sent you the wrong medical certification and would send you one from her primary care physician. On November 24, after you have received nothing, you decide to terminate her under the company's absence policy. On November 28 you send her a termination letter dated the 24th informing her of the decision. You also decide to contact her personally on the 28th to let her know that she was being terminated. That evening you receive a fax FMLA medical certification signed by a nurse practitioner stating that the employee would not be able to return to work for a month. Is this a story of too little, too late for the employee? Not according to the Sixth Circuit Court of Appeals¹.

In Branham v. Gannett Satellite Information Network, Inc., the court found that the employee under these facts had established that she was entitled to FMLA leave. The court held that employees are entitled to the full 15-day certification period to provide a medical certification supporting the need for FMLA leave. That means that even though the employer received a note from a doctor indicating that the employee could come back to work, the employee was still entitled to the full 15 days to seek a medical certification that supported the leave. The company's mistake was assuming that the first doctor's note was the only paperwork that they would receive from the employee. In addition to this, the Sixth Circuit also found that the company could not deny FMLA leave to the employee because there was no evidence that it ever formally requested the employee to provide a medical certification in accordance with FMLA regulations.

Lessons learned:

Follow the FMLA regulations to the letter when requesting medical certifications from employees

Allow employees all the time that they are entitled under the FMLA to return a medical certification

¹The Sixth Circuit covers Kentucky, Michigan, Ohio and Tennessee.

Top 10 Mistakes Made By Employers

2010-11-05T00:00:00

Top 10 Mistakes Made by Employers
by Joseph "Trey" L. Wood, III
November 5, 2010

Frequently, a disgruntled employee will talk to a plaintiff lawyer about perceived harassment or discrimination in the workplace. The plaintiff lawyer may find that the complaint that the employee comes calling about is much ado about nothing. However, crafty plaintiff lawyers are always on the lookout for different ways to trap an unwary employer and, by questioning the employee in depth, they may uncover violations that the employee had no idea was occurring.

Here are some of the top mistakes made by employers that could lead to costly awards to employees or ex-employees:

1. Poor Policy Management
Employers without employment policies in place (or out-of-date policies) and managers who don't know the company's policies or apply them inconsistently are two reasons employers are found to illegally discriminate against employees.

Fixing the Problem: Create, or update, an employee handbook. Then, educate managers and supervisors about the policies and make certain that the policies are applied consistently and fairly.

2. Lack of Proper Training, Resources and Tools for Managers
It is difficult enough for managers to handle their employees, but if they are expected to do so without proper training and resources, it is almost an impossible task.

Fixing the Problem: Provide managers and supervisors with periodic training on policies and procedures as well as a basic understanding of the principles of discrimination, harassment and retaliation.

3. Lack of Clarity
Problems can arise if an employee's performance expectations are misunderstood, or the employer makes promises that it does not keep.

Fixing the Problem: Clear communication is critical. Be clear in general communications with all employees, as well as with communications to individual employees. Finally, make only promises you intend to keep.

4. Poor Recordkeeping
If an employer fails to document performance or disciplinary issues, in the eyes of a jury the problems never existed.

Fixing the Problem: Keep proper factual documents on performance reviews, attendance, time records/tardiness, disciplinary issues and requests for accommodation. For key documents, make certain to document that the employee received a copy.

5. Lack of Objectivity and Patience
All employers have their favorite employees. But failing to be objective with those employees, while being impatient with other employees, may be perceived as illegal discrimination.

Fixing the Problem: Don't be "trigger happy" when it comes to terminating employees. Treat everyone the same - both good performers and bad. Finally, take a deep breath and see the big picture of the climate of the workplace.

6. Acting In a Way That Seems Punitive
The goal of progressive discipline is to rehabilitate a poor performing employee. Discipline, or treatment that seems like punishment, may push an otherwise non-litigious employee into the hands of a lawyer.

Fixing the Problem: Don't threaten employees lightly or act in a way that seems punishing. When counseling an employee, do not make personal or unprofessional comments. Finally, do not submit performance information on employees on uncontested claims for unemployment.

7. Failure to Guard Against Retaliation Claims
Terminating an employee shortly after the employee has made a complaint of harassment or retaliation is frequently a recipe for disaster. Such a step should only be taken if it can be backed up by documentation or if it involves verifiable misconduct on the employee's part.

Fixing the Problem: Be very careful with impacting the employment status of any employee who has taken "protected activity," that is, complaining of harassment or discrimination, or who has filed a charge of discrimination or lawsuit against the company.

8. Lack of Thoroughness and Follow-Through
If the employer provides a mechanism for employees to complain, make sure to take all complaints seriously and follow through with a proper investigation and resolution of the complaint.

Fixing the Problem: Investigate complaints thoroughly and promptly. (The investigation should begin no later than 24 hours after the complaint has been made.) Also, take decisive action in response to the complaint and follow up with the complaining employee once the investigation is complete.

9. Overloaded Managers
Many of the mistakes above are not the result of intentional neglect or inattention, but rather managers and supervisors with too many irons in the fire.

Fixing the Problem: Keep a pulse on your managers' and supervisors' workloads and make sure your staffing levels can handle your volume of work.

10. Improper Handling of Termination
Very often, the way you handle a termination dictates whether an employee will leave quietly, or run to the nearest lawyer.

Fixing the Problem: Rather than try to spare the employees feelings, be honest with the reason for termination. The termination meeting should be brief and to the point and do not argue with the employee - you don't need to feel victorious after the termination meeting. Finally, if you decide to offer the employee severance, only do so in exchange for a written release.

Little mistakes can add up and land you in court, so it is best to avoid them altogether with a strategy to follow a proper HR plan.

Final Regulations for GINA Released

2010-11-14T00:00:00

Final Regulations for GINA Released
by Joseph "Trey" L. Wood, III
November 14, 2010

At long last, the EEOC has published final regulations that interpret and implement the non-discrimination provisions of the Genetic Information Non-Discrimination Act of 2008 (GINA). The regulations may be found at http://www.federalregister.gov/articles/2010/11/09/2010-28011/regulations-under-the-genetic-information-nondiscrimination-act-of-2008.

Of particular interest to employers is disclaimer language that the EEOC has drafted that all employers should insert into any of their medical exam and medical inquiry forms. Such forms are frequently used for post-offer medical exams, FMLA medical certifications and ADA medical information requests. The specific language offered by the EEOC reads as follows:

The Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits employers and other entities covered by GINA Title II from requesting or requiring genetic information of employees or their family members. In order to comply with this law, we are asking that you not provide any genetic information when responding to this request for medical information. 'Genetic information,' as defined by GINA, includes an individual's family medical history, the results of an individual's or family member's genetic tests, the fact that an individual or an individual's family member sought or received genetic services, and genetic information of a fetus carried by an individual or an individual's family member or an embryo lawfully held by an individual or family member receiving assistive reproductive services.

Employers who insert this language into their medical certifications and requests will be alleviated from liability under GINA in the event that a medical provider discloses genetic information in spite of the warning.

The NLRB's After Us and We're Not Even Unionized!

2010-11-17T00:00:00

The NLRB's After Us and We're Not Even Unionized!
by Joseph "Trey" L. Wood, III
November 17, 2010

Many employers think that the National Labor Relations Board is the government's agency responsible for dealing with union issues. While that is true, the NLRB is actually charged with protecting employee rights whether the employer is union or non-union. All employees and employers are covered by the National Labor Relations Act. Section 7 of the NLRA protects employees' "concerted, protected activity". Essentially, employees are allowed to communicate with co-workers about the terms and conditions of employment. An employer's attempt to hinder or interfere with those rights is a violation of the NLRA which could lead to an unfair labor practice charge being filed on the employees' behalf by the NLRB.

As an example, many employers believe that information about their employees' rate of pay is a private matter between the employer and its employees. Accordingly, the employer may have a policy in place indicating that employees should not discuss their rate of pay with anyone. Such a policy would have the effect of preventing employees from discussing their rate of pay, or one of the terms and conditions of their employment, with other employees. Accordingly, the NLRB has taken the position that such a policy is a violation of the NLRA.

In a recent, somewhat frightening development, the NLRB has recently filed a complaint alleging that American Medical Response of Connecticut, Inc. (AMR) violated Section 7 of the act by terminating an employee for posting negative comments about her supervisor on her Facebook page. AMR has a social media policy that prohibits employees from disparaging the company and its supervisors in social media posts, even when posting while off-duty and using a personal computer. Apparently, the policy did not include a disclaimer that the policy would not be construed or applied in a manner that interferes with employees' rights under the NLRA. The Board's complaint is also noteworthy because of the fact that it appears to allege that merely having an anti-disparagement social networking policy violates Section 7 even if the employer does not actually apply the policy and impose discipline.

There is still a long way to go to see if the Board's position will be upheld. Unless the parties settle the AMR matter, the complaint will first have to be heard by an administrative law judge, after which an appeal can be taken to the NLRB and then to a federal court of appeals: something that could easily take more than two years.

What Should Employers Do?
Employers should be cautious about terminating an employee for posting negative comments about the employer on social networking sites, especially when the content of the posting is concerted, protected activity. In addition, it may be wise to review your social media policy to add a disclaimer such as the one mentioned above.

Tips for Transitioning 3PL Services

2010-11-18T00:00:00

Tips for Transitioning 3PL Services
by Gus Bourgeois
November 18, 2010

Here are a few tips for manufacturers and other consumers of third party logistics (3PL) services to consider when drafting their next 3PL contract, to minimize transition issues, regardless of whether transitioning to another provider or in-house:

The transition from your incumbent 3PL to another provider, or from your incumbent 3PL back in-house, is a process - even in relatively basic 3PL arrangements, the transition can often take several months. More importantly, the transition will require the incumbent 3PL to work closely with you and any successor 3PL to ensure that your supply chain is not interrupted. Of course, the incumbent 3PL has its own concerns, such as redeploying employees and equipment in a timely manner, and minimizing "end-of-contract" expenses. It is therefore wise to include a "transition" clause in your 3PL contract, setting forth in reasonable detail those additional duties required of the incumbent 3PL as part of the transition process (including a general duty to act in good faith to assist in such transition), allocating costs related to those additional duties, and most importantly, identifying those critical "end-of-contract" tasks which must be successfully completed before final payments are made.

Perhaps the most important service provided by a 3PL relates to information about the flow of goods through your supply chain. Visibility to this data is crucial to your core business, and any gap in that visibility can affect your bottom line. Therefore, one of the most important considerations from the very start of any 3PL relationship is to ensure that you will have unrestricted access to such information during any end-of-term transition period, and that upon termination, such historical data will be provided to you (and to any successor 3PL) in a format that is efficient and economical, in order to facilitate a smooth transition. One key point in this regard is to make certain to include a clause stating that all of your data in the possession of the incumbent 3PL, regardless of the form it may be in or whether the format has been manipulated by such 3PL, remains your sole property.

As mentioned, 3PL relationships tend to be long-term, often lasting multiple years and in some cases, more than a decade. As a result, certain key employees of your incumbent 3PL can become so integrated into your supply chain function that losing access to the knowledge base of those employees in any transition would be detrimental to your operations. Of course, 3PL providers recognize this fact and the inherent value of these employees, not only because of the experience and knowledge they bring to the 3PL and its other customers (existing or potential), but because their ability to retain these employees (or, more to the point, to prevent such employees from working directly for you or a successor 3PL for some period of time after any termination) acts as a disincentive to your ending your relationship with such 3PL. As a result, 3PL providers typically include "no-hire" clauses in their customer contracts. You should evaluate these clauses carefully and consider their effect on your future transition plans. At the very least, it is recommended that you include a liquidated damages or "buy-out" clause, so that you have an option to hire any such key persons in-house, in the event that a transition would otherwise involve the loss of the services of such person. It may be easier to negotiate the amount of such liquidated damages or buy-out provisions at the start of the 3PL relationship, when the 3PL is anxious to finalize the contract and start the flow of payments, than to negotiate the deletion of the clause entirely, which will almost certainly be met with stern opposition from even the most eager 3PL.

Although an efficient and cost-effective dispute resolution process is critical to any long-term services contract, it is especially important with respect to 3PL contracts in any transition process. You should take care to negotiate a dispute resolution clause that prohibits the 3PL from terminating the contract earlier than the anticipated termination date, suspending services or payments to your suppliers, or otherwise disrupting the flow of goods and information through your supply chain, due to the existence of a pending dispute. While these actions would be detrimental if taken at any time during the term of the contract, they are more likely to occur during a transition, when the incumbent 3PL may feel that it has less to lose in taking such actions (and may also fear that resolving the dispute may have less significance to you once it is no longer the "incumbent" 3PL). It is therefore critical to clearly specify the parameters of the dispute resolution process, and to separate such process from the ongoing provision of services by the incumbent 3PL.

Paycheck Fairness Act is Dead - For Now

2010-11-18T00:00:00

Paycheck Fairness Act is Dead — For Now
by Joseph "Trey" L. Wood, III
November 18, 2010

On November 17, the Senate voted 58-41 against proceeding to a floor debate on the Paycheck Fairness Act. That means that the legislation, which had the support of President Obama and was previously passed by the House of Representatives, is dead. As you may recall from my October 10 posting (Paycheck Fairness Act - Fair to Who?), the Act would have made employers liable for unlimited punitive damages under the Fair Labor Standards Act for even unintentional pay disparities, and would have eliminated current limits for back pay as well as for compensatory damages. It would also have made class actions against employers much easier by eliminating a requirement under current law that employees must give their written consent to be included in a class action case. If passed, it would also have hampered an employer's ability to compensate its employees based on criteria such as cost-of-living differences among geographic locations, different work responsibilities within similar job categories, or prior salary history.

With this vote it is clear that the effects of the November election are beginning to reverberate throughout Capitol Hill.

Mandatory Health Risk Assessments Violate the ADA

2010-12-02T00:00:00

Mandatory Health Risk Assessments Violate the ADA
by Joseph "Trey" L. Wood, III
December 2, 2010

An Equal Employment Opportunity Commission (EEOC) Informal Discussion Letter reveals the EEOC's opinion that health risk assessments (HRA) are invalid as long as they are mandatory. In other words, an employer could be sued under the Americans with Disabilities Act (ADA) for refusing health care coverage to an individual because he or she failed to participate in an HRA.

An HRA is a type of medical examination to determine an individual's overall level of wellness. It includes a questionnaire asking about lifestyle, diet, exercise choices and biometrics testing cholesterol and blood pressure. After completing the assessment, the individual is given a score and practical ways of improving their health. In answering the HRA questionnaire, however, the individual may disclose information related to disability or medical examinations or both. This information is protected under the ADA and employers may not ask for this type of information unless it is job-related and consistent with a business necessity. Requiring employees to complete an HRA is not considered job-related and consistent with a business necessity because it is not related to an employee's ability to perform an essential job function. An HRA is too general and too subjective for such a purpose.

An HRA is mandatory if non-participating individuals are penalized compared to participating individuals. For example, the denial of health care coverage or other benefits would constitute a penalty, but the forfeiture of an inducement to participate in an HRA is not a penalty, as long as the inducements meet certain criteria set by HIPAA. The value of the participation rewards may not exceed 20% of the total health insurance coverage for the individual employee or the employee and dependent. In addition, the reward must be reasonably designed to prevent disease or promote health, employees must be given the opportunity to participate in the program at least once a year, and similarly situated employees should receive the same reward.

As long as the HRA is part of an employer's voluntary wellness program, the HRA is legal. But, when the HRA is a prerequisite for health insurance coverage, it is a violation of the ADA. Additionally, employers should look at their HRA incentives to make sure they do not violate HIPAA.

Department of Labor Now in the Attorney Referral Business

2010-12-07T00:00:00

Department of Labor Now In the Attorney Referral Business
by Joseph "Trey" L. Wood, III
December 7, 2010

As most of you know, overtime wage claims and FMLA claims have sky-rocketed. The Department of Labor (DOL), which is responsible for handling these types of matters, has now announced that if they are too busy to handle one of these claims, a new federal program will help make sure the employee is referred to a lawyer who is qualified to pursue the complaint on behalf of the employee. The referral program is part of the Obama administration's Access to Justice Initiative. The following is a description of the program from the White House press release:

"The Department of Labor and the American Bar Association (ABA) (have) announced a collaboration to help workers resolve complaints received by DOL's Wage and Hour Division (for) not getting paid the minimum wage or not being paid overtime, or being denied family medical leave.

Beginning on December 13, 2010, complainants whose cases cannot be resolved by DOL because of limited capacity will be given a toll-free number to a newly created system where they are connected to an ABA-approved attorney referral provider if there are participating attorneys in their area.

In addition, if DOL has conducted an investigation, the complainant will be given information about the findings to provide to an attorney who may take the case, including the violations at issue and any back wages owed.

DOL has also developed a special process for complainants and representing attorneys to obtain relevant case information and documents when available."

The bottom line is this: the current administration is making a clear statement that laws protecting employees will be strongly enforced. The best thing for employers to do is to make sure that their employees are properly classified and being paid overtime and to review their leave policies to make certain they are compliant.

Texas Governor Rick Perry Proposes “Loser Pays” Tort Reform, But Does Anyone Win?

2010-12-17T00:00:00

Texas Governor Rick Perry Proposes "Loser Pays" Tort Reform, But Does Anyone Win?
by Andrew Pearce
December 17, 2010

Following his recent re-election, Texas Governor Rick Perry is apparently proposing a British-style "loser pays" rule. Currently, only plaintiffs can recover litigation costs, and only in limited circumstances. Under the "loser pays" rule, a plaintiff could be required to pick up the costs of the defendant if the plaintiff loses the lawsuit.

Not surprisingly, arguments are being made both for and against such a rule depending on the politics. Some argue that there are too many frivolous lawsuits filed; others assert that a "loser pays" system would have the effect of closing the courthouse doors to ordinary citizens.

An opinion from the Wall Street Journal claims that the "loser pays" rule - which would only apply to claims defined as "groundless" (in other words, any case that is lost) - would provide an extra disincentive for the tort industry to bring such groundless claims. And in doing so, Texas would arguably build on reforms in 2003 and 2005 that have vastly improved the state's legal climate.

However, an argument from legalaffairs.org provides that the "loser pays" system can actually have the opposite effect because plaintiffs are encouraged to file potentially strong cases involving trivial amounts without worrying about the expense. Further, parties are less likely to settle because the motivation to avoid the expense of protracted litigation is lessened when a party believes it will recover the costs at trial.

Time will tell whether Governor Perry intends to aggressively pursue a "loser pays" system in Texas. And, as with most things, the consequences of such a system are equally unclear.

To read more about the Wall Street Journal Opinion, visit: http://online.wsj.com/article/SB10001424052748703514904575602762974652860.html

The legalaffairs.org Argument can be read here: http://www.legalaffairs.org/issues/November-December-2005/argument_kritzer_novdec05.msp

Texas Lobo Trucking LLC Acquires Assets of New Mexico-based Lobo Trucking, Ltd.

2010-12-28T00:00:00

Growth Capital Partners, L.P. Announce VLS Recovery Services, LLC. has Completed a Management Buyout

2011-01-07T00:00:00

GulfStar Group Announces the Sale of CAIC Holding Company, Inc.

2011-01-25T00:00:00

SARA RICHEY AND GAVIN W. PARKER JOIN BOYARMILLER AS ASSOCIATES

Sara Richey and Gavin Parker Join BoyarMiller as Associates

2010-11-10T00:00:00

Death of the Employee Free Choice Act No Deterrent to National Labor Relations Board

2010-12-22T00:00:00

Death of the Employee Free Choice Act No Deterrent to National Labor Relations Board
by Joseph "Trey" L. Wood, III
December 22, 2011

While the last election may have sounded the death knell of the proposed Employee Free Choice Act (EFCA), it does not mean that the current administration is rolling over on the issue of organized labor. In a startling new maneuver, the National Labor Relations Board (NLRB) has issued a proposed regulation that would require most employers to post a notice advising employees of their rights under the National Labor Relations Act (NLRA), how an employee can file an unfair labor practice complaint, the right of employees to collectively bargain and elect a union, etc. The language of the proposed poster is set out below. It is certain that there will be a public outcry over this proposed regulation, but in the end, if the regulation is passed by the Board, expect the amount of union activity to increase significantly.

Employee Rights Under the National Labor Relations Act
The NLRA guarantees the right of employees to organize and bargain collectively with their employers, and to engage in other protected concerted activity. Employees covered by the NLRA* are protected from certain types of employer and union misconduct. This Notice gives you general information about your rights, and about the obligations of employers and unions under the NLRA. Contact the NLRB, the Federal agency that investigates and resolves complaints under the NLRA, using the contact information supplied below, if you have any questions about specific rights that may apply in your particular workplace.

Under the NLRA, you have the right to:

Organize a union to negotiate with your employer concerning your wages, hours, and other terms and conditions of employment.
Form, join or assist a union.
Bargain collectively through representatives of employees' own choosing for a contract with your employer setting your wages, benefits, hours, and other working conditions.
Discuss your terms and conditions of employment or union organizing with your co-workers or a union.
Take action with one or more co-workers to improve your working conditions by, among other means, raising work-related complaints directly with your employer or with a government agency, and seeking help from a union.
Strike and picket, depending on the purpose or means of the strike or the picketing.
Choose not to do any of these activities, including joining or remaining a member of a union.

Under the NLRA, it is illegal for your employer to:

Prohibit you from soliciting for a union during non-work time, such as before or after work or during break times; or from distributing union literature during non-work time, in non-work areas, such as parking lots or break rooms.
Question you about your union support or activities in a manner that discourages you from engaging in that activity.
Fire, demote, or transfer you, or reduce your hours or change your shift, or otherwise take adverse action against you, or threaten to take any of these actions, because you join or support a union, or because you engage in concerted activity for mutual aid and protection, or because you choose not to engage in any such activity.
Threaten to close your workplace if workers choose a union to represent them.
Promise or grant promotions, pay raises, or other benefits to discourage or encourage union support.
Prohibit you from wearing union hats, buttons, t-shirts, and pins in the workplace except under special circumstances.
Spy on or videotape peaceful union activities and gatherings or pretend to do so.

Under the NLRA, it is illegal for a union or for the union that represents you in bargaining with your employer to:

Threaten you that you will lose your job unless you support the union.
Refuse to process a grievance because you have criticized union officials or because you are not a member of the union.
Use or maintain discriminatory standards or procedures in making job referrals from a hiring hall.
Cause or attempt to cause an employer to discriminate against you because of your union-related activity.
Take other adverse action against you based on whether you have joined or support the union.

If you and your co-workers select a union to act as your collective bargaining representative, your employer and the union are required to bargain in good faith in a genuine effort to reach a written, binding agreement setting your terms and conditions of employment. The union is required to fairly represent you in bargaining and enforcing the agreement.

Illegal conduct will not be permitted. If you believe your rights or the rights of others have been violated, you should contact the NLRB promptly to protect your rights, generally within six months of the unlawful activity. You may inquire about possible violations without your employer or anyone else being informed of the inquiry. Charges may be filed by any person and need not be filed by the employee directly affected by the
violation. The NLRB may order an employer to rehire a worker fired in violation of the law and to pay lost wages and benefits, and may order an employer or union to cease violating the law. Employees should seek assistance from the nearest regional NLRB office, which can be found on the Agency's website at www.nlrb.gov.

You can also contact the NLRB by calling toll-free: 1-866-667-NLRB (6572) or (TTY) 1-866-315-NLRB (1-866-315-6572) for hearing impaired.

*The NLRA covers most private-sector employers. Excluded from coverage under the NLRA are public-sector employees, agricultural and domestic workers, independent contractors, workers employed by a parent or spouse, employees of air and rail carriers covered by the Railway Labor Act, and supervisors (although supervisors that have been discriminated against for refusing to violate the NLRA may be covered).

This is an official Government Notice and must not be defaced by anyone.

EEOC Has Banner Year

2010-12-23T00:00:00

EECO Has Banner Year
by Joseph "Trey" L. Wood, III
December 23, 2010

The Equal Employment Opportunity Commission (EEOC) has reported that for FY 2010, which ended September 30, a record 99,922 charges of discrimination were filed. That is the largest number in the 45-year history of the Commission. The agency also recovered more than $319 million in monetary benefits for individuals-its highest level ever. Other achievements include:

The mediation program ended the year with a record 9,370 resolutions, 10 percent more than FY 2009 levels, and more than $142 million in monetary benefits.
The EEOC also expanded its reach to under-served communities by providing educational training and public outreach events to approximately 250,000 persons.
The agency continued its concerted effort to build a strong national systemic enforcement program. At the end of the fiscal year, 465 systemic investigations, involving more than 2,000 charges, were undertaken.
The EEOC resolved a total of 7,213 requests for hearings in the federal sector, securing more than $63 million in relief for parties who requested hearings. The agency also timely resolved more than 66 percent of federal sector appeals.

Key factors for this third straight year of record, or near record, charges include layoffs and cutbacks by employers. While some may believe that the shift in control of the U.S. House of Representatives will stem the rising tide in discrimination claims made with the EEOC, this is likely not true. While there has been a shift in the legislative branch, the current administration and administrative agencies like the EEOC do not need the approval of Congress to enforce existing laws.

The most important thing that employers can do to try and avoid this trend affecting their companies is to train managers and supervisors in what is required of them by various employment laws so that they may spot potential issues before they become problems.

New Year's Resolutions

2011-01-05T00:00:00

New Year's Resolutions
by Joseph "Trey" L. Wood, III
January 5, 2011

New Year's Resolutions — we make them every year: lose weight, exercise more, spend more quality time with the family, etc., etc. But have you ever decided to resolve to create a work environment that fosters greater employee productivity and loyalty, and reduces potential employment liability? Why not try it this year?

Sometimes, employers feel that the solution to any employee problem is to apply a monetary poultice. With the economy the way it has been lately, this is increasingly difficult and is rarely the solution. While employee compensation is important, a study was conducted to find out what managers thought was important versus what their employees thought was important.¹ Here are the findings:

What Managers Think Employees Want (in order)

1. Good wages
2. Job security
3. Promotion/growth opportunities
4. Good working conditions
5. Interesting work
6. Personal loyalty to workers
7. Tactful discipline
8. Full appreciation for work done
9. Sympathetic help on personal issues
10. Feeling 'part' of things.

What Employees Say They Want (in order)

1. Full appreciation for work done
2. Feeling 'part' of things
3. Sympathetic help on personal issues
4. Job security
5. Good wages
6. Interesting work
7. Promotion/growth opportunities
8. Personal loyalty to workers
9. Good working conditions
10. Tactful discipline

Is it surprising that the top three things that employees say they want from their managers are at the bottom of what managers think employees want? In order to turn this around, it is important for employers to make the following resolutions:

Train Managers and Supervisors
In addition to training management personnel about the importance of spotting employment issues before they become lawsuits, it is also important that they understand that to foster a more productive and cohesive workforce, they should be attuned to what employees want from their employer. Accordingly, train managers to pay attention to those three things above that are most important to employees so that they may modify their own behavior to make the workplace more harmonious.

Audit Employee Handbooks and I-9 Forms
Employment laws change daily, and ICE (Immigration Customs and Enforcement) raids are becoming more commonplace. To avoid potential liability for failing to have proper policies and completed paperwork, make sure to have your employee handbook reviewed by a qualified professional, and conduct an internal audit of the company's I-9 forms.

Regularly Distribute Harassment/Discrimination Policies and Obtain Signed Acknowledgments
Nothing is more frustrating than facing an employee in a harassment suit who claims that he/she was never told about the company's harassment policy. To avoid facing this dilemma, distribute these policies at least once a year and make sure that all employees sign a document acknowledging their receipt of the policy. In addition, make sure that you have a signed acknowledgment from each employee that he/she has received a copy of the employee handbook.

Making these three simple resolutions for your company, and sticking to them, will go a long way in making the New Year very bright and promising!

¹ ^{Foreman Facts, from the Labor Relations Institute of NY. This study was replicated with similar results by Ken Kovach (1980); Valerie Wilson, Achievers International (1988); Bob Nelson, Blanchard Training & Development (1991); and Sheryl & Don Grimme, GHR Training Solutions (1997-2001).}

Return to Work "Without Restriction"

2011-01-21T00:00:00

Return to Work "Without Restrictions"
by Joseph "Trey" L. Wood, III
January 21, 2011

Many employers have policies that state that employees who wish to return to work following an illness or injury must be able to do so "without restriction" or for "full duty." It now appears that those types of policies are seen as red flags by the Equal Employment Opportunity Commission (EEOC) when employees are terminated for not being able to meet these requirements. Earlier this month the EEOC announced a $3.2 million settlement in a lawsuit against Jewel-Osco, alleging that the grocery chain fired disabled employees who could not return to work without restriction rather than seeking to find them reasonable accommodations.

While the company has denied any wrongdoing and has indicated that it chose to settle the case to avoid litigation costs and put the matter behind them to focus on current business initiatives, it is clear that the EEOC's suit had some merit. Part of the consent decree governing the settlement requires Jewel-Osco to engage a consultant to review and recommend changes to its current job descriptions to make sure that they accurately describe physical requirements for the job. It also requires the company to obtain recommendations from the consultant regarding possible accommodations to common work restrictions in various positions within the store.

What should you do?
For most companies, best practices include having up-to-date job descriptions in order to make decisions about accommodating an employee's medical restrictions. Accurate job descriptions can be the lynch pin to defending a disability claim as the employer is given a great deal of deference in deciding what the essential functions of a particular job are. In addition, when an employee is unable to return to full duty, it is the employer's obligation to engage in the interactive process to determine if a reasonable accommodation can be found. While employees are never required to create a job for an employee, it should be determined if the employee's condition truly limits him/her from the essential functions of the job, or just peripheral job tasks that can be easily delegated to others without any undue hardship. Finally, it is strongly recommended that employers review their return to work policies to make sure they include a disclaimer that the provisions of the Americans with Disabilities Act (ADA) will be complied with in making the determination of returning the employee to work.

Supreme's Give Nod to Third-Party Retaliation

2011-01-26T00:00:00

Supreme's Give Not to Third Party Retaliation
by Joseph "Trey" L. Wood, III
January 26, 2011

In a rare unanimous decision, the United States Supreme Court has ruled that Title VII of the Civil Rights Act of 1964 covers retaliation claims filed by third-parties who are considered to be "aggrieved persons" because they are "within the zone of interests sought to be protected by Title VII." Thompson v. North American Stainless, LP, No. 09-291, U.S. Supreme Court (January 24, 2011).

Background: Eric Thompson and his fiancé, Miriam Regalado, were employees of North American Stainless, LP. Three weeks after Regalado filed a sex discrimination charge against the employer with the Equal Employment Opportunity Commission (EEOC), the company fired Thompson. Thompson filed suit against the company alleging his termination was to retaliate against Regalado for filing her Charge. The District Court for the Eastern District of Kentucky and the Sixth Circuit Court of Appeals both found in favor of the employer finding that Thompson was not "in the class of persons for whom Congress created a retaliation cause of action."

Supremes Reverse: The first issue that the Supreme Court had to decide was whether Thompson's firing was unlawful retaliation. They concluded it is "obvious that a reasonable worker might be dissuaded from engaging in protected activity (i.e., filing a Charge of discrimination) if she knew that her fiancé would be fired."

The second issue to be resolved was whether Thompson could sue under Title VII for third-party retaliation. The Court declared, in a decision written by Justice Antonin Scalia, that a plaintiff may sue if he/she "falls within the 'zone of interests' sought to be protected by the statutory provision whose violation forms the legal basis for his complaint." However, a person may not sue if his/her interests are "marginally related" or "inconsistent" with the purpose intended by Congress.

What this Means to You: While the meaning of the phrase "zone of interest" was not defined, it is obvious that employers will have to be careful in taking any adverse employment actions against employees who have a unique relationship with an employee who has taken protected activity, such as filing a Charge of discrimination, or complaining of illegal workplace harassment.

2011 Houston Office Market Real Estate Forecast

2011-01-25T00:00:00

2011 Houston Office Market Real Estate Forecast
by Tim Heinrich
January 25, 2011

In a recent forecast for Houston's 2011 office real estate market, Jay Nowlin, President and Founder of Nowlin Interests, expressed "cautious optimism" during a luncheon hosted by O'Connor & Associates on Jan. 12. The following are highlights from the forecast:

Although Houston experienced significant job losses in 2009, job loss and job creation in 2010 were about break-even. Positive job creation is anticipated for 2011, especially among larger companies. Also, there was a near-doubling in 2010 of the active rig count in the United States, as horizontal drilling activities continued to increase. This significant increase in drilling activity should generate additional business for oil service companies, which are a significant part of the Houston economy.
The Class A office market will perform better in 2011 than the Class B and Class C markets. Large corporations, which are active users of Class A space, are sitting on large reserves of cash, waiting for the opportunity to expand. Also, a limited construction of new Class A space means there is not a great need for absorption. As such, occupancy levels are expected to increase in the future. However, small businesses are still struggling to meet their capital needs. Although lenders are starting to make more loans, lending is still selective and tight. Vacancy rates in Class B and Class C buildings are expected to continue at current levels.
Active investors appear to be interested principally in acquiring core assets, even though these assets generally produce lower returns. There is a perception of certainty with these assets, which makes acquisition loans more readily available. Value-added assets, however, are still slow to move on the market because of a disparity between the pricing by sellers and buyers. Sellers are asking prices that they hope will recover some of their investment, while buyers are offering much lower prices because the limited availability of ready, attractive financing makes it more difficult to achieve adequate returns. Transactions involving "distressed" assets will eventually resume as sellers, buyers and lenders begin to acknowledge that we have reached the bottom of the downturn in the commercial real estate market.

Although the Houston office is not expected to return to the robust times occurring 5 years ago, it does appear that 2011 will be stronger than 2010, at least for properties that are well positioned in the market.

The Internet and Its Impact on Litigation: What Can Attorneys and Judges Cite in the Internet Era?

2011-02-02T00:00:00

The Internet and Its Impact on Litigation: What Can Attorneys and Judges Cite in the Internet Era?
by Jennifer L. Hebert
February 2, 2011

In today's world of online dictionaries and Wikipedia, online research and citation of online sources is becoming more prevalent in legal writing for both attorneys and judges. But what can and should you cite as an attorney? What should you avoid? And how do you know what's accurate and what's not? Unfortunately, there isn't a clear answer, but by following the tips below, you can make an informed decision when necessary:

Always check the applicable rules and professional rules of conduct for guidance. While most rules do not yet directly address these issues, they may at least provide some guidance.
Research your source to determine if it is reliable. If there is any question as to the reliability of the information, it most likely is best not to use that source and find an alternative source if one is available. While some online resources are generally reliable, others are not. For example, while it does occasionally contain mistakes, Wikipedia has been found to be accurate as any other encyclopedia in multiple studies. But because Wikipedia consists of user-generated content, you would be wise to double check any information received through Wikipedia with other sources when available.
Know what the courts are citing and what they are avoiding. For example, Wikipedia has been cited for general propositions by multiple courts but has not been widely accepted for use. Urbandictionary.com has also been cited by multiple courts, and Mapquest.com appears to be generally cited by courts throughout the country.
Be careful using online citations. Web addresses change on a regular basis, and as a result, your citations may not be correct by the time someone else is trying to find the source you are citing.
Most importantly, ask yourself whether the information you want to cite would be useful for the court. Is it something the court should consider? In general, if the information is collateral to the real issues involved, don't cite it. On the other hand, definitions or issues for which the court can take judicial notice can generally be cited without concern if the information comes from reliable source.

Overall, use common sense and good judgment and you should reach the right decision.

Workplace Romance: Avoid Problems—Send in the Love Contract

2011-02-07T00:00:00

Workplace Romance: Avoid Problems-Send in the Love Contract
by Joseph "Trey" L. Wood, III
February 7, 2011

In honor of Valentine's Day, when love is "in the air," it seems fitting to address an issue that affects employers every day: workplace romances.

At some point, an office or workplace romance will flourish at your place of business, if it has not already. It seems only logical since people spend large amounts of time together at work (most employees spend at least 160 hours per month at work), that relationships may develop outside the scope of normal business duties. The question then becomes, as an employer, how should a company handle these types of relationships?

First, as a rule of thumb, employees at the managerial and/or supervisor level should avoid office romances with subordinates. As with any romantic relationship, the odds that it will sour are high, and additionally, your company risks serious exposure to a sexual harassment lawsuit, even if the relationship was consensual. For instance, a subordinate employee could allege that she was afraid to lose her job if she did not participate in the relationship, regardless of whether that claim is true or not.

The most sensible position for any employer should most certainly be that employees should not engage in non-professional, romantic relationships with co-workers. To get this point across, many companies maintain an "anti-fraternization" policy to discourage these types of relationships. Despite best efforts, however, these types of policies do not always work. Although it can be helpful to have an anti-fraternization policy, it will not serve as a deterrent to individuals that are truly serious about exploring a non-work-related relationship with a co-worker.

Anti-fraternization policies may be totally disregarded by employees, and are difficult for employers to enforce. What then is the point of including such a policy in an employee handbook? At the very least, employers have a clear policy that has been communicated to employees which states that romantic relationships are discouraged (or forbidden entirely, depending on the policy language) and are a violation of company policy. If this does not work, what other options do you have as an employer to prevent a workplace romance from potentially leading to a lawsuit? The answer can be found in a newly developed idea that is becoming more common each day: the "love contract."

Employers are aware that workplace romances can, and in most instances, will cause problems. As such, when management learns of a workplace relationship, it is a good idea to have the employees involved sign what has become commonly known as the "love contract." This type of contract allows employees to put into writing the understanding that they are engaged in a consensual relationship. In addition to allowing employees to confirm that their relationship is consensual, it allows them to agree in writing that they will follow all company guidelines and policies dealing with harassment and discrimination. Further, the employees can agree that they will conduct themselves professionally at work, will not play favorites (particularly with each other at the expense of other employees), and will refrain from engaging in behavior that has no place in a work setting.

Workplace romances will happen, at some point or another. Incorporating anti-fraternization language into your policies, although a good idea, will not necessarily curb a relationship that does not want to be curbed. In extremely rare instances, your employees may even do a very good job of keeping the relationship a secret from everyone else, including management, and there will be no noticeable problems caused that can be attributed to the relationship. In a majority of cases however, the relationship will become common knowledge, and when that happens, consider sending in the "love contract" to protect yourself, especially once the love is gone.

Set Your Business Up Right and Avoid Bitter "Business Divorce" Down the Road

2011-02-09T00:00:00

Set Your Business Up Right and Avoid Bitter “Business Divorce” Down the Road
by Chris Hanslik
February 9, 2011

As an entrepreneur, you believe your new business venture will succeed. Why wouldn't you? You and your business partners have an idea for a product or service that the public wants and needs. Hours of careful deliberation have gone into the business plan and personal finances are the source of your initial capital.

During a business start up, funds are often limited and it's common for founders to avoid unnecessary expenses until the business is up and running. Don't, however, neglect the need for solid corporate formation documents when you start your business. Small- to mid-sized companies often fail to fully consider the implications of proper documentation on the affairs of the company and the potential problems that can arise down the road should animosity develop between the owners.

When owners cannot agree on the direction of the business it can lead to what some call a "Business Divorce" - which is essentially a "break up" of business partners.

Business Divorces come in all shapes and sizes and for countless reasons. The one universal truth is, that if not handled properly, the business itself can be the victim of the fight - and fighting among owners can put a drain on the company's resources and distract from running the business. The good news is that most Business Divorces can be avoided by following these tips:

Execute the proper formation documents at the beginning of the venture to include: By-Laws, Shareholder Agreement, Company Agreement, Employment Agreement, etc.
Document each partner's expectations related to owning and operating the business in the formation documents to include job titles and descriptions as well as compensation
Ensure the formation documents contain an easy to follow Buy-Sell provision
Ensure the formation documents contain an easy to follow "dead-lock" provision so that the business is not unnecessarily interrupted because the owners cannot agree on something
Ensure that any owner compensation changes are done on a proportionate basis
Don't terminate an owner who is also an employee unless good cause exists

It's important to remember that without these safeguards, when a dispute occurs the time and money spent fighting over who is entitled to what usually destroys the very thing the parties are fighting over - the company. With prudent planning on the front-end, a framework can be established to allow for a peaceful separation if needed.

Baby Steps to Business in Cuba?

2011-02-14T00:00:00

Baby Steps to Business in Cuba?
by Edgar Saldivar
February 14, 2011

On January 28, 2011, new rules on travel and money transfers to Cuba took effect, which amend portions of the Cuban Assets Control Regulations, 31 CFR part 515 (the "Regulations"). The Regulations are part of a comprehensive program related to the long-running U.S. embargo imposed against Cuba in response to the 1959 Cuban Revolution.

The new rules provide for more travel to Cuba for educational, cultural, religious, and journalistic activities. The following are some of the highlights of these changes:

Section 515.565 of the Regulations now provides a general license authorizing academic institutions to engage in travel-related transactions for certain educational purposes, instead of the previous and more restrictive requirement of a specific license.
The new general license also lets U.S. students study in Cuba through any sponsoring academic institution for a longer period of time than previously allowed.
A new category of travel under this section authorizes travel for educational purposes through organizations that promote "people-to-people" contact, not necessarily through academic institutions.
Section 515.566 also provides a general license to religious organizations to engage in travel-related transactions for religious purposes.

While the new rules on travel clearly implement policy changes designed to increase people-to-people contact and enhance the free flow of information between the two nations, some of the new rules on remittances, or cash payments, to Cuba reveal an intent to promote private enterprise in Cuba, which could lay the groundwork for further relaxing of trade restrictions. The new rules generally expand licensing of remittances to Cuba under section 515.570. Now under a general license, anyone subject to U.S. jurisdiction can make periodic payments of $500, up to four times a year, to Cuban nationals, not just family members, provided the recipient is not an official of the Government of Cuba or a prohibited member of the Cuban Communist Party, as defined by the Regulations. The new paragraph (b) explicitly allows for investments "to support the development of private businesses." Moreover, paragraph (g)(1) under the new rules states that specific licenses may be issued on a case-by-case basis for remittances to individuals or independent non-governmental entities "to support the development of private business, including small farms."

Although the new rules appear to ease the Cuba travel ban, it remains unclear what the effect on the overall trade embargo will be, specifically as it relates to U.S. business. A close reading of the new rules on remittances suggests that encouraging business in Cuba is part of the agenda. However, as with anything, things are always more complicated than they appear, and it will take greater efforts from both sides of the Florida Straits to really open up business between the two nations.

SCOTUS UPDATE: Does Freedom of Speech Trump the Freedom of Religion and the Right to Peaceably Assemble?

2011-02-18T00:00:00

SCOTUS UPDATE: Does Freedom of Speech Trump the Freedom of Religion and the Right to Peaceably Assemble?
by Jennifer Hebert
February 18, 2011

In the past few months, the United States Supreme Court (SCOTUS) has heard oral arguments in several noteworthy cases which could have profound impacts on various issues from freedom of speech and freedom of religion to privacy rights of corporations and immigration reform. Continue to watch our website for additional posting summaries and updates on these potentially landmark cases. First up — Snyder v. Phelps.

Snyder v. Phelps
(Oral Argument held on October 6, 2010)

The facts of this case have been all over the news in various forms since 2006 when Albert Snyder's son, Marine Lance Corporal Matthew A. Snyder, was killed in action while deployed in Iraq. Little did Snyder know that his son's tragic death would lead to one of the most watched Supreme Court cases in years, implicating the United States' sacred freedoms of religion and freedom of speech.

Basic Facts: At Matthew Snyder's military funeral, well known protester Fred Phelps and his follower's from the Westboro Baptist Church (known for disrupting military funerals all over the United States with anti-homosexuality protests) picketed carrying inflammatory signs and later published a controversial poem allegedly about Matthew Snyder's upbringing on the WBC's website.

Previous Litigation: Snyder successfully filed suit against Phelps and WBC for intentional infliction of emotion distress, invasion of privacy, and conspiracy based on their actions related to Matthew Snyder's funeral and was awarded $2.9 million in compensatory damages and $8 million in punitive damages from the jury at trial. On appeal, the Fourth Circuit Court of Appeals overturned the trial court judgment citing first amendment grounds and stating that Phelp's speech was protected as a result. The Fourth Circuit Court of Appeals also ordered Snyder to pay Phelp's legal bills of more than $16,000.

Question for the Court: The Supreme Court now must determine whether the First Amendment's freedom of speech guarantee should outweigh an individual's right to freedom of religion and peaceful assembly, as well as related issues such as whether a funeral should be afforded the same level of privacy one expects to receive in his home or is a public forum and whether the parents of a fallen soldier are "public figures" such that they have lesser privacy rights.

SCOTUS UPDATE: Do Corporations Have Rights of Privacy?

2011-02-22T00:00:00

SCOTUS UPDATE: Do Corporations Have Rights of Privacy?
by Jennifer Hebert
February 22, 2011

Federal Communications Commission v. AT&T, Inc.
(Oral Argument held on January 19, 2011)

Privacy rights of corporations have been at issue in numerous cases through the years, but this case takes a look specifically at whether a corporation has privacy rights similar to that of an individual.

Basic Facts: In 2004, AT&T voluntarily disclosed to the FCC that one of its subsidiaries had erroneously charged the Federal E-Rate program for services provided to a Connecticut school district. After the FCC opened an investigation and requested voluminous amounts of internal documentation from AT&T, the FCC and AT&T reached a settlement of the matter. The settlement, however, was not well-received by Comp-Tel, a trade association representing long-distance telephone service providers, local phone carriers, and other AT&T competitors, and Comp-Tel requested documents from the FCC under the FOIA. The FCC refused to produce sensitive cost and billing data it had received from AT&T but also refused AT&T's request to withhold the rest of the investigatory file, which AT&T claimed was subject to Exemption because it "could reasonably be expected to constitute an unwarranted invasion of personal privacy." The FCC explicitly rejected AT&T's claim of personal privacy and stated that the exemption applied only to the personal privacy rights of individuals.

Previous Litigation: After AT&T filed an unsuccessful appeal with the FCC, the Third Circuit Court of Appeal unanimously disagreed with the FCC's interpretation of the FOIA exemption at issue and held that the Administrative Procedure Act in which the FOIA is included specifically defines "person" to include a corporation.

Question for the Court: Does a certain Freedom of Information Act exemption which exempts from disclosure information compiled for law enforcement purposes when disclosure of such information could be considered an unwarranted invasion into "personal privacy" apply to corporations?

SCOTUS UPDATE: Another Controversial Arizona Immigration Law Examined

2011-03-01T00:00:00

SCOTUS UPDATE: Another Controversial Arizona Immigration Law Examined
by Jennifer Hebert
March 1, 2011

US Chamber of Commerce v. Whiting
(Oral Argument held on December 8, 2010)

As immigration law issues continue to pervade the nightly news, the first of several immigration laws enacted by the state of Arizona over the last few years is now set for contemplation by the Supreme Court.

Basic Facts: In 2007, Arizona (along with the governor of Arizona at the time, Janet Napolitano, now U.S. Secretary of Homeland Security) enacted the Legal Arizona Workers Act, which requires employers in Arizona to verify worker's legal employment status through a federal electronic verification system (E-Verify) and imposes civil fines on businesses (including revocation of state licenses to do business) who employee illegal aliens. Despite the fact that Arizona has yet to attempt to enforce the law against any employer, the Act was not well received by business, civil rights or immigration organizations in the state who argue that the Act is preempted by federal immigration law, including the 1986 Immigration and Reform Act.

Previous Litigation: The Legal Arizona Workers Act has previously been upheld by both the Arizona District Court and the Ninth Circuit Court of Appeals partially due to lack of specific preemptive intent by the U.S. Congress. The Ninth Circuit also specifically held that regulating the employment of unauthorized aliens was within a state's police powers.

Question for the Court: Is the Legal Arizona Workers Act preempted by Federal immigration law?

Update: Employers’ Regulation of Employees’ Social Media Use

2011-03-01T00:00:00

Update: Employers' Regulation of Employees' Social Media Use
by Joseph "Trey" L. Wood, III and Chris Hanslik
March 1, 2011

Our November 17, 2010 blog entry titled "NLRB's After Us and We're Not Even Unionized" indicated:

As an update to this, the NLRB and the employer, AMR have settled the matter prior to it being heard by an administrative law judge. Therefore, we will not know which direction the ALJ would have ruled.

In another recent case, the Eleventh Circuit Court of Appeals has upheld an employer's right to regulate the type of material that an employee posts on her Myspace page. In Marshall v. City of Savannah, the female firefighter employee posted some questionable photos of herself on the internet. Her employer, being informed of this by a co-worker, was able to view the photos because her status on the site was not "private," allowing anyone to see them. The employer decided to issue the employee an oral reprimand, the lowest form of punishment available, based on the photos' bringing "discredit to the City and Savannah Fire Department." During the counseling session, the employee became very abusive and hostile and was, accordingly, terminated. She sued her employer claiming sex and race discrimination. While the Court sided with the employer, it did so only because the female employee was unable to show that men were treated more favorably than she was.

While this case is less about an employer's right to regulate an employee's social media content and more about the individual's inability to prove any discrimination, it is a helpful ruling for employers. However, we can be certain that the NLRB, which will not be bound by the 11th Circuit' ruling, will continue to push the boundaries of the National Labor Relations Act, especially Section 7 of the Act which protects employees' concerted protected activities. Given the fact that the Board now enjoys a Democratic majority along with an Administration that is pro-labor, employers, both unionized and non-union, would be wise to pay careful attention to which way the wind is blowing.

David Bond Honored by Texas Bar Foundation

2011-03-01T00:00:00

Edgar Saldivar Appointed to NHPO Executive Board

2011-02-18T00:00:00

SCOTUS UPDATE: Court Rules in Favor of Funeral Protestors

2011-03-02T00:00:00

SCOTUS UPDATE: Court Rules in Favor of Funeral Protestors
by Jennifer Hebert
March 2, 2011

On Wednesday, March 2, 2011, the United States Supreme Court issued a ruling in favor of the controversial leader of the Westboro Baptist Church (Fred Phelps) in the controversial Phelps v. Snyder litigation.

As reported on this website on February 18, 2011, the linchpin of the case involved a determination of the right to free speech versus the rights of freedom of religion and freedom to peaceably assemble, as well as implicating privacy rights for the families of fallen soldiers. In its opinion, the eight-member majority led by Chief Justice John Roberts (only Justice Samuel Alito dissented) found in favor of Phelps and overruled a jury verdict in favor of the Snyder family in the amount of $5 million. The Court, being careful to distance themselves from any implication that they approved of Phelp's actions, relied on First Amendment principles and emphasized the important of protecting free speech, even when hurtful. While noting that Phelps and his followers' actions did inflict pain on the Snyder family, the court also implied that the facts of this case affected their decision primarily because the protest took place virtually out of sight of the Snyder family and attendees of Matthew Snyder's funeral and there was no indication that the protest actually interfered with the funeral.

Supreme Court Ruling Bolsters Need For Thorough Investigations and Training

2011-03-07T00:00:00

Supreme Court Ruling Bolsters Need For Thorough Investigations and Training
by Joseph "Trey" L. Wood, III
March 7, 2011

Last week the Supreme Court held that an employer may be liable for the discriminatory motives of a supervisor, even when the individual making the employment decision had the purest of motives. The Court's ruling will trigger human resources departments everywhere to reconsider employment-related decisions where supervisors influence or even provide input into the ultimate decision.

The Court's decision in Staub v. Proctor Hospital involved what is known as the "cat's paw" theory in which many courts have found liability against an employer even when the ultimate decision maker is admittedly unbiased, if the affected employee's supervisor harbors discriminatory animus. Staub actually involved a claim of discrimination under USERRA, the law protecting employees from discrimination based upon their service in the military. In the case, the employee's immediate supervisor engaged in a course of conduct against the employee which clearly showed his anti-military feelings. When the employee violated one of the supervisor's warnings to report to him whenever the employee had completed a task, the human resources manager terminated the employee with little investigation into the matter, relying upon a review of the employee's personnel file and recommendations from the supervisor. The employee's involvement with the military played no role in the human resources manager's decision to terminate Staub. However, the Supreme Court found that under such circumstances, the employer may be held liable for discrimination.

This decision serves as a sobering reminder that it is imperative that supervisory personnel be adequately trained on what laws protect employees from discrimination. It also means that the job of human resources professionals has gotten much harder. While the Supreme Court refused to adopt a steadfast rule immunizing employers who perform independent investigations of the conduct that led to the adverse employment action, it did provide some guidance:

"Thus, if the employer's investigation results in an adverse action for reasons unrelated to the supervisor's original biased action (by the terms of USERRA it is the employer's burden to establish that), then the employer will not be liable. But the supervisor's biased report may remain a causal factor if the independent investigation takes it into account without determining that the adverse action was, apart from the supervisor's recommendation, entirely justified."

Accordingly, human resources will now, apparently, have to question the motives of any supervisor or supervisors who are claimed to have made, caused or influenced an adverse employment-related decision to be made.

Unanimous Jury Verdict in Contract and Non-Compete Case

2011-03-11T00:00:00

SCOTUS UPDATE: Corporations Do Not Have Personal Privacy Rights Under the FOIA

2011-03-16T00:00:00

SCOTUS UPDATE: Corporations Do Not Have Personal Privacy Rights Under the FOIA
by Jennifer Hebert
March 16, 2011

On March 1, 2011, the Supreme Court issued a unanimous ruling (with Justice Kagan not participating) holding that corporations do not have personal privacy rights for purposes of Exemption 7(C) of the Freedom of Information Act (FOIA). In Federal Communications Commission v. AT&T, Inc., the court overturned the Third Circuit's previous ruling that AT&T was subject to the "personal privacy" exemption allowed by the FOIA and therefore could withhold documents otherwise subject to an FOIA request. While the Third Circuit had held that AT&T was subject to the exemption because the term "person" as defined in the FOIA included corporations, the Supreme Court disagreed.

In fact, the Supreme Court expressly refused to use the definition of "person" included in the FOIA to infer the meaning of "personal" noting that while words with the same root may have similar meanings, adjectives sometimes "acquire distinct meanings of their own." The Court also noted that "personal" is often used "to mean precisely the opposite of business-related" and dictionary definitions suggest that "‘personal' does not ordinarily relate to artificial ‘persons' such as corporations." As a result, the Court refused to find that corporations such as AT&T have personal privacy rights under the FOIA.

Gulfstar Group Announces the Sale of Delcor USA, Inc.

2011-03-21T00:00:00

EEOC’s ADA Amendment Act Regulations Finalized

2011-03-29T00:00:00

EEOC's ADA Amendment Act Regulations Finalized
by Joseph "Trey" L. Wood, III
March 29, 2011

On Friday, March 25, 2011, the EEOC published its finalized regulations governing the Americans with Disabilities Act Amendment Act (ADAAA). The final regulations may be viewed at www.ofr.gov. Briefly, the highlights of the new regulations are as follows:

"Substantially Limits": The new regulations significantly relax the definition of what impairments "substantially limit" major life activities. The Amendments Act also clearly stated that the Supreme Court's interpretation of the term "substantially limits" as meaning "severely restricts" was too high of a standard and the ADAAA intended to lower that standard. While the Act itself did not offer guidance as to where that standard should be, the proposed regulation specifically states that in order to be "substantially limiting" an impairment need not severely restrict or significantly restrict performance of a major life activity. Certainly, this is a far lower standard than that previously held by the Supreme Court and the EEOC. The proposed regulations do identify that temporary, non-chronic impairment of short duration with little or no residual effects such as a cold or common flu, a sprained joint or a broken bone that is expected to heal completely will usually not substantially limit a major life activity. These conditions could be viewed as both minor and transitory but under the language of the regulations, few other ongoing conditions will likely be excluded if they are found to limit a major life activity or bodily function. They require courts to ignore whether "mitigating measures," such as medication, ameliorate an impairment's effects. Going forward, the evaluation of a "substantial limitation" must be based on the individual's NON-MEDICATED condition. The regulations go on to state that an impairment does not have to "prevent, or significantly or severely restrict" a major life activity to be considered a disability.

Episodic Impairments: The proposed regulations also indicate that an impairment that is episodic or in remission is a disability if it would substantially limit a major life activity when active. The EEOC then goes on to list several examples such as epilepsy, cancer, depression, hypertension, asthma, bipolar disorder, and post-traumatic stress disorder.

Examples of Impairments Qualifying As Disabilities: The new regulations also list several impairments that will ordinarily qualify as disabilities. They include "deafness, blindness, intellectual disability (formerly known as mental retardation), partially or completely missing limbs, mobility impairments requiring use of a wheelchair (a mitigating measure), autism, cancer, cerebral palsy, diabetes, epilepsy, HIV/AIDS, multiple sclerosis, muscular dystrophy, major depression, bipolar disorder, post-traumatic stress disorder, obsessive-compulsive disorder, and schizophrenia." In the past, there were no "per se" disabilities.

"Major Life Activities": The EEOC's regulations incorporate the ADAAA's expanded definition of major life activities, but have also added reaching, sitting and interacting with others as major life activities. In addition, the regulations have expanded the list of major bodily functions to include hemic, lymphatic and musculoskeletal systems.

"Regarded As" Having a Disability: The proposed regulations provide several examples of transitory and minor impairments, such as a broken or sprained bone that is expected to heal normally. The regulations also provide examples of impairments that the EEOC would not consider minor and transitory, such as Hepatitis C or heart disease. The "regarded as" employee is not entitled to reasonable accommodation and must establish he or she is "qualified" to do the job.

Five Rules of Construction: The new regulations also detail five rules of construction for determining whether an impairment limits a major life activity.

1. Focus on discrimination-not disability. In ADA cases, the focus should be on whether or not discrimination occurred and not on whether the individual meets the definition of disability.

2. Rejection of Supreme Court. An individual whose impairment substantially limits a major life activity need not also demonstrate a limitation in the inability to perform "activities of central importance to daily life."

3. One impairment is enough. An impairment that substantially limits one major life activity need not limit any other major life activities or impact work to be considered substantially limiting.

4. Use your common sense. When comparing an individual's limitation to determine whether or not it is substantially limited, it should be compared to the general population and a common sense analysis without resorting to scientific or medical evidence may be followed.

5. What is transitory? The regulation clarifies that impairments that last for fewer than six months may still be substantially limiting. Therefore, it is clear that at this point in time, the EEOC is not adopting a bright line rule that conditions lasting six months are transitory in nature and therefore not covered.

The EEOC also explains that an employer may regard an individual as disabled if it takes an action based on a symptom of an impairment. The EEOC provides examples of how this applies. In one example, an employer refuses to hire someone with a facial tic who does not know the facial tic is cause by Tourette's Syndrome. The EEOC would consider the employer in this hypothetical to have regarded the individual as disabled even though it did not know the individual had Tourette's.

The Immigration Dilemma: Ways to Protect Yourself from Liability Under US Immigration Laws

2011-03-30T00:00:00

The Immigration Dilemma: Ways to Protect Yourself from Liability Under US Immigration Laws
by Joseph "Trey" L. Wood, III
March 30, 2011

Under the Immigration Reform and Control Act (IRCA) employers are often placed between a rock and a hard place when confronted with an employee who may be unauthorized to work in the United States. This article will explain what employers should do in situations where they suspect their employees may not be authorized to work in this country.

SITUATION 1: THE ROCK
In cases with suspicious circumstances or employee fraud, an employer is not liable for making further investigations of an employee's status. However, employers risk liability if they unreasonably investigate an employee's authorization status by requesting documents and verification without reason. To illustrate, the most common actions which may result in liability under IRCA are:

A request for specific documentation can be considered "document abuse" if the request is made for the purpose of discriminating against an individual on the basis of national origin or citizenship status
An employer's refusal to accept documents, during the employment eligibility verification procedure, that are acceptable verification documents under the law, and that appear on their face to be genuine
Re-verifying a permanent resident only because his or her green card has expired.

SITUATION 2: THE HARD PLACE
Despite the fact that employers may risk liability if they investigate employees without reason, employers still have a duty under IRCA to review work-authorization documents for fraud. Employers are also liable under IRCA for "knowingly" hiring unauthorized aliens, or for continuing to employ such aliens after learning that they are not authorized to work. Employer liability is not limited to those situations where it has actual knowledge that an employee does not have work authorization. "Knowledge" is defined under IRCA to include situations where the employer deliberately fails to investigate suspicious circumstances. The following are examples of constructive knowledge:

The employer fails to complete Form I-9 and it turns out the employee is unauthorized to work
The employer continues to employ the employee without re-verifying his or her employment eligibility after the expiration date for employment eligibility listed by the alien in Section 1 of the I-9 form
The employer has information available to it that indicates the employee is not authorized to work

AVOIDING THE ROCK AND THE HARD PLACE
A general rule of thumb is that employers should not make further inquiries regarding an employee's work authorization based on mere rumors around the workplace. However, if there is conflicting documentation or reliable information becomes available to the employer indicating immigration irregularities, further inquiries are permissible. Employers should remember that they are not expected to be detectives ferreting out all unauthorized workers from the work place. Therefore, when an employee presents documents evidencing employment eligibility from the acceptable list of documents and those documents appear genuine, employers can consider those documents as proof of the employee's eligibility to work in the United States. Absent clear evidence to the contrary, the employer should avoid inquiring further about the employment eligibility of a worker.

Walter Ulrich video

Steve Stewart video

Q&A video

The Hazard of Dukes

2011-04-06T00:00:00

The Hazard of Dukes
by Chris Hanslik & Joseph "Trey" L. Wood, III
April 6, 2011

On March 29 the United States Supreme Court heard oral arguments in Dukes v. Wal-Mart Stores, Inc. The class action lawsuit involves, potentially, 1.5 million female Wal-Mart employees and ex-employees claiming gender discrimination in terms of pay and promotions. The potential liability Wal-Mart faces is in the billions of dollars. However, the case is more significant for class action procedural issues than for any substantive employment-related issues.

The lawsuit has been certified as a class action under two different procedural rules. First, the suit was certified under Federal Rule of Civil Procedure 23(b), which relates only to class action claims for injunctive or declaratory relief. Wal-Mart has argued that the plaintiffs are seeking monetary damages which are clearly more important than any injunctive or declaratory relief which they are seeking. The Ninth Circuit Court of Appeals, which affirmed the class action, indicated that the plaintiffs' claims for monetary damages did not "predominate" over their request for other relief.

The Supreme Court also ordered the parties to brief and argue whether certification is consistent under Federal Rule of Civil Procedure 23(a), which sets forth the class action requirements of numerosity, commonality, typicality and adequacy of representation. It is difficult to conceive of a set of circumstances under which 1.5 million females, located in stores across the country and supervised by thousands of different managers, can meet the rule's requirement that their claims of gender bias all arose from some common plan or scheme stemming from Wal-Mart's corporate headquarters.

According to those who were present at the oral argument, the questions posed by the Justices to the attorneys for both sides seemed to be more sympathetic to Wal-Mart. Several justices sharply questioned whether such a large number of women could be discriminated against without a showing of an "unlawful" policy coming from corporate headquarters. The court is likely to issues a decision in the case prior to the end of its term in late June. We will be sure to update you as soon as the ruling is announced.

Savor the Hope: Dining for Devereux

2011-01-27T00:00:00

Savor the Hope:
Dining for Devereux Gala
January 27, 2011

BoyarMiller is a proud sponsor of Devereux Texas' Savor the Hope Gala held at the historic Rice Hotel.

The event benefits the Devereux
Texas Treatment Network which
is part of a nationwide network of
programs treating individuals of
all ages who have a wide range of emotional, behavioral, developmental, psychiatric and chemical dependency disorders.

PHOTOS
top right - Trey & Stacey Wood with Catherine and Chris Hanslik
bottom right - Chris and Catherine Hanslik with Jeff Brown

BoyarMiller 20th Anniversary Celebration

2011-02-22T00:00:00

BoyarMiller 20th Anniversary
Celebration
February 22, 2011

In February 2011, more than 200 clients and friends of the firm joined with BoyarMiller to celebrate the firm's 20th Year in Business.

Yet Another Reason for Employee Handbook Audits

2011-04-14T00:00:00

Yet Another Reason for Employee Handbook Audits
by Joseph "Trey" L. Wood, III
April 14, 2011

While union membership has declined steadily over the past several decades, it is clear that the current administration is an advocate for organized labor. President Obama has appointed two of the most overtly pro-union members to the National Labor Relations Board (NLRB) that we have seen in years. Craig Becker, one of Obama's early appointees who was rejected by the Senate but appointed during the 2010 Easter recess, serves as associate general counsel to the Service Employees International Union and the AFL-CIO. It is his stated opinion that employers "should be stripped of any legally cognizable interest in their employees' election of representatives." Translated — employers should not be allowed to oppose union organizing drives. While pro-union legislation has failed to garner adequate support in Congress, the NLRB has the authority to enact procedural changes that could short circuit what unions are clamoring for-greater employee rights at the expense of employers.

This fact is certainly being reflected in the NLRB's rulings. Recently, the NLRB found that the existence of three objectionable rules contained within an employee handbook were sufficient to overturn the results of a decertification election. In Jurys Boston Hotel, 356 NLRB No. 114 (2011), the employer had voluntarily recognized the union as its employees' bargaining representative. Two years later, the employees filed a petition seeking to decertify the union and the Board scheduled the requested election. The hotel had a 63 page employee handbook containing the regular rules and regulations that might be found in any typical handbook. However, after the election petition was filed, the union filed an unfair labor practice charge challenging three policies within the handbook: 1) No Solicitation Policy; 2) No Loitering Policy; and, 3) Grooming Policy banning wearing of buttons. Those policies had been in effect for two years without the union raising any complaints prior to the requested election. The employer, in response, voluntarily revised two of the policies and deleted one in its entirety. That should have fixed the problem, right? Wrong.

While the original hearing officer found that the policies were objectionable, they "did not require setting aside the election because they were promulgated before the employer recognized the union, were not enforced or cited by the employer during the critical [election] period, and were not shown to have deterred any employee from exercising Section 7 rights."

The NLRB majority overturned the hearing officer's ruling, finding that the policies in question were objectionable and that "[e]ach of these rules, in force during the critical election period, reasonably tended to interfere with employee free choice." The Board also found that the fact that the election was decided by a single vote proved that the rules could have affected the results.

This all points to the inescapable conclusion that the NLRB will do whatever it can to promote the growth of organized labor. Accordingly, employers should do whatever they can to ward off potential claims of unfair labor practices, including having their handbooks reviewed to make sure they are compliant with current labor laws.

"No Match" Letters Return

2011-04-26T00:00:00

"No Match" Letters Return
by Joseph "Trey" L. Wood, III
April 26, 2011

After a three-year hiatus, the Social Security Administration (SSA) recently announced that it will again begin sending "No Match" letters to employers.

These letters are used to advise employers that there is a discrepancy in the records of the SSA between the name of an employee and the Social Security number listed for that employee on the payroll taxes submitted by the employer. The SSA suspended sending out these letters for the past three years during litigation surrounding the Department of Homeland Security's (DHS) proposed regulation that would have provided a "safe harbor" for employers if they followed certain procedures in responding to "No Match" letters. The DHS has since withdrawn that proposed regulation.

If you receive a "No-Match" letter from the SSA, you should first check your own records to make certain that the problem does not stem from transposing a number or some other clerical error. If that is not the case, you should follow up with the employee to check to make certain that the information that he/she provided to you is correct. If the employee provided the information that is in question, you should inform the employee of the discrepancy and have the employee resolve the issue with the SSA within "a reasonable period of time." A reasonable amount of time is generally two weeks. After receiving the updated information from the employee, follow up with the SSA to verify any new information or documentation provided by the employee. If the employee fails to provide a satisfactory response, you, as the employer, arguably possess "constructive knowledge" that the employee may not be eligible to work in the United States. Accordingly, at that time the only option may be termination.

Chris Hanslik Featured Speaker at South Texas College of Law 2011 Spring Awards Ceremony

2011-04-21T00:00:00

Chris Hanslik Featured Speaker at South Texas College of Law
2011 Spring Awards Ceremony
April 21, 2011

Chris Hanslik served as the featured alumni speaker at the STCL 2011 Spring Awards Ceremony where awards were presented to third year (graduating)
students, including academic honors, advocacy awards, pro bono honors and community service awards.

Gulfstar Group Announces the Sale of Lone Star Overnight

2011-05-11T00:00:00

Welcome W. Wilson, Sr. Honored by The Houston Technology Center as 2011 Entrepreneur of the Year

2011-05-17T00:00:00

Edgar Saldivar Presents to National Hispanic Professional Organization Educational Breakfast

2011-05-28T00:00:00

Edgar Saldivar Presents "Insights on Cuba and the Impact of the New Cuban Rules" to National Hispanic Professional Organization at Educational Breakfast
May 28, 2011

Edgar Saldivar will present recent changes to U.S. laws and how they affect travel and business in Cuba. Edgar, an Associate in BoyarMiller's Litigation Group, also serves on the NHPO's Board of Directors.

May 28, 2011 at 10:00 am
Doneraki on 2836 Fulton, Houston, TX 77009

South Texas College of Law 26th Annual Real Estate Law Conference

2011-06-02T00:00:00

South Texas College of Law
26th Annual Real Estate Law Conference
June 2 - 3, 2011

Landlord/tenant dispute
June 2, 12:00 pm

Presentation by Lee Colllins

Specialty Leases: Hospitality
June 2, 2:45 pm

Presentation by Tim Heinrich

OSHA Recordkeeping Site for Employers

2011-05-20T00:00:00

OSHA Recordkeeping Site for Employers
by Joseph "Trey" L. Wood, III
May 20, 2011

You may have heard, or read in my last blog entry, that the Department of Labor (DOL) has come out with an "App" to assist employees in keeping track of their time for wage and overtime matters.

Not to appear too one-sided, the DOL just came out with a website to assist employers with recordkeeping for OSHA matters. This directly from the DOL's press release:

"The OSHA Recordkeeping Advisor helps employers and others responsible for organizational safety and health quickly determine whether an injury or illness is work-related; whether a work-related injury or illness needs to be recorded; and which provisions of the regulations apply when recording a work-related injury or illness. To help employers in making these determinations, the OSHA Recordkeeping Advisor relies on their responses to a series of pre-set questions."

The website may be found at http://www.dol.gov/elaws/osharecordkeeping.htm.

That's nice, but not as cool as an app.

Refelctions of a "Foreigner"on OTC

Reflections of a "Foreigner" on OTC

2011-05-20T00:00:00

Reflections of a "Foreigner" on OTC
by Gary W. Miller
May 20, 2011

Assuming that 75,000 attendees can't be all wrong, it was a good year for the 2011 Offshore Technology Conference held in Houston. Much of my focus was on our visitors from the UK and especially Aberdeen, so I was a bit of a foreigner among a close knit group of locals.

Once again, the Post Oak Hilton was sold out with participants from Scotland, and in visiting with more than just a few, I would characterize the mood among the attorneys as cautiously optimistic and the attitude among the business owners as somewhat more upbeat. Bank lawyers were more cautious and hopeful, cautious about the Scottish banks' ability and willingness to lend, but hopeful that their reorganization would allow a return to normality. Merger and Acquisition attorneys were beginning to see some action, but still longed for the days just a few years ago when middle market deals were their constant companion. Lawyers and business people alike were happy to be a year down the road from the Deepwater Horizon, and optimistic that drilling should return to reasonable levels in the Gulf.

The week started on Saturday morning with the OTC kickoff breakfast sponsored by Houston Grampian Association and the British American Business Council. Bob Ruddiman, Head of Energy with McGrigors, focused on changing times as the key note speaker and was the first attorney I have heard give the address. For the visitors, there was Texas golf at its best that followed, as well as a chance to get some quality personal time with their business associates from Aberdeen. From there, it was seminars on the new UK Anti-Bribery laws presented by Aberdeen attorneys from two firms, the always rather excellent Simmons and Paull & Williamsons cocktail parties, as well as a variety of dinners, lunches and cups of coffee. Absent this year were our friends from the Schjødt firm in Norway, but we will look for them again next year.

All in all, for an American lawyer placing himself in the middle of hundreds of overseas visitors, OTC was a good time to renew old friendships and a time to be cautiously optimistic about the times to come.

Independent Insurance Agents of Houston Employment Law Seminar

2011-05-24T00:00:00

Independent Insurance Agents of Houston
Employment Law Seminar

May 24, 2011

BoyarMiller's Trey Wood and Michel Perez conduct a full-day seminar on Employment Law for IIA Houston. They will provide current updates in the law on topics including:

The Employment Verification and I-9 Process
Paying Employees in Compliance with Wage and Hour Laws
Discrimination, Harassment and Retaliation
Dealing with Sick and Injured Employees under the ADA and FMLA

For more information, click here.

Houston Attorney Networking Group February Happy Hour

2011-02-17T00:00:00

Houston Attorney Networking Group June Happy Hour

2011-06-07T00:00:00

BoyarMiller Partners with HBA for Habitat for Humanity Build

2011-05-21T00:00:00

Supremes OK Arizona’s Legal Arizona Workers Act

2011-06-01T00:00:00

Supreme's OK Legal Arizona Workers Act
by Joseph "Trey" L. Wood, III
June 1, 2011

The Legal Arizona Workers Act (LAWA) requires the Attorney General or County Attorney to investigate all complaints made by anyone against an employer relating to the employment of unauthorized aliens. The U.S. Immigration and Customs Enforcement (ICE) agency and local enforcement will be informed of valid complaints, and the County Attorneys may file charges against the employer. The Act also provides for a progressive penalty system that depends on whether the violating employer "knowingly" or "intentionally" employed the unauthorized alien. The Act applies to Arizona employers of all sizes. The other major provision of the Act requires all employers use the federal E-Verify system to verify the employment eligibility of all new hires beginning January 1, 2008. LAWA was challenged by business and civil rights groups alleging that the Act was preempted by federal law and would lead to discrimination by employers.

Lower courts found that LAWA was not preempted by the Immigration Reform and Control Act of 1986 (IRCA) and that, specifically, the statute was a "licensing" statute that is expressly permitted by that law. On May 26, 2011, The United States Supreme Court affirmed the decisions of the lower courts noting that "Arizona has taken the route least likely to cause tension with federal law."

This ruling will have an impact beyond the borders of Arizona. Many states struggling with illegal immigrant issues have been awaiting this ruling in order to determine whether they should implement their own laws to help curb the hiring of unauthorized workers. However, it should be noted that this ruling does not address Arizona's other controversial immigration statute, S.B. 1070, which requires law enforcement officials to attempt to determine the immigration status of any person that they believe to be an alien unlawfully present in the United States. Stay tuned for updates on that incendiary topic.

Back to School With SEARCH 2011 Uniform Drive Kick Off Party

2011-06-28T00:00:00

Back to School With SEARCH 2011 Uniform Drive Closing Party

2011-07-26T00:00:00

Upswing in Logistics Activity Bodes Well for Port of Houston

2011-05-23T00:00:00

Upswing in Logistics Activity Bodes Well for Port of Houston
by Gus Bourgeois
May 23, 2011

Research firm Armstrong & Associates (www.3plogistics.com) reported that most third party logistics providers (3PL) experienced improved financial performance in 2010 and into 2011. In its annual report released May 20, 2011, Armstrong & Associates noted that while both revenues and profits of 3PL's were generally higher during those time periods, the trend was strongest in the international transportation management segment.

Meanwhile, in an unrelated report, the Los Angeles Economic Development Corporation recently predicted that the volume and value of international trade in the Los Angeles Customs District (including the Long Beach Port, which has long been the dominant US port for imports from Asia) is expected to grow in 2011. But Donald Sachs, the executive director of the Industry Manufacturers Council, cautioned about whether Southern California would continue to reap the benefits of the resurgence in international trade. "I hate to rain on their parade," he said. "But until we know what effects the widening of the Panama Canal will have, we won't really have a clear picture." According to the Inland Valley Daily Bulletin, which reported the story, Sachs is concerned that allowing bigger ships to go through the canal will give a lot of the local Customs District's business to Texas ports.

The upshot of these reports? With economic trends now firmly reflecting a rebound in international trade, and with the long awaited completion of the Panama Canal expansion only three years away, the hope that the Port of Houston will reap immediate and significant benefits from the expansion — at the peak of the economic cycle — is getting closer to reality.

BoyarMiller Represents GEG Group in Lease for L.A. Restaurant Concept, Katsuya by Starck Houston

2011-06-03T00:00:00

Chris Hanslik Appointed to Texas State Bar Committee on Administration of Rules of Evidence

2011-06-06T00:00:00

Andrew Pearce to Co-Chair Houston Bar Association Fun Run

2011-06-07T00:00:00

BoyarMiller Wins Summary Judgment for Group of Doctors

2011-06-07T00:00:00

Employers Lose Fight Against Concealed Carry License Holder Employees in Texas

2011-06-08T00:00:00

Employers Lose Fight Against Concealed Carry License Holder Employees in Texas
by Joseph "Trey" L. Wood, III
June 8, 2011

On June 2, the Texas Legislature passed S.B. 321, which prohibits employers from denying employees with concealed carry handgun licenses the ability to carry a firearm in a locked, privately owned automobile in a parking lot, garage or parking area that the employer provides to employees. Employers may still prohibit the possession of firearms within their offices or places of business, where the possession of a firearm is prohibited by state or federal law, or if the vehicle is owned or leased by the employer. The Bill also provides for exceptions pertaining to property subject to an oil, gas, or other mineral lease and property owned or leased by a chemical manufacturer or oil and gas refiners.

Opponents of the new legislation felt that it would increase greater workplace violence liability issues for employers. In response to this, the Bill grants immunity to employers, except in cases of "gross negligence," from civil actions for personal injury, death or property damages resulting from an occurrence involving a firearm that the employer is required to allow on the employer's property under the new law. This new Act will take effect on September 1 if it is signed by Texas Governor Rick Perry.

ULI Young Leaders - Legal Aspects of a Real Estate Acquisition: From Contract to Closing

2011-06-28T00:00:00

United Kingdom's Bribery Act 2010 to Become a Law

2011-06-14T00:00:00

United Kingdom's Bribery Act 2010 to Become Law
by Gus Bourgeois
June 14, 2011

After years of discussion, debate and delay, the United Kingdom's Bribery Act 2010, which has been described as the toughest anti-corruption legislation in the world, will finally become law effective July 1, 2011. Although the Act covers the crime of bribery broadly, the most important provisions of the Act from the point of view of international businesses are those dealing with bribery of a foreign public official (Section 6 of the Act) and failure of a commercial organization to prevent bribery on their behalf (Section 7 of the Act).

A person who promises, offers or gives an improper financial or other advantage to a foreign public official, either directly or through a third party, can be found guilty of bribery of a foreign public official. A foreign public official is defined as "an individual holding legislative, administrative or judicial posts or anyone carrying out a public function for a foreign country or the country's public agencies or an official or agent of a public international organization". There is no requirement to show that the bribe resulted in the public official acting improperly. This Section applies to a person who (1) committed the act in the UK, or (2) acted outside of the UK if such act would have constituted a crime if committed in the UK, if the person had a "close connection" to the UK, which includes being a British citizen or resident, or a company incorporated in the UK. Unlike the U.S. Foreign Corrupt Practices Act, there is no exception for "facilitation payments" — making the Bribery Act 2010 much more comprehensive in its scope than the FCPA.

The crime of failure of commercial organizations to prevent bribery on their behalf applies not only to the organization itself, but to its employees and agents on an individual basis, and the employer can be held vicariously liable for the acts of its employees, agents and subsidiaries. This is a strict liability offense, so there is no need to prove intent in order to reach a finding of guilt. This Section applies to any commercial organization which has business in the UK, without regard to location; therefore, according to the Archbold Review, "...a German business with retail outlets in the UK which pays a bribe in Spain could, in theory at least, face prosecution in the UK". However, the commercial organization has a defense if it can show that it had implemented adequate procedures to prevent persons associated with it from engaging in such conduct.

These provisions may have a significant impact on the compliance efforts of international businesses which employ British citizens or residents, or which conduct business in the UK (whether directly or through subsidiaries or affiliates). It is expected that such businesses will attempt to impose their internal compliance regimes on suppliers by contract, which may lead to higher costs to the supplier and a "shaking out" of smaller suppliers who do not have the financial and compliance resources to satisfy such contractual requirements.

Dukes Not So Hazardous After All

2011-06-24T00:00:00

Dukes Not So Hazardous After All
by Joseph "Trey" L. Wood, III
June 24, 2011

As an update to our blog posting on April 6, the United States Supreme Court has ruled that a district court improperly certified a nationwide class of female employees of Wal-Mart who were claiming sex discrimination in the company's pay and promotion practices. In Dukes v. Wal-Mart, the Court unanimously ruled that the lower courts improperly certified the lawsuit under Rule 23(b), which relates only to class action claims for injunctive or declaratory relief, but was split along ideological lines (5-4) regarding the issue of whether the matter was improperly certified as a class action under Rule 23(a), which sets forth the four threshold class action requirements for certifying a class action of numerosity, commonality, typicality and adequacy of representation.

Writing for the majority, Justice Antonin Scalia explained that of Rule 23(a)'s four threshold requirements, the "crux" of the Dukes case turned on commonality — namely, whether there were "questions of law or fact common to the class." In addressing this question, the Supreme Court adopted wholesale the approach that it previously had taken in General Telephone Co. of Southwest v. Falcon, 457 U.S. 147 (1982), an approach which the Ninth Circuit, in its en banc opinion, had partially rejected as dicta. The Supreme Court's majority held that in order to certify a class, plaintiffs must "affirmatively demonstrate" and "be prepared to prove" with "significant proof" at the class certification stage that class members have "suffered the same injury," in that they have a common contention of fact or law, the determination of which "is central to the validity of each one of the [class members'] claims in one stroke."

At stake in this case was the possibility of the largest employment class action in history, with literally billions of dollars on the line. With this ruling, however, employers across the country can breathe a collective sigh of relief. While this case will certainly make it more difficult for employees to certify class actions for discrimination claims in the future, the Supreme Court's ruling does little to dissuade creative plaintiff's lawyers from trying to certify class claims based upon the disparate impact that certain company policies may have.

NLRB Again Flex’s Its Muscle

2011-06-25T00:00:00

NLRB Again Flex's Its Muscle
by Joseph "Trey" L. Wood, III
June 25, 2011

While the passage of the Employee Free Choice Act is seemingly dead, the National Labor Relations Board (NLRB) is still seeking to implement parts of the Act through administrative fiat. On June 21, the NLRB proposed changes to its existing rules governing union elections. If implemented, the new rules would significantly restrict an employer's ability to successfully stage its own campaign in opposition to a union's organizing efforts. Specifically, the new proposed rules include the following requirements:

Potentially cutting down the time that a representation election is held from 56 days to only about 26 days. Typically, the more time employees have to study the issues, the less likely they are to vote for a union.
Employers must provide the NLRB and unions more information about voters. The proposed rule would require employers to provide information on its employees' phone numbers, email addresses, job classifications, work location and shift. The current rules only provide that employers must give out home addresses. Under the proposed rules, unions will have much easier access to employees.
Employers will no longer be entitled to a hearing to determine who votes. Under current rules, the parties have a right to a pre-election hearing to determine the voting unit. The NLRB's proposal, challenges to voters would (most of the time) be challenged at the polls and then litigated afterward. This could potentially discourage voter turnout, particularly among those who tend to side with the company.

There is a 60-day comment period for these proposed changes, followed by agency review and consideration, before the rules are finalized and implemented. If passed, the rules are subject to court review. All of these potential changes mean that it is more important than ever for non-union employers to remain vigilant in their efforts to promote preventive labor relations in advance of union organizing efforts.

Bill Boyar Selected as a Director of the Texas Business Hall of Fame Foundation

2011-06-28T00:00:00

Non-Compete Agreements in Texas More Enforceable than Ever

2011-07-05T00:00:00

Non-Compete Agreements in Texas More Enforceable than Ever
by Joseph "Trey" L. Wood, III
July 5, 2011

On June 24, the Texas Supreme Court made it easier for employers to enforce non-compete agreements with employees by holding that stock options can serve as consideration sufficient to support the agreement. Before this ruling it was generally accepted that only an employer's providing confidential information or "trade secrets" could suffice as consideration for a non-compete.

Retreating from years of previous case law, the Supreme Court stated, "Consideration for a non-compete that is reasonably related to an interest worthy of protection, such as trade secrets, confidential information or goodwill, satisfies the [statute.]" With this ruling, it does not seem too far-fetched to conclude that cash might even serve as valid consideration. We will have to wait and see how lower courts interpret this ruling.

A PDF copy of the Court's opinion is available at: http://www.noncompetenews.com/file.axd?file=2011%2f6%2fMarsh+USA+v.+Cook.pdf

Social Media Harassment?

2011-07-18T00:00:00

Social Media Harassment?
by Joseph "Trey" L. Wood, III
July 18, 2011

The explosion of social media is no longer a headline grabbing phenomenon. In addition to Facebook, MySpace, Twitter and a plethora of other social websites, individuals have taken to creating and maintaining their own personal blogs. While most employers recognize that they have a duty to maintain a workplace atmosphere free of illegal harassment, what about the situation where one of your company's employees, on his own time and away from the workplace, starts to make fun of another employee's physical deformity on his personal blog? Does the company have an obligation to do something about it?

Recently, an Orange County California jury answered this question by awarding a Juvenile Corrections Officer over $1.6 million dollars on his claim that he was harassed at work due to his severely deformed right hand. In an unofficial blog about the juvenile detention center, comments were posted by an employee referring to Espinoza as "the claw" "rat claw" and "one handed commander." Espinoza alleged that the comments and harassment spilled over into the workplace. After Espinoza complained, he was transferred to an assignment he did not want, and sued. Defendant County of Orange alleged there were no suspects to investigate, and that there was no evidence that any coworkers harassed Espinoza in the workplace. The jury, on the other hand, disagreed and found in Espinoza's favor against the County. Espinoza v. County of Orange, et. al., (Orange County Superior Court Case No. 30-2008-00110643-CU-Wt-CJC).

This case certainly does not mean that employees should be banned from social media. However, it is important for the employer to recognize that it should take into account employees' use of social media when training supervisors and creating company policies. As an example, a Company's No Harassment policy should include state that pejorative comments about employees made in social media are not allowed and should be reported the same as any other harassing comments. Also, supervisors should be reminded that they should be very careful about what they post online so that any potentially discriminatory animus is not reflected or revealed. Then, train everyone about what is suitable and not suitable for posting online and what they should do if happens. Finally, if an employee complains about another employee's harassment through social media, take steps to immediately investigate and fix the problem. Only by taking these steps can you potentially fend off claims of online harassment.

Securities Class Action Litigation Update

2011-07-22T00:00:00

Securities Class Action Litigation Update
by Edgar Saldivar
July 22, 2011

On July 13, 2011, the Wall Street Journal's Law Blog referenced a report about the increased number of class action lawsuits seeking damages for lost share value filed by investors against companies involved in mergers and acquisitions. A recent U.S. Supreme Court decision, Erica P. John Fund, Inc. v. Halliburton Co., provides insight into where the courts stand on securities class action litigation.

In Halliburton, decided on June 6, 2011, the Supreme Court overturned a Fifth Circuit ruling that vacated class certification for a securities fraud class action. The proposed class alleged that Halliburton issued false statements about its prospects in order to manipulate the market price of its stock. The Fifth Circuit held that the investors failed to prove "loss causation" which, according to a prior Fifth Circuit case, Oscar Private Equity Invs. v. Allegiance Telecom, Inc., is required to entitle the plaintiffs to a "fraud on the market" presumption to establish each investor's reliance on the alleged misrepresentations. That presumption is a product of the Supreme Court's 1988 ruling in Basic, Inc. v. Levinson, which permitted a presumption of reliance when the security is traded on an efficient market. Without the presumption, the plaintiffs would have to establish reliance on an individual basis and, thus, would likely fail to meet the requirement for Rule 23(b)(3) class actions that common issues "predominate" over issues affecting each class member. But the Fifth Circuit's requirement of proof of "loss causation" to establish the "fraud on the market" presumption would effectively require the investors to prove the merits of their whole case before being allowed to proceed as a class. In Halliburton, the Supreme Court concluded that securities fraud plaintiffs need not prove loss causation in order to be entitled to the presumption of "fraud on the market" required for class certification.

On the law blog PrawfsBlawg, University of Miami Professor of Law Sergio J. Campos notes that the Fifth Circuit's (reversed) position in Halliburton and the Supreme Court's more recent decision in Wal-Mart Stores, Inc. v. Dukes evidence a strong impulse by courts to require a merits determination before class certification. However, in the context of securities class action litigation, the U.S. Supreme Court has effectively removed that hurdle from the certification process.

Another Reason to Classify Your Employees / Independent Contractors Correctly

2011-07-25T00:00:00

Another Reason to Classify Your Employees / Independent Contractors Correctly
by Joseph "Trey" L. Wood, III
July 25, 2011

The essence of any lawsuit seeking an injunction to enforce a non-competition agreement is breach of contract: The company seeking to enforce the non-compete is claiming that the violating party breached the non-compete. A defense often raised in these matters is that the company acted with "unclean hands," i.e., that the company breached the agreement too, so the non-compete should, likewise, be unenforceable. In one recent case, this very argument was used with success in terms of the independent contractor relationship.

In the case, Joseph Figueroa had an independent contractor agreement (ICA) with Precision Surgical, Inc., a medical equipment supplier. The agreement contained several restrictive covenants, including a non-compete agreement. Figueroa worked under the ICA for several years and Precision required him to, among other things, devote all of his time to selling Precision's products, report to Precision on a daily basis, attend monthly meetings, wear the company's logo, and obtain permission from the company before giving quotes to certain prospects. A dispute between them ensued and Figueroa left the company and filed suit to invalidate the non-compete. Precision filed a counterclaim to enforce the non-compete seeking an injunction to prevent Figueroa from working for a competitor.

Figueroa raised the "unclean hands" defense by claiming that Precision breached its agreement because the company had misclassified him as an independent contractor when he was really an employee. Both the trial court and the U.S. Third Circuit Court of Appeals agreed and the company's request for an injunction was denied.

What this Means for You
While the court's decision to deny the injunction was based on more than just the fact that the company misclassified the independent contractor, it is very likely that the contractor/employee would have prevailed under this theory alone. Accordingly, it is imperative that if you have Independent Contractor Agreements with restrictive covenants, such as non-competes, that the individuals working under those Agreements are properly classified as independent contractors and are not, in fact, employees.

Religious Discrimination Claims Rise

2011-08-15T00:00:00

Religious Discrimination Claims Rise
by Joseph "Trey" L. Wood, III
August 15, 2011

Several months after the 9/11 attacks, Alamo Car Rental fired one of its customer service representatives, a Muslim woman who refused to remove her head scarf during Islam's holy month of Ramadan. The U.S. Equal Employment Opportunity Commission (EEOC) in Phoenix filed a lawsuit claiming that Alamo committed backlash discrimination based on religion. Last year, a jury awarded more than $287,000 to the woman.

In this case, the judge decided that Alamo's religious discrimination against the woman was so clear cut that those allegations did not even go to the jury; the jury's only role was to decide how much money the ex-employee was entitled to. "For nearly six years, Alamo has continued to deny that it violated the law when it refused to accommodate Ms. Nur's religious beliefs and fired her," said Mary Jo O'Neill, regional attorney for the EEOC Phoenix District Office in a statement following the jury's ruling. "Title VII [of the Civil Rights Act of 1964] protects people of all religious beliefs, and no one should ever have to sacrifice her religious beliefs in order to keep a job."

Religious discrimination cases such as Nur's have been on the rise since 9/11. The number of cases that the EEOC, the federal agency responsible for enforcing the laws that prohibit employment discrimination, has received based on religious discrimination has increased from 1,939 in 2000 to 3,790 in 2010.

Of course, not all religious discrimination cases involve Muslims or what the EEOC calls other "vulnerable groups" post-9/11. The increased focus on religion has led to claims by members of other denominations as well. For example, in October 2007, a jury ordered AT&T Inc. to pay $756,000 in a religious discrimination lawsuit the EEOC brought on behalf of two male customer service technicians who were suspended and fired for attending a Jehovah's Witnesses Convention. And according to the Los Angeles Times, in July the Los Angeles Police Department was sued for religious discrimination after it disciplined an off-duty police sergeant who called homosexual acts "sinful" and an "abomination."

A Proactive Approach
In order to stave off potential religious discrimination claims by employees of all faiths, employers need to understand their duties under Title VII, and they need to communicate those duties and expectations to their employees.

Understand "Reasonable Accommodations"
Title VII requires that employers make reasonable accommodations for their employees' religious beliefs, but only if it doesn't cause undue hardship. It can be very complicated for organizations to determine what is reasonable, and what represents an undue hardship.
Educate Employees about their Responsibilities
While employers must try to resolve conflicts between religious needs and work-related duties, employees must do the same. They should offer as much notice as possible when they need to take time off for holy days, and they should work their vacation schedules or personal days around these times. Upon hiring or during job training, employers should communicate their expectations to employees; an annual refresher course for all employees, including managers, can help head off conflicts.
Consider Religious Clothing When Developing Dress Codes
Many religions require a particular type of dress or symbols, from tattoos for Coptic Christians to yarmulkes for devout Jewish men to hijabs, or head scarves, for devout Muslim women. Employers must factor these types of religious garb into their formal dress codes and informal expectations for what employees can wear.

One of the few relatively clear rules about religious symbols or clothing representing an undue hardship involves safety issues. If a particular type of religious garb could represent a safety risk for that particular employee's job, the employer generally has the right to dictate what the employee can or cannot wear.
Laws Apply to Applicants, Too
It is illegal to ask job applicants about their religion or observance of religious holidays during any point of the hiring process. Asking if an applicant's religion will prevent them from working holidays and weekends is not acceptable-rather, the employee must alert the employer about needed days off once he or she is hired. However, employers can describe the hours and duties that a job entails during the interview process.
"Joking" Comments
When someone in the workplace makes comments about a person's religion, or supposed religion, that can quickly cross the line into religious discrimination, even if they insist it was all in good fun. The company should clearly lay out what the boundaries are for unacceptable personal comments and enforce those as soon as they become aware of the comments or a compliant is filed.

The United States is on track to become more, and not less, religiously diverse. With the proper planning and policies, employers can create an environment where employees of all religions, as well as no religions, feel valued. This also helps the company minimize its exposure to potential religious discrimination lawsuits.

2011 Houston Cellar Classic

2011-10-22T00:00:00

10th Annual Divots for Devereux Golf Classic

2011-09-19T00:00:00

You're Fired! Insubordination Still Legitimate Reason for Terminations

2011-08-22T00:00:00

You're Fired! Insubordination Still Reason for Terminations
by Joseph "Trey" L. Wood, III
August 22, 2011

You hire a new employee with great hopes of a long lasting and productive relationship. However, after a very short while, co-workers begin to complain about your new hire and her attitude towards the staff. When you attempt to counsel the employee over the complained of conduct, she raises her voice, accuses you and others within the office of being unfair and refuses to accept any responsibility for her own actions. If there was ever conduct that met the definition of insubordination, this is surely it. But what to do? Should the employee be fired or given another chance?

Typically, employees are given a little latitude when it comes to resolving interpersonal conflicts with other staff members. Certainly a counseling session is called for, but when the counseling meeting gets off-track, it may mean that the employee has to go. However, employers are typically reluctant to pull the trigger under such circumstances for fear of a lawsuit. However, at least one court recently sided with an employer's decision to terminate an employee under a similar set of facts. In the case, the family-owned commercial trucking company hired a dispatcher who at the time of hire was 51 years old. Co-workers began complaining about the employee within the first couple of months of her employment. The company moved the employee to a newly created job with the same pay and hours, but with a more flexible schedule. In her new position, the employee worked in close proximity with a younger female employee who, according to the employee, overused the phone for personal calls. A meeting was called with the employee and the younger employee to try and fix the problem. By all accounts, the meeting did not go well. Upset by the older employee's antics, and concluding that she was insubordinate, the employer decided to terminate her employment. When the employer informed her of the decision, the employee threw a fit with much name calling. Later that evening the employee called asking for severance. The employer declined. The employee sued claiming that she was the victim of age and gender discrimination.

In such a lawsuit, the employee is always required to show as part of her case that she is meeting the expectations of her employer. In this case, the court found that the employee's insubordination undermined her claims of discrimination in two ways:

Insubordination precluded her from proving that she "met her employer's legitimate job expectations"
Insubordination is a non-discriminatory reason for termination, which means that the employee was unable to show that her employer's actions were simply an excuse, or pretext, for discrimination

Although the employee claimed that she was treated differently than similarly situated male/younger employees, she was unable to show that anyone else had been similarly insubordinate and treated more favorably.

The problem with relying on insubordination as a reason for termination is because it is a very nebulous term. Typically, employers should only use insubordination as a reason for termination if the conduct clearly meets the definition of the word. Again, to avoid claims of discrimination, it is important for employers to remain consistent in enforcing a policy against insubordination, doling out similar discipline for similar conduct. The conduct in question should be documented contemporaneously and objectively. This will go a long way in defending any potential claims that may later arise.

All Employers Now Required to Post Notice of Employees’ Unionization Rights

2011-08-26T00:00:00

All Employers Now Required to Post Notice of Employees' Unionization Rights
by Joseph "Trey" L. Wood, III
August 26, 2011

On August 25, the National Labor Relations Board (NLRB) issued a final rule that requires all employers subject to the National Labor Relations Act to notify employees of their rights under the National Labor Relations Act (NLRA) by November 14, 2011.¹ The notice will be required to be posted where other workplace notices are typically posted. Also, employers who customarily post notices to employees regarding personnel rules or policies on an internet or intranet site will be required to post the Board's notice on those sites.

The notice states that employees have the right to act together to improve wages and working conditions, to form, join and assist a union, to bargain collectively with their employer, and to refrain from any of these activities. It provides examples of unlawful employer and union conduct and instructs employees how to contact the NLRB with questions or complaints. The 11-by-17 inch notice is available for downloading from the NLRB's website. Translated versions will also be available and must be posted at workplaces where at least 20% of the employees are not proficient in English.

¹^{The NLRA applies to all employers with the exception of government or union employers, companies that primarily have a municipal function and religious schools.}

More than $14,000 Raised for School Uniforms for SEARCH Kids in Need

2011-08-01T00:00:00

Employers May Have to Add to the List of Those Protected from Discrimination: The Unemployed

2011-08-29T00:00:00

Employers May Have to Add to the List of Those Protected from Discrimination: The Unemployed
by Joseph "Trey" L. Wood, III
August 29, 2011

Most employers are aware that they may not discriminate against job applicants on the basis of their race, sex, national origin, religion, disability, veteran status, etc, etc. Adding to that already long list, a recent bill introduced into the U.S. House of Representatives and Senate would make it illegal for an employer to: (1) refuse to consider for employment or refuse to offer employment to an individual because of the individual's status as unemployed; (2) publish in print, on the Internet, or in any other medium, an advertisement or announcement for any job that includes any provision stating or indicating that an individual's status as unemployed disqualifies the individual for a job ("must be currently employed"); and (3) direct or request that an employment agency take an individual's status as unemployed into account in screening or referring applicants for employment.

The Fair Employment Opportunity Act was introduced as a result, in part, of the EEOC's public meetings to examine the practice by employers of considering only employed candidates for job openings and excluding the unemployed from consideration. Should the Act be signed in to law by President Obama, employers found to have violated the Act would be liable to the affected individual for any wages, salary, benefits, or other compensation denied or lost to the individual; or, in a case in which wages, salary, benefits, or other compensation have not been denied or lost to the individual, any actual monetary losses sustained as a direct result of the violation, or a civil penalty of $1,000 per violation per day, whichever is greater. In addition, there are provisions in the proposed Act for liquidated damages, interest, and attorney fees.

There is an exception contained within the Act. An employer may discriminate against the unemployed "where a requirement related to employment status is a bona fide occupational qualification reasonably necessary to successful performance in the job, and to eliminate the burdens imposed on commerce by excluding such individuals from employment." In other words, if the employer can show that an applicant's employment in a similar job, at the time of application, is necessary to successful performance for the job applied for, there is no violation. Stay tuned as we continue to monitor this Bill's progress.

Perpetuation: Building an Agency that will Survive the First Generation

2011-09-14T00:00:00

Harris County Civic Leadership Briefing

2011-10-26T00:00:00

BoyarMiller Chairman Chris Hanslik Selected for Center for Houston's Future Business/Civic Leadership Forum

2011-08-07T00:00:00

EEOC Scrutinizes Criminal Background Checks

2011-08-30T00:00:00

EEOC Scrutinizes Criminal Background Checks
by Chris Hanslik & Joseph "Trey" L. Wood, III
August 30, 2011

In the past few years, the Equal Employment Opportunity Commission (EEOC) has renewed its focus on the hiring process, including Title VII protections for ex-convicts. For years, the EEOC's guidelines have disapproved of an employer's absolute ban on hiring anyone with a criminal conviction. Rather, they direct that if an employer's conviction-based screening policy causes a disparate impact against a protected class of individuals, the employer must show that it considered: (1) the "nature and gravity" of the applicant's offense; (2) the "time that has passed since the conviction and/or completion of sentence;" and (3) the "nature of the job held or sought."

EEOC guidelines do not have the force of the law. In fact, one federal court of appeals found that the EEOC guideline pertaining to criminal conviction bans "are not entitled to great deference."¹ The court went on to complain that the guideline does not explain how employers are supposed to consider the nature and gravity of the offense in crafting any bright-line policy on criminal convictions, nor do they address whether an employer can decide that certain offenses are serious enough to warrant a lifetime ban on not being hired.

In response to this criticism, the EEOC held a meeting in Washington D.C. on July 26 focusing on how the use of background checks, and in particular criminal background checks, adversely affect minorities. During the meeting the EEOC hinted that they plan to revise their 20-year-old background check guidelines. Given the fact that the EEOC has also held fairly recent meetings on the use of credit checks in the hiring process, to examine the treatment of unemployed job seekers, and regarding disparate treatment in 21st century hiring decisions, it is likely that revisions to these guidelines will be forthcoming.

What this Means for Employers
Given this recent flurry of EEOC activity, employers who conduct criminal background checks should continue to monitor further developments, not only on the federal level, but the state level as well. Many states have passed "ban the box" laws, which refers to removing check boxes on employment applications that ask if the applicant has ever been arrested or convicted of a crime.² In addition, employers who have concerns about their hiring practices may want to consider conducting a privileged review of their screening methods to help identify any areas of potential concern. Finally, and most importantly, consider whether the information that you are obtaining during the hiring process is job-related. In the end, if the information that you are asking for is not directly related to the job in question, it may be best not to ask for that information.

¹El v. South Eastern Pennsylvania Transportation Authority, 479 F.3d 232 (3^rd Cir. 2007).

²California, Connecticut, Hawaii, Massachusetts, Minnesota, and New Mexico all have versions of "ban the box" laws.

Bill Boyar Named to Univeristy of Houston Graduate Real Estate Program Executive Advisory Board

2011-09-12T00:00:00

Few Bright Spots in Capital Markets According to Expert Panel at BoyarMiller's Breakfast Forum

2011-09-15T00:00:00

BoyarMiller Attorneys Selected for Including in 2011 Texas Super Lawyers

2011-09-12T00:00:00

How to Sell Your Business for the Best Price and Terms Workshop

2011-11-03T00:00:00

Employee Rights Poster Now Available

2011-09-26T00:00:00

Employee Rights Poster Now Available
by Joseph "Trey" L. Wood, III
September 26, 2011

As an update to our posting of August 26, the Employee Rights poster that is required of virtually all employers effective November 14, is now available on the NLRB's website at https://www.nlrb.gov/poster.

The 11-by-17-inch notice should be posted in a conspicuous place, where other notifications of workplace rights and employer rules and policies are posted.

Covered by EPLI? Better Think Again

2011-09-30T00:00:00

Covered by EPLI? Better Think Again
by Joseph "Trey" L. Wood, III
September 30, 2011

Many employers purchase an insurance product known as Employers Practices Liability Insurance (EPLI) for coverage in the event they are sued for different types of employment claims such as harassment, discrimination and retaliation. One such employer, Cracker Barrel, had an EPLI policy with Cincinnati Insurance Company. Cracker Barrel was sued by the EEOC for sexual and racial harassment, racial discrimination, retaliation and discharge. Ultimately, the suit was settled for $2,000,000 plus $700,000 in attorneys' fees. There was no question but that the allegations made in the suit were of the type covered under the policy. Then why did the insurance company deny the claim?

Cincinnati Insurance Company stated that it properly denied coverage because the lawsuit did not fall under the definition of a "covered claim." The policy in question defined such a claim as:

"a civil, administrative, or arbitration proceeding commenced by the service of a complaint or charge, which is brought by any past, present or prospective employees."

Since the lawsuit against Cracker Barrel was brought by the EEOC and not employees, the company wasn't covered. In the end, a federal district court in Tennessee agreed. Cracker Barrel Old Country Store, Inc. v. Cincinnati Insurance Co., 3:07-cv-00303 (M.D. TN 8/11/11)

WHAT YOU SHOULD DO
While it is likely that this will be appealed to the 6^th Circuit Court of Appeals, the prudent employer with EPLI insurance should check the language of its policy and contact its insurance agent/ broker to make sure that it is covered for any charges or lawsuits brought by the government on behalf of employees.

BoyarMiller Represents GSL Welcome Group in the Purchase of Tuscan Technology Center, Building 4

2011-10-05T00:00:00

NLRB Postpones Posting Requirement

2011-10-06T00:00:00

NLRB Postpones Posting Requirements
by Joseph "Trey" L. Wood, III
October 6, 2011

As an update to our posts on August 26 and September 26, the National Labor Relations Board (NLRB) has announced that it has postponed the implementation date of its new posting requirement to January 31, 2012. As you may recall, on August 25 the NLRB issued a final rule that requires all employers subject to the National Labor Relations Act to notify employees of their rights under the National Labor Relations Act (NLRA).

A statement on the NLRB's website on October 5, 2011 announces the postponed implementation of the posting requirement indicating that there is a need "to allow for enhanced education and outreach to employers, particularly those who operate small and medium sized businesses." The statement goes on to state that the Board decided to postpone the rule's implementation date due to questions from businesses and trade organizations regarding which businesses fall under the Board's jurisdiction and to ensure "broad voluntary compliance."

What the Board failed to mention on its website are the numerous lawsuits filed by business groups challenging the validity of the rule. (But I'm sure those lawsuits had nothing to do with this decision.) We will continue to monitor the situation to let you know the latest on this topic when it happens.

The End of the "Public Profile" - When Your Facebook Status Jeopardizes your Case

2011-10-07T00:00:00

The End of the "Public Profile" — When Your Facebook Status Jeopardizes Your Case
by Craig Dillard
October 7, 2011

In the rapidly growing world of Social Media chances are you either have a Facebook, LinkedIn or Twitter account — or someone you work with does. Social Media Websites are rapidly becoming a popular informational gathering tool used for everything from college applications to job interviews to litigation.

In a recent trial case, a lawsuit was filed alleging manufacturing defects and violations of the Texas Deceptive Trade Practices Act regarding a newly purchased recreational vehicle. During the case, a photo was discovered on the Plaintiffs' MySpace account capturing the Plaintiff's entire family posing in front of the recreational vehicle more than 300 miles from the Plaintiffs' home. The photo was taken and posted eight months after the claim was filed alleging the vehicle unusable. The photo was one of the most critical pieces of evidence in the case. The jury took less than 15 minutes to find against the Plaintiff.

During a recent deposition in a case dealing with the alleged taking of trade secret information from a large oil and gas company, a key witness presented himself as a person of "honor, integrity and fairness" in dealing with people and business situations. A quotation taken from the witness's Facebook page stating "if you ain't cheating, you ain't trying" was presented potentially discrediting the demeanor of the witness.

These examples support the need to closely monitor Social Media; especially true for companies or individuals that have the potential to face litigation. One of the first steps is to ensure Social Media profile pages are set to the highest degree of privacy possible limiting access to your information to only individuals you "approve". This can be accomplished by following a few quick steps depending on your particular Social Media Website. A simple Google search like "How to make my Facebook profile private" will walk you through the process. If you didn't know your profile could be set to private, or you haven't yet taken these steps, your information is wide open to the public.

In addition to monitoring the information on your social media page, you should also periodically conduct a Google/Yahoo/Bing search to see what a random search of your name will turn up on the Internet. You may find there are one or more Websites out there you didn't even know about which contain your personal information.

With Social Media, information often thought to be private can be alarmingly available for public consumption or discovery. Take action now to ensure your privacy by limiting access to your profile to those you trust and continually monitoring your Web presence to avoid unfortunate surprises where you find your private life on full display.

The Pitfalls of Stock Options for Start-Up Companies

2011-10-19T00:00:00

The Pitfalls of Stock Options for Start-Up Companies
by Gus Bourgeois
October 19, 2011

It is very common for start-up companies to issue stock options to certain key employees, but there are significant risks in doing so to both the option recipient and the company under Internal Revenue Code (IRC) Section 409A if the options have an exercise price less than the fair market value of the common stock as of the option grant date. Internal Revenue Service (IRS) regulations require that fair market value be determined using "reasonable application of a reasonable valuation method," and provide a presumption that a company's fair market value determination will be considered reasonable if it takes into account the relevant valuation factors described in the regulations, and:

(a) if the valuation is determined by an independent appraisal no more than 12 months before the transaction date; OR

(b) if the valuation is of "illiquid stock of a start-up corporation" and is made reasonably, in good faith, evidenced by a written report, performed by a person with significant knowledge and experience or training in performing such valuations

But the costs of obtaining an independent appraisal may be high for start-up companies, and the company may not have ready access to a person who has "significant knowledge and experience or training in performing such valuations."

WHAT YOU SHOULD DO
If a start-up company is considering issuing stock options, it is important to understand the requirements of IRC 409A as early as possible in the process, and to plan for the costs of obtaining the required valuation. In such cases, a start-up company may find that it will be better served by issuing restricted stock or some other equity vehicle which falls outside the purview of IRC 409A, instead of stock options.

The Three C’s of Discipline and Termination

2011-10-19T00:00:00

The Three C's of Discipline and Termination
by Joseph "Trey" L. Wood, III
October 19, 2011

I always preach that when employers are considering disciplining or terminating an employee, they best way to stay out of trouble is to should follow the three C's: Consistency, Communication and Common Sense.

Consistency
Employers must remain consistent in the way they enforce company policies and rules of conduct. Remaining consistent in making decisions promotes credibility while inconsistency suggests bias (discrimination) against individual employees. Consistency is not only important for supervisors within a particular department, but also company-wide.

Communication
Before disciplining an employee, ask yourself if the rule/expectation that the employee violated was actually communicated to the employee. After all, it's rather unfair to discipline an employee for breaking a rule if he/she didn't know the rule was in place. Certainly, this is not true for all instances of misconduct, but it is important for most. (Also, if an employer is going to try and dispute an unemployment claim, it is going to have to prove to the Workforce Commission that the employee knew about the rule before it was violated.)

Common Sense
Before disciplining or terminating an employee, the employer should step away from itself and view the entirety of the situation as objectively as possible. Does the punishment about to be imposed "fit the crime?" Certainly, factors such as seniority and culpability should factor into the decision making process.

I remind everyone of the three C's because of a recent case that came out of California. In the case, the ex-employee sued her employer, Nielsen Media Research, for age discrimination.¹ Christine Earl was hired in 1994 at the age of 47 and her employment progressed as follows:

August 2005: Verbal warning for leaving gifts at unoccupied households.
January 2006: Repeat violation.
February 2006: Placed in "Developmental Improvement Plan" after violating policy requiring the recruiter to keep a company map while recruiting targeted households.
September 2006: Performance review overall good, with need to follow policies.
September 2006: Ms. Earl diagnosed with "peripheral neuropathy" It is a nerve damage condition that worsens with age.
October 2006: Ms. Earl mistakenly wrote a household's address, failed to verify it, causing installers to go to the wrong address.
January 2007: Nielsen terminated Ms. Earl for violations of company policy listed above. She was age 59.

After the employee was fired, Nielsen hired five new employees with the same job title as the employee fired, all of whom were much younger. While the trial court originally dismissed the lawsuit, the California Court of Appeals is sending the case to a jury to decide because it found that a reasonable juror could find that the employer's reason for termination was false because the employee was able to show that the employer applied discipline in an inconsistent manner. In one example, a much younger employee received only discipline for the same type of conduct that Ms. Earl was allegedly fired for. The Court also found that Nielsen deviated from its own policy by terminating her when the policy indicated that she should have been placed on a performance improvement plan.

In the end, this is another fine example of an employer who did not follow the three C's and may, ultimately, have to pay for its mistake.

_{1 Earl v. Nielsen Media Research, Inc.}

Philip A. Dunlap Joins BoyarMiller as Business Group Associate

2011-04-25T00:00:00

Jeremy Sanders Joins BoyarMiller Litigation Group as Counsel

2011-10-19T00:00:00

The Entrepreneurship Institute's Presidents' Forum

2011-10-19T00:00:00

SCOTUS UPDATE: Are FCC Regulations on Indecency Unconstitutionally Vague?

2011-10-20T00:00:00

SCOTUS UPDATE: Are FCC Regulations on Indecency Unconstitutionally Vague?
by Jennifer Hebert
October 20, 2011

In the next few months, the United States Supreme Court will hear oral arguments in several noteworthy cases which could have profound impacts on various issues from broadcast decency regulations to affirmative action. Many believe health care reform and state immigration regulation may also be added to this term, but no cases have yet been added to the Court's docket and likely will not until at least December. Continue to watch our blog as we post additional summaries of and updates on these potentially landmark cases.

Federal Communications Commission v. Fox Television Stations
(Oral Argument Date Yet to Be Decided)

It's unusual for a year to go by without some controversy over indecency on television from the infamous wardrobe malfunction during the 2004 Super Bowl (which itself it still playing out on appeal in the Third Court of Appeals) to Melissa Leo's inadvertent flub at the 2011 Oscars. This year the Supreme Court will take on these types of situations by analyzing the constitutionality of FCC regulations on indecency on television.

Basic Facts
This case stems from three unrelated FCC violations one involving brief nudity in an NYPD Blue episode on ABC in 2003 and the other two involving the use of a single expletive during two live Fox award shows in 2002 and 2003. In both cases, the FCC issued fines and Fox and ABC appealed.

Previous Litigation
In an earlier case involving the same Fox award shows, the Supreme Court ruled that the FCC had authority to change its profanity policy from issuing fines for repeated uses of profanity in a single television event to issuing fines for even a single use in a television program. That case, however, failed to address whether the FCC's rules were unconstitutionally vague (as is now presented) and such question was sent back to the Second Circuit for decision.

When sent back, the Second Circuit Court of appeals invalidated the FCC decision finding that two broadcasts including expletives on live award shows were indecent pursuant to regulatory and statutory rules. The Court's decision was based on a finding that the rules under which the fines were issued were unconstitutionally vague (the "Award Show Case").

In a separate proceeding, the Second Circuit applied its ruling from the Award Show Case to again overrule a fine issued by the FCC against ABC for brief nudity in an NYPD Blue episode. The two cases have been consolidated by acting Solicitor General Neal K. Katyal for joint consideration by the Supreme Court on the basis that considering the two cases together will allow the Court to consider application of FCC policy to both live and scripted television.

Question for the Court
Whether FCC regulations on decency are so vague that they are unconstitutional or sufficiently clear to be enforced?

Texas Legislature Expands Scope of Liability for LLCs

2011-10-21T00:00:00

Texas Legislature Expands Scope of Liability for LLCs
by Chris Hanslik
October 21, 2011

During the 2011 Texas Legislative Session several amendments to the Texas Business Organizations Code (TBOC) were passed. One of the more significant changes relates to the personal liability of members and managers of limited liability companies.

Section 101.114 of the TBOC provides that a member or manager is not liable for the debts, obligations or liabilities of a limited liability company, except as and to the extent the company agreement or regulations specifically provide otherwise. As stated, this language prohibits a court from holding the members or managers liable for the debts, obligations and liabilities of the limited liability company. Courts in Texas, however, have applied corporate veil piercing principles – alter ego, sham corporation, perpetrating an actual fraud – to limited liability companies, creating a conflict between the limited liability company statutes and common law. Applying the corporate veil piercing standards to limited liability companies these courts followed the provisions in Article 2.21 of the Texas Business Corporations Act which is now found in the TBOC in Sections 21.223 - 21.226.

In an effort to harmonize the TBOC with the state and federal courts that have addressed this issue, the Texas Legislature adopted the same standards used in the corporate statutory provisions. This amendment can be found in Section 101.002 of the TBOC which provides that Sections 21.223, 21.224, 21.225 and 21.226 apply to a limited liability company and its members, owners, assignees and subscribers, subject to the limitations contained in Section 101.114.

The result is that member and managers of Texas LLCs can no longer hide behind what was once thought of as an impenetrable liability shield.

How "Alternate Employer Endorsement" Can Help If You Hire Temporary Workers

2011-10-23T00:00:00

How "Alternate Employer Endorsement" Can Help If You Hire Temporary Workers
by Edgar Saldivar
October 23, 2011

Businesses often depend on staffing companies or "temp agencies" to supply their workers. The contract between the staffing company and the client business typically has a provision for workers' compensation insurance coverage. Depending on the nature of the services provided by the staffing company, the client business may or may not qualify by statute for workers' compensation insurance coverage through the policy held by the staffing company. Nevertheless, recent case law suggests that a little-known endorsement in workers' compensation insurance policies known as the "alternate employer endorsement" may allow businesses who hire temporary workers to have coverage under the staffing company's workers' compensation insurance policy.

The Staff Leasing Services Act (Texas Labor Code § 91.001, et seq.) provides for licensing and regulation of staff leasing services companies that assign workers to client companies on assignments "of a long term or continuing nature, rather than temporary or season in nature." For workers' compensation insurance purposes, the Act makes the client company a co-employer who, thus, can benefit from the licensed staffing company's workers' compensation insurance coverage when a leased employee is injured. But what if the staffing company supplying your workers is not properly licensed? In Houston, only 25 staffing companies are currently licensed by the Texas Department of Licensing and Regulation. What if you go through a temporary staffing agency to supply temporary workers? The Staff Leasing Services Act specifically does not apply to companies that provide temporary help. These situations beg the following question: can you still benefit from the staffing agency's workers' compensation insurance coverage? The alternate employer endorsement may provide a solution.

The U.S. Court of Appeals for the Fifth Circuit recently held in Cal-Dive Intern., Inc. v. Seabright Insurance Company that "when endorsements such as the Alternate Employer Endorsement add additional insureds to the policy, these additional insureds enjoy the same benefits and are subject to the same restrictions as a named insured absent policy language to the contrary." This is consistent with a prior holding of the Fourteenth Court of Appeals of Texas in Brown v. Aztec Rig Equipment, Inc., in which the court held that a client listed as additional insured in an alternate employer endorsement had workers' compensation coverage through the temporary employment agency and was an "employer" within the meaning of the Workers' Compensation Act. Beyond the courts' holdings, the Texas Department of Insurance recognizes that alternate employer endorsements provide workers' compensation insurance coverage "as though the alternate employer is insured" (Texas Workers' Compensation and Employers' Liability Manual).

What does this mean for businesses that hire temporary workers? In addition to maintaining your own workers' compensation policy, you can better manage your risk for liability from injuries to temporary workers by ensuring that the staffing company you deal with has a workers' compensation insurance policy with an alternate employer endorsement listing your company as an additional insured.

Hiring 101: Tips to Avoid Legal Landmines

2011-10-25T00:00:00

Hiring 101: Tips to Avoid Legal Landmines
by Joseph "Trey" L. Wood, III
October 25, 2011

Choosing, hiring and retaining good employees is always of the utmost importance. Often, supervisors and managers have only one opportunity to evaluate and determine if a candidate is the right person for a particular job-the employment interview. Thus, managers and supervisors must have sufficient interviewing skills to obtain the information necessary to make a thoughtful and accurate evaluation of a candidate.

Learning basic interviewing techniques and ideas helps managers and supervisors gain the skills necessary to put the right people on the job and avoid various legal pitfalls involved with interviewing.

Recruiting Candidates
Federal and State law prohibit discrimination in hiring the same as they do during the employment relationship. Sometimes an employer's recruitment efforts have the unintended effect of illegal discrimination. For example, it is not uncommon for an employer to obtain job applicants through word-of-mouth, nepotism or unsolicited walk-in applications.

It is important to remember that even potential applicants who did not formally apply may be able to state a claim under Title VII if the recruiting methods used never brought the opening to their attention, or the employer's application methods "chilled" certain groups from applying.

Word-of-Mouth: While word-of-mouth recruiting is not illegal per se, there is an inference that when notifying people of job opportunities, employees will typically notify people of the same race and gender as the employees. To establish discrimination, however, it must be shown that the practice is part of a pattern of intentional discrimination.

Nepotism: Like word-of-mouth, nepotism is illegal only if it can be shown that its practice has an adverse impact against a protected classification of applicants.

Walk-in Applications: As long as there is no disparity between the employer's applicant pool and the relevant labor market, this recruiting method is generally lawful.

Help-wanted Advertisements: It is unlawful to indicate in job advertisements a preference for race, color, religion, sex, national origin, or age, unless one of these factors is a bona fide occupational qualification.

Legal Aspects of Interviewing
Now more than ever, a simple employment interview can be a potential minefield for supervisors and managers. Interview questions, in and of themselves, can form the basis of a lawsuit, no matter how innocent they seem. The law is constantly changing and anyone participating in an interview of a new employee must be certain to avoid questions which could be considered discriminatory. It is impossible to list every question which can be asked, but as a rule of thumb, if the question does not directly relate to whether or not the individual can do the job, DON'T ASK IT!!!

Avoiding the Grasp of the EEOC
Recently, the EEOC adopted the recommendations of an internal task force which recognized a "deficiency" in its investigation and litigation of "systematic" cases of discrimination: CLASS ACTIONS. The EEOC has publicly announced a new direction in its pursuit of discrimination claims, shifting its focus from individual charges to claims involving a "pattern or practice, policy and/or class cases where the alleged discrimination has a broad impact on an industry, profession, company, or geographic location."

Some of the recommendations made by the task force include:

Creation of incentives to encourage EEOC employees to identify, investigate, and litigate "systematic" cases;
Expanded investigations of individual charges which may lead to the discovery of "systematic" discrimination;
Shifting of resources from individual and small class cases to larger cases of alleged "systematic" discrimination; and
Creation of outreach programs to community organizations, workers, the plaintiff's bar, and state and local agencies to identify potential areas of "systematic" discrimination.

Last year, the EEOC reported that 99,922 claims alleging employment discrimination were filed against private sector employers. While the number of claims filed with the EEOC will likely not wane, there has already been a change in the way they are approached. These changes will have a substantial effect on hiring practices in the United States. As the EEOC intensifies its pursuit of "systematic" cases of discrimination, investigations are likely to intensify, and the plaintiff's bar is expected to respond accordingly. To avoid the possibility of facing a class action lawsuit challenging your company's hiring practices, the following tips should be considered:

Track your applicant flow data: This will help reduce our liability in potential hiring claims. If Insurance Agencies can show who applied for the job, we can better defend against lawsuits. Insurance Agencies should gather demographic data by attaching the Voluntary Applicant Data Request (VADR) form. This form is both EEOC and OFCCP compliant. A copy of this form may be found at http://www.ltd.org/pdf/Vol%20App%20Data%20Record.pdf. You should keep applicant flow data for a minimum of four years.
Do not use rigid cut off scores for employment tests: unless they have been properly validated by an expert in job selection procedures. Current tests should be used as one of many tools to make a decision on a given selection criteria. Avoid using the same or similar tests for both hiring and promotion decisions.
Job posting should state only the criteria that will be used in the selection process: Try and explain the process for job selection in the job posting. Limit the criteria on a posting to no more than 8 criteria. Try to list objective criteria in the job posting.
Interviews should assess defined criteria. There should be a defined set of questions for each interview. The questions should seek to determine whether the job applicant meets the defined criteria set for the job. The criteria should also have some type of rating system (i.e., if one criterion is more important than the rest, this should be documented). Notes should be taken on the job interview and kept for four years (preferably in job folder for each filled job). These notes should reflect how this person measures up to the specific criteria listed in the job posting. Remember, your notes can always be subject to review if a lawsuit is filed. Finally, always maintain annual training for all personnel involved in selection decisions.

Reasonable Accommodation in the Hiring Process
The Americans with Disabilities Act (ADA) prohibits employers from discriminating against qualified persons with disabilities who are able to perform the essential functions of the job, with or without reasonable accommodation, provided the accommodation does not place an undue burden on the employer. Depending on the pre-offer and post-offer stages of the interview and hiring process, the ADA limits an employer's ability to make disability-related inquiries or to require medical examinations. If an employee requests a reasonable accommodation during the interview process, employers are required to provide such accommodation unless it would cause an undue hardship. Some examples of what the EEOC considers to be reasonable accommodation in the interview process include:

Providing written materials in accessible formats, such as large print, Braille, or audiotape;
Providing readers or sign language interpreters;
Ensuring that recruitment, interviews, tests, and other components of the application process are held in accessible locations;
Providing or modifying equipment or devices; and
Adjusting or modifying application policies and procedures.

During the hiring process, and prior to making an offer, an employer may not ask an applicant whether he or she needs a reasonable accommodation. When the employer knows that the applicant has a disability, either because it is obvious or is voluntarily disclosed, the employer may ask whether the applicant will need an accommodation. The employer may also ask for a demonstration as to how the disabled individual could perform the essential functions of the job, such as lifting certain weight.

Post-Offer Inquiries and Considerations
Once a job offer has been extended, the employer has much greater latitude. Employers may condition the start of employment on the successful completion of a medical examination, including a psychiatric examination if:

The examination or inquiry is required of all employees entering the same job category regardless of disability;
Information on medical conditions and history is maintained in a separate, confidential file; and
The results of the examination are used only in accordance with the ADA.

An employer who withdraws an offer of employment because the medical examination reveals that the applicant cannot perform the essential functions of the job, even with a reasonable accommodation must demonstrate either that (a) the criteria does not screen out or tend to screen out individuals with disabilities or (b) the criteria are job-related and consistent with business necessity and there is no reasonable accommodation that would enable the individual to perform the essential functions of the job without undue hardship on the employer.

Drug Testing
The ADA specifically states that, for purposes of the ADA, tests to determine the current use of illegal controlled substances are not considered medical examinations. Therefore, pre-employment drug tests are permissible for private employers.

What About Alcohol Testing? In an odd twist of logic, it is determined that tests to determine whether and/or how much alcohol an individual has consumed are medical and are, therefore, illegal during the pre-employment stage.

It is hard enough in today's economic climate to find qualified applicants for your company's needs. The last thing you need is to be tripped up by failing to identify and comply with the myriad of laws that govern the hiring process. However, with proper planning and training, even these hurdles can be rather easily overcome.

Contractors: Remember Your Rights under the Texas Constitution

2011-10-26T00:00:00

Contractors: Remember Your Rights Under the Texas Constitution
by Jeremy Sanders
October 26, 2011

In Texas, a qualified contractor is protected from non-payment of labor and materials on construction projects under the Texas Constitution. Article XVI, Section 37 of the Texas Constitution grants contractors of every class a lien on the buildings and articles made or repaired by them for the value of their labor or material furnished. In essence, a qualified contractor has an automatic lien if he is not paid on a project. However, a contractor MUST QUALIFY for this protection in accordance with the guidelines stated below and there are certain principles that should be understood before pursuing a constitutional lien.

The contractor must have a direct contractual relationship with the owner. Contractors/ subcontractors not in privity of contract with the owner do not qualify for this type of lien. Subcontractors or suppliers not contracting directly with the owner must perfect a statutory lien or bond claim to protect their interests.
If the contractor qualifies, constitutional liens are automatic and self-executing, meaning they do not require the contractor to serve any particular notice and the filing of a lien affidavit is not required. However, in order to avoid claims by third-party purchasers (see below), it is nevertheless advisable to file a lien affidavit claiming a constitutional lien in the real property records of the county where the property is located.
Constitutional liens will not be enforced against a third-party purchaser who has neither actual nor constructive notice of the lien. This is in contrast to statutory liens filed pursuant to the Property Code. When a mechanic's lien is filed of record according to the statutes, it will be enforced against a subsequent purchaser without notice.
Constitutional liens are binding on an article or building that has been made or repaired by the qualified contractor. Landscaping and other similar work do not qualify under the definition of "buildings and articles" as stated in the Constitution. For that type of work, the contractor is required to perfect a statutory lien or bond claim to protect his interests.
Constitutional liens are not available for public works buildings or projects.
Constitutional liens do not specifically provide for the recovery of attorneys' fees. However, the Texas Civil Practice and Remedies Code provides for the recovery of attorneys' fees if the claim is for rendered services, performed labor or furnished material.

This said, a contractor should be aware of all applicable lien deadlines as outlined in the Property Code. When available, contractors should always perfect a statutory lien or bond claim to secure their rights and not rely solely on the protection of a constitutional lien as an automatic remedy. And, while it is beneficial for a contractor to understand all of his remedies including the constitutional lien, contractors should consult the Property Code, Constitution and a practitioner in construction law to fully understand all applicable requirements for perfecting their lien rights.

Giving Employees a Lift: Must Employers Accommodate an Employee Who Commutes?

2011-10-27T00:00:00

Giving Employees a Lift: Must Employers Accommodate an Employee Who Commutes?
by Joseph "Trey" L. Wood, III
October 27, 2011

Employers are typically aware of the fact that they must reasonably accommodate employees with disabilities while at work, but does that mean that they have an obligation to help employees get to work? That issue has been coming up a lot recently and the courts that have examined the issue have given differing opinions on the subject.

Recently, the Second Circuit Court of Appeals (which covers New York, Connecticut and Vermont) found that employers may have such an obligation. In the case that they considered, the employee, who had a hearing impairment and also suffered from cancer, worked for the New York Department of Health and Mental Hygiene at their office in Queens. The Department reassigned her to work at its Manhattan office for nine months. The employee requested that her employer assist her with her commute to Manhattan during this time. While the district court found that commuting "falls outside the scope" of the employee's job and the employer's obligation to accommodate, the Second Circuit reversed finding that "there is nothing inherently unreasonable . . . in requiring an employer to furnish an otherwise qualified disabled employee with assistance related to her ability to get to work."

The case has been sent back to the district court with instructions to analyze whether it would have been reasonable for the employer to provide assistance with the employee's ability to get to work. The Second Circuit also listed the following as examples of what the employer should have considered as possible accommodations:

Transferring the employee back to Queens or another closer location;
Allowing the employee to work from home; or
Providing the employee with a car or parking permit.

The Court also listed the following as a non-exclusive list of factors for evaluating the reasonableness of possible accommodations including:

The number of employees employed by the employer;
The number and location of its offices;
Whether other available positions existed which the employee showed she was qualified to perform;
Whether the plaintiff could have been shifted to a more convenient office without unduly burdening the employer; and
Whether it would be reasonable for the plaintiff to work without on-site supervision.

While other Circuit Courts of Appeals have found that the duty to accommodate does not extend beyond the workplace, and consequently no duty to assist employees with their commute, this issue is bound to come up again and again as they struggle to interpret the requirements of the Americans With Disabilities Act Amendment Act.

Accordingly, if your company is facing a request by a disabled employee with a request to assist with his/her commute, the prudent course of action is to carefully weigh all factors and include competent counsel on the decision-making process.

Excuses, Excuses, Excuses…

2011-10-28T00:00:00

Excuses, Excuses, Excuses...
by Joseph "Trey" L. Wood, III
October 28, 2011

A nationwide study conducted by Harris Interactive from August 16 to September 8, 2011, and reported in Career Builder, reported some pretty zany excuses for why employees miss work. The study included more than 2,600 employers and 4,300 workers.

Here are some of the unique reasons employees called out sick:

Employee's 12-year-old daughter stole his car and he had no other way to work. Employee didn't want to report it to the police
Employee said bats got in her hair
Employee said a refrigerator fell on him
Employee was in line at a coffee shop when truck carrying flour backed up and dumped the flour into her convertible
Employee said a deer bit him during hunting season
Employee ate too much at a party
Employee fell out of bed and broke his nose
Employee got a cold from a puppy
Employee's child stuck a mint up his nose and had to go to the ER to remove it
Employee hurt his back chasing a beaver
Employee got his toe caught in a vent cover
Employee had a headache after going to too many garage sales
Employee's brother-in-law was kidnapped by a drug cartel while in Mexico
Employee drank anti-freeze by mistake and had to go to the hospital
Employee was at a bowling alley and a bucket filled with water crashed through the ceiling and hit her on the head

What would you do if one of your employees called in with an excuse as questionable as these. Certainly, it appears that most of these excuses could be verifiable, but what if they were not? In the same study, 15% of employers said that they have fired employees for calling in sick without a legitimate excuse. Also, 28% of the employers indicated that they have checked up on an employee who called in with a questionable absence. Of those employers, 69% required the employee to provide a doctor's note, 52% called the employee at home, 19% had another employee call the employee, and 16% drove by the employee's home.

At the end of the day, it is probably a good idea to have a consistently enforced policy that requires employees to provide some type of documentation to verify the reasons for their absences. If they fail to do so, look to your company's disciplinary policy on how they should be handled at that point.

Antiquated Computer Employee Exemption May Get An Update

2011-10-31T00:00:00

Antiquated Computer Employee Exemption May Get An Update
by Joseph "Trey" L. Wood, III
October 31, 2011

When it comes to technology, what was invented last week is seemingly an antique today. The same can be said for the Fair Labor Standards Act's test for employees who are exempt under the Computer Employee Exemption. Section 13(a)(17) of the FLSA has set out that for an employee to be exempt under that test, and not be entitled to overtime, the employee's primary duty must consist of:

The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;
The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or
A combination of the aforementioned duties, the performance of which requires the same level of skills.

In an effort to update this test to reflect real world computer and information technology occupations, Senators Kay Hagan (D-NC), Johnny Isakson (R-GA), Mike Enzi (R-WY), and Michael Bennet (D-CO) introduced the Computer Professionals Update Act. This bill would apply the exemption to those who are "working in a computer or information technology occupation (including, but not limited to, work related to computers, information systems, components, networks, software, hardware, databases, security, internet, intranet, or websites) as an analyst, programmer, engineer, designer, developer, administrator, or other similarly skilled worker, whose primary duty is:

(A) the application of systems, network or database analysis techniques and procedures, including consulting with users, to determine or modify hardware, software, network, database, or system functional specifications;

(B) the design, development, documentation, analysis, creation, testing, securing, configuration, integration, debugging, modification of computer or information technology, or enabling continuity of systems and applications;

(C) directing the work of individuals performing duties described in subparagraph (A) or (B), including training such individuals or leading teams performing such duties; or

(D) a combination of duties described in subparagraphs (A), (B), and (C), the performance of which requires the same level of skill;

who is compensated at an hourly rate of not less than $27.63 an hour or who is paid on a salary basis at a salary level as set forth by the Department of Labor in part 541 of title 29, Code of Federal Regulations. An employee described in this paragraph shall be considered an employee in a professional capacity.

Wow, bipartisan legislation that actually makes sense! This bill has been referred to the Senate Committee on Health, Education, Labor and Pensions. We will continue to monitor this and keep you updated on its progress.

Congress Again Mulls Employee/Contractor Classification

2011-11-04T00:00:00

Congress Again Mulls Employee/Contractor Classification
by Joseph "Trey" L. Wood, III
November 4, 2011

Introduced into Congress yet again is the new and improved Employee Misclassification Prevention Act. The bill is intended to punish employers who misclassify employees as independent contractors. The proposed legislation would impose the following requirements on employers:

Require every employer, within six months of enactment, to provide written notices to every worker who performs labor or services for it informing them whether they have been classified as an employee or "non-employee" (independent contractor) - and why they have been classified as such
Mandate that employers direct all workers to a Department of Labor (DOL) website, which would inform employees of their rights and encourage them to contact the DOL if they suspect they've been misclassified
Require employers to keep records of the hours, work and wages of employees and "non-employees" for the purpose of backing up workers' classifications
Impose penalties upon employers of $1,100 per worker for first-time violations and $5,000 per worker for repeat or "willful" violations
Make it illegal for employers to discriminate or retaliate against workers who exercise their rights under the bill
Allow the DOL and Internal Revenue Service (IRS) to share information on cases where employers misclassify workers
Amend the Social Security Act to create penalties for misclassifying employees - or paying unreported wages to employees - for unemployment compensation purposes
Direct the DOL to perform audits on employers in industries that frequently misclassify workers
Direct state unemployment agencies to conduct audits to identify employers who are misclassifying employees

While two previous versions of this bill failed to gain any traction, given the recent sensitivity of this subject, it will be interesting to see whether this go-around will have a different outcome. We will continue to monitor this and will let you know how the bill fares.

Dodd-Frank Act Imposes Filing Obligations on Exempt Reporting Advisers

2011-11-07T00:00:00

Dodd-Frank Act Imposes Filing Obligations on Exempt Reporting Advisers
by Philip A. Dunlap
November 7, 2011

The Dodd-Frank Act provides for private fund advisers certain exemptions from registration with the Securities and Exchange Commission (SEC). The most relied upon exemptions are for private fund advisers that (i) advise solely venture capital funds or (ii) advise solely private funds having less than $150 million aggregate assets under management.

However, the SEC has issued a rule that requires these "exempt reporting advisers" to file a limited Form ADV by March 30, 2012, including all associated filing fees. The form can be found at http://www.sec.gov/about/forms/formadv-part1a.pdf.

Exempt reporting advisers must also file sections of Schedules A, B, C and D of the Form ADV.

Additionally, the SEC will require exempt reporting advisers to file amendments to its Form ADV at least annually, within 90 days of the end of the adviser's fiscal year and more frequently if required by the instructions to the Form ADV (such as updating identification information, form of organization and any disciplinary information).

As a result of these new requirements, it is recommended that exempt private fund advisers begin to operate as if they were subject to the SEC reporting requirements. They should conduct their business with the understanding that all of the information required to be included in their Form ADV will become public knowledge upon filing the Form ADV.

If you have questions about the Form ADV and the information necessary to disclose, please contact us.

How Final is Arbitration? In Texas, You Decide.

2011-11-14T00:00:00

How Final is Arbitration? In Texas, You Decide.
by Chris Hanslik
November 14, 2011

The arbitration process was designed to provide an efficient and economical forum for dispute resolution. One of the important features of arbitration is a very limited right of appeal. The Texas Supreme Court, however, has now taken the position that the Texas General Arbitration Act (TGAA) does not limit judicial review of an arbitration award to the grounds specified in the TGAA. In Nafta Traders, Inc. v. Quinn, the Texas Supreme Court also went one step further and stated that the Federal Arbitration Act (FAA) does not preempt expanded judicial review of an arbitration award under the TGAA.

At issue in Nafta Traders was an arbitration clause contained in an employee handbook which stated that "the arbitrator does not have authority (i) to render a decision which contains a reversible error of state or federal law, or (ii) to apply a cause of action or remedy not expressly provided for under existing state or federal law." After an award in favor of Quinn was issued, Nafta Traders appealed claiming that the parties' agreement placed limits on the arbitrator's authority which expanded the scope of review beyond the provisions in the FAA and TGAA.

While Nafta Traders was pending in the appeals process, the United States Supreme Court issued a ruling in Hall Street Assocs., L.L.C. v. Mattel, Inc. that the grounds specified in the FAA for vacating or modifying an arbitration award are exclusive and can not be expanded by agreement. Breaking ranks with the U.S. Supreme Court, the Texas Supreme Court distinguished the situation in Nafta Traders from Hall Street Associates by finding that the parties in Nafta Traders had not expanded the standard for review, but rather denied the arbitrator certain powers. The court then noted that because one of the statutory grounds for vacating an arbitration award under the TGAA is that it exceeds the arbitrator's powers, the award under the arbitration provision could therefore be reviewed for errors of law and to confirm that any relief granted was based on a cause of action or remedy authorized under existing federal or state law. The court also held that the TGAA is not preempted by the FAA.

The result of the holding in Nafta Traders is that the TGAA does not limit judicial review of an arbitration award to the grounds specifically set forth in the TGAA. Accordingly, parties whose agreement to arbitrate is subject to the TGAA may preserve their right to a traditional appeal by restricting the arbitrator's powers to those typically possessed by a trial court judge or by expressly stating that the arbitration award will be subject to traditional judicial standards of appellate review. Another important aspect to note is that under Nafta Traders the parties must make a verbatim record of the arbitration proceeding.

With this broad power in the hands of contracting parties arbitration under the TGAA may not be so binding after all.

SCOTUS UPDATE: Can the Government Require Health Insurance for All Americans?

2011-11-14T00:00:00

SCOTUS UPDATE: Can the Government Require Health Insurance for All Americans?
by Jennifer Hebert
November 14, 2011

Dept. of Health and Human Services v. Florid et al
Florida et al v. Dept. of Health and Human Services
Nat'l Federation of Independent Business v. Sebelius
(Oral Argument Expected February/March 2012)

Whether you agree or disagree with the mandates set forth in the sweeping Patient Protection and Affordable Care Act, these cases are likely to garner more attention than any other case before the Supreme Court this term. While the White House fully supports the Act and believes the Supreme Court will uphold the law, 28 states have publicly challenged the constitutionality of the Act. Among the cases accepted by the Supreme Court is the largest judicial challenge to the Act and involves a joint filing by 26 states including Florida, Alabama, Alaska, Arizona, Colorado, Georgia, Idaho, Indiana, Iowa, Kansas, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, North Dakota, Ohio, Pennsylvania, South Carolina, South Dakota, Texas, Utah, Washington, Wisconsin and Wyoming. Oklahoma and Virginia have also challenged the law in separate legal proceedings.

Basic Facts: In March of 2010, President Obama signed into law the Patient Protection and Affordable Care Act. The Act includes multiple mandates including a requirement that almost all Americans purchase personal health insurance by 2014. The Act also requires states to fund Medicaid at a greatly increased level or risk losing all federal Medicaid funds and mandates certain levels of health insurance for state employees. Among other things, the Act also changes certain aspects of the private health insurance industry and public health insurance programs, mandates increases in insurance coverage for pre-existing conditions, makes Medicaid available to more Americans, subsidizes health insurance costs for low income Americans, reduces or eliminates co-pays for certain preventative healthcare needs, and requires Americans who receive health care benefits over a certain dollar value to pay taxes on such benefits.

Previous Litigation: In the last year, at least six different federal courts have addressed the constitutionality of the act. Only three of these cases have been accepted for review by the Supreme Court at this time.

Questions for the Court: This case requires the Justices to address three specific issues including the key question of whether the federal government can require all Americans to have health insurance or face penalties for failing to do so. The Justices must also decide whether the federal government can force states to increase their share of Medicaid costs or risk losing all Medicaid funding if they refuse to do so. If the Justices find that such mandates are unconstitutional, they then have to decide whether the entire law must be stricken or only those sections of the law they find to be unconstitutional. Other issues raised in other litigation relating to the Act will not be heard in this case.

Say "Cheese" — You’re fired!

2011-11-16T00:00:00

Say "Cheese" — You're Fired!
by Joseph "Trey" L. Wood, III
November 16, 2011

In another example of why it is important for employers to consistently enforce company policy, the Fourth Circuit Court of Appeals recently enforced a decision by the National Labor Relations Board finding that an employer violated the National Labor Relations Act (NLRA) when it allegedly fired an employee for photographing other employees at work. The Court agreed with the Board that the employee was terminated for engaging in concerted protected activity.

In NLRB v. White Oak Manor, the employer had a policy that prohibited employees from wearing hats and taking photographs inside a long-term care facility. The employee, Nichole Wright-Gore, was embarrassed about a bad haircut and started to wear a hat to work, without comment from her supervisor. After a week, other supervisors told her to remove the hat. When she refused she was sent home. The next day, White Oak employees dressed up and wore costumes for Halloween. Wright-Gore had a costume that included a hat, but her supervisor made her remove it. The employee complained to her employer that the company was enforcing the policy unequally. Upon hearing the employee's complaint, her supervisor gave her a written warning for insubordination.

During the ensuing weeks, the employee photographed several employees – both with and without their permission – wearing hats and violating other White Oak dress code policies. She also shared the photographs with employees and discussed with them the unequal treatment of White Oak in an effort to gain their support. White Oak fired Wright-Gore for violating the company's policy prohibiting taking pictures in the facility. The employee then filed an unfair labor practice charge alleging that the employer interfered with her right to engage in concerted protected activity.

First, it is important to remember that the NLRA affects all employers-not just those with union representation. As you may recall from previous posts, Section 7 of the NLRA protects employees' "concerted, protected activity". Essentially, employees are allowed to communicate with co-workers about the terms and conditions of employment. An employer's attempt to hinder or interfere with those rights is a violation of the NLRA which could lead to an unfair labor practice charge being filed on the employees' behalf by the Board. In this case, Wright-Gore's complaints were protected concerted activity because she was attempting to have her employer enforce its dress code fairly. While White Oak Manor argued that her activity lost protection because she took pictures of employees without permission, there was evidence that other employees took pictures of each other without permission and displayed those photographs in the facility.

What does this mean to you?
This is another shining example of the National Labor Relations Board becoming more active in enforcing the NLRA against non-union employers the wake of declining union membership. This particular case should serve as a reminder of the importance of consistently and uniformly enforcing your company's policies.

Residency Visas May Spark More Investment from Within and Abroad the US

2011-11-17T00:00:00

Residency Visas May Spark More Investment from Within and Abroad the US (en Español below)
by Edgar Saldivar
November 17, 2011

On October 20, 2011, a bipartisan group of U.S. Congressmen introduced the Visa Improvements to Stimulate International Tourism to the United States of America Act (VISIT-USA Act, S.1746) designed to bolster the current housing market by luring foreign investors to buy homes with the promise of a residential visa. Earlier this year, another group of bipartisan lawmakers introduced the Startup Visa Act of 2011 (S.565) intended to create jobs by helping foreign entrepreneurs secure immigrant visas if they raise certain levels of capital for startup ventures from qualified American investors. By reforming the U.S. immigration system, these proposed laws aim to facilitate greater investment both from within the U.S. and from abroad in the hope of providing a much needed boost to the U.S. economy.

The VISIT-USA Act would provide a three-year residential visa for foreign nationals who invest at least $500,000 in residential real estate in the U.S. Under the bill, visa applicants must spend at least $250,000 on a primary residence where they will reside for at least 180 days out of the year while paying taxes. Though not a path to citizenship, the bill would effectively offer extended tourist visas for foreign investors seeking to take advantage of the excess supply of residential properties in the U.S. real estate market.

The Startup Visa Act of 2011 (S.565), on the other hand, would amend immigration law to give foreign entrepreneurs a two-year conditional permanent resident visa (conditional green card) which would convert to a permanent residency (green card) if applicants meet certain conditions. According to its official press release on March 14, 2011, the Startup Visa Act is intended to "drive job creation and increase America's global competitiveness by helping immigrant entrepreneurs secure visas to the United States." The Act arose from the absence of a visa category specifically designed for foreign entrepreneurs who want to start a company in the U.S. and currently face limited or no visa options.

While many foreign entrepreneurs wait for the potential passage of the Startup Visa Act, some entrepreneurs may already qualify for an EB-5 immigrant visa to get their businesses under way. Created in 1990, the EB-5 immigrant investor visa is designed for foreign investors who invest a specified amount of capital in the U.S. and who will create full-time employment for at least 10 employees. To qualify for an EB-5 visa, an investor must invest either $500,000 or $1,000,000 depending on where the business enterprise is located.

The EB-5 immigrant investor process has been a growing source of foreign capital in the last two years, with the bulk of visa applications coming from Chinese investors who seek to do business in the U.S. and set a path to citizenship for their families. Additionally, with the ongoing instability in Mexico, growing numbers of wealthy Mexican business owners have been coming to the U.S. seeking to set up shop with the help of the EB-5 visa process in places like Houston, The Woodlands, and the Texas Rio Grande Valley. A recent article in rgVision Magazine notes that scores of Mexican families are currently ready to invest more than $83 million in Rio Grande Valley businesses through the EB-5 immigrant investor program. Many more are likely waiting to do the same in other parts of the state.

With the incentives of a robust Texas economy and potential residency visas, the flow of foreign investors or entrepreneurs seeking to do business in Texas will likely keep growing. This means that new immigrant-owned businesses will need guidance in the legal nuances of setting up and growing a business in Texas to get off on the right foot in their new market. Beyond the hurdles of immigration and tax laws, foreign investors and entrepreneurs will need legal advice on transactional matters such as business acquisitions and dispositions, choice of entity and corporate formation, real estate acquisitions, capital and strategic plan development, and private equity and venture capital funding. Prospective business owners should also seek counsel in the event of potential litigation and discrimination or wage claims, as well as the need for employment counseling, policy creation, and employment-related agreements. Having the necessary legal tools in place to allow immigrant business owners to do what they do best may be enough to spur some growth in our economy.

Visas de Residencia Pueden Provocar Más Inversión en los Estados Unidos Desde Dentro y en el Extranjero

El 20 de octubre de 2011, un grupo bipartidista de congresistas estadounidenses introdujo el proyecto de ley denomindado Visa Improvements to Stimulate International Tourism to the United States of America Act (VISIT-USA Act, S.1746) diseñado para reforzar el actual mercado de la vivienda por atraer inversionistas extranjeros a comprar casas con la promesa de una visa residencial. Este año, otro grupo de legisladores bipartidista introdujo el proyecto de ley denominado Startup Visa Act of 2011 (S.565) destinado a crear puestos de trabajo por ayudar a empresarios extranjeros obtener visas de inmigrante si recaudan ciertos niveles de capital para empresas de inicio por medio de inversores estadounidenses calificados. Reformando el sistema de inmigración de Estados Unidos, estas leyes propuestas pretenden facilitar una mayor inversión tanto desde dentro de los Estados Unidos y del extranjero con la esperanza de proporcionar un impulso muy necesario a la economía de Estados Unidos.

La ley VISIT-USA Act proporcionaría una visa residencial de tres años para los extranjeros que invierten por lo menos $500,000 dólares en inmuebles residenciales en los Estados Unidos. En virtud de la ley, los solicitantes de visa deben gastar al menos $250,000 dólares en una residencia principal donde residen al menos 180 días al año mientras paguen impuestos. Aunque no es un camino a la ciudadanía, el proyecto de ley ofrecería efectivamente visas turísticas extendidas para los inversores extranjeros que buscan aprovechar del exceso suministro de viviendas en el mercado de bienes raíces de Estados Unidos.

La ley Startup Visa, por otro lado, modificaría la ley de inmigración para dar a los empresarios extranjeros una visa de residente permanente condicional de dos años (tarjeta verde condicional) que podría convertir a una residencia permanente (tarjeta verde) si los solicitantes cumplen determinadas condiciones. De acuerdo con su comunicado de prensa oficial el 14 de marzo de 2011, la ley Startup Visa pretende "impulsar la creación de empleo y aumentar la competitividad global de los Estados Unidos por ayudar a empresarios inmigrantes obtener visas a los Estados Unidos." La ley surgió de la ausencia de una categoría de visa diseñada específicamente para los empresarios extranjeros que quieran iniciar una empresa en Estados Unidos y actualmente se ecuentran con opciones limitadas o sin opciones.

Mientras muchos empresarios extranjeros esperan para la posible aprobación de la ley Startup Visa, algunos empresarios ya pueden calificar para una visa de inmigrante de EB-5 para poner en marcha sus negocios. Creado en 1990, la visa de inversionista inmigrante EB-5 está diseñada para los inversionistas extranjeros que invierten una cantidad especificada de capital en los Estados Unidos y que crearán empleo de tiempo-completo para por lo menos 10 empleados. Para calificar para una visa EB-5, el inversor debe invertir $500,000 o $1,000,000 de dólares dependiendo de donde se encuentra la empresa.

El proceso de inversionista inmigrante EB-5 ha sido una fuente creciente de capital extranjero en los últimos dos años, con la mayor parte de las solicitudes de visa procedentes de inversores chinos que buscan hacer negocios en los Estados Unidos y establecer una ruta de acceso a la ciudadanía para sus familias. Además, con la continua inestabilidad en México, un número creciente de ricos empresarios mexicanos ha estado viniendo a los Estados Unidos tratando de iniciar negocios con la ayuda del proceso de visa EB-5 en lugares como Houston, The Woodlands, y el Valle de Texas. Un artículo reciente en la revista rgVision señala que decenas de familias mexicanas están actualmente dispuestas a invertir más de 83 millones de dólares en empresas del Valle de Texas a través del programa de inversionista inmigrante EB-5. Muchos más probablemente esperan hacer lo mismo en otras partes del estado.

Con los incentivos de una robusta economía de Texas y posibles visas de residencia, es probable que el flujo de inversionistas o empresarios extranjeros que buscan hacer negocios en Texas siga creciendo. Esto significa que nuevas empresas propiedad de inmigrantes necesitarán orientación en los matices legales de la creación y crecimiento de un negocio en Texas para bajar con el pie derecho en su nuevo mercado. Más allá de los obstáculos de las leyes de inmigración e impuestos, los empresarios e inversionistas extranjeros necesitarán asesoramiento jurídico sobre cuestiones transaccionales tales como adquisiciones y disposiciones de negocios, elección de entidad y formación corporativa, adquisiciones de bienes inmuebles, desarrollo del plan estratégico y de capital, y financiamento de capital privado y capital de empresa. Los empresarios futuros también deben buscar el consejo de abogados en caso de posible litigio y de reclamaciones sobre la discriminación o el salario, así como la necesidad de la consejería de empleo, creación de políticas, y acuerdos relacionados con el empleo. Contar con las herramientas legales necesarias para permitir a los empresarios inmigrantes a hacer lo que mejor saben hacer puede ser suficiente para estimular el crecimiento de nuestra economía.

Frequently Misunderstood Issues Regarding Lease Assignments

2011-11-30T00:00:00

Frequently Misunderstood Issues Regarding Lease Assignments
by Brad Scarborough
November 30, 2011

Two of the frequently misunderstood lease issues that I receive calls about are whether the landlord's consent is required to assign a lease and whether an assigning tenant is released from liability under a lease after it assigns the lease. A tenant's failure to understand these can have a devastating effect on a tenant that needs to assign its lease, or that assigns its lease to an assignee without giving paying careful attention to its continued liability under the lease.

Landlord's Consent Is Required for Lease Assignment
Generally speaking, a contract involving real property may be assigned absent a provision to the contrary in the contract. However, § 91.005 of the Texas Property Code provides that a tenant may not rent its leasehold estate during the term of a lease without the prior consent of Landlord. Texas courts have held that such statute applies to a lease assignment as well as a sublease of the premises, and this limitation on the transfer of a tenant's leasehold estate is for the landlord's sole benefit. Accordingly, the landlord of a tenant that assigns its leasehold estate without the landlord's consent has the option to either declare the assignment invalid bring an action against the tenant or waive the statutory provision enforce the obligations against both the assignee and the original tenant/assignor. The statutory prohibition against assigning a lease without the landlord's consent may be avoided only by a clear expression of the parties' intent that landlord's consent is not required. Because a landlord does not have a duty to consent to a proposed assignment of the lease, a lease should include an express provision that the landlord may not unreasonably withhold its consent to a sublease or assignment. Absent such a provision, a tenant may find itself unable to either assign its lease or sublet its premises.

No Release of Liability for Tenant after an Assignment
Even when the landlord consents to an assignment of the lease, the original tenant is not released from the obligations of the lease unless the landlord expressly releases the original tenant from such obligations. In an assignment situation, the assignee, as well as the original tenant, is liable for the obligations of the tenant under the Lease. Therefore, careful consideration should go into the selection of an assignee or subtenant and the assignment should contain an indemnity from the assignee to protect the original tenant from the liability. However, that indemnity obligation may not be worth the paper it is written on if the assignee does not have the financial ability to satisfy that obligation.

USERRA Expanded to Include Harassment Claims

2011-11-29T00:00:00

USERRA Expanded to Include Harassment Claims
by Joseph "Trey" L. Wood, III
November 29, 2011

A new law signed by President Obama on November 21 will make it easier for individuals to sue employers for harassment on the basis of their military status. While the thrust of the Veterans Opportunity to Work to Hire Heroes Act is to reduce unemployment rates for veterans of the Iraq and Afghanistan conflicts, it also amends the Uniformed Services Employment and Reemployment Rights Act (USERRA) to specifically recognize claims of harassment (hostile work environment) on account of an individual's military status.

Prior to the passage of this legislation, courts were mixed on whether claims of harassment under USERRA were viable. However, by amending USERRA to include harassment claims, the Act has established the same standard for harassment claims for military status as those for sex, race, religion and other protected categories under most employment discrimination laws.

What you should do?
The passage of this law, coupled with the Supreme Court's ruling in Staub v. Proctor Hospital presents two significant protections afforded to those protected by USERRA. (You may recall in Staub that the Supreme Court recognized the Cat's Paw theory of liability to hold a company liable for discrimination even though the ultimate decision-maker harbored no discriminatory animus against the service member who was terminated.) Accordingly, it would be wise to invest in updating the training of your supervisors and revising any relevant policies to include the protection of those with military and veteran status.

GulfStar Group Completes Private Placement for Jones Industrial Holdings, Inc.

2011-12-05T00:00:00

Edgar Saldivar Named to Houston's Top 25 Young Latino Leaders by "Latino Leaders Magazine"

2011-12-01T00:00:00

SCOTUS UPDATE: Are States Barred from Enforcing Federal Immigration Law?

2011-12-13T00:00:00

SCOTUS UPDATE: Are States Barred from Enforcing Federal Immigration Law?
by Jennifer Hebert
December 13, 2011

Arizona v. United States
(Oral Argument Expected in April/May 2012)

As expected, the Supreme Court has accepted for review Arizona v. United States, a potentially landmark case asking the Supreme Court to determine how far a state can go to enforce federal immigration laws. Supporters on both sides of this case have made national headlines arguing their opinions as to the constitutionality and the necessity of Arizona's Support Our Law Enforcement and Safe Neighborhoods Act (SB 1070). Supporters argue that the federal government's failure to sufficiently enforce immigration laws forces border-states to bear an unreasonable and unbearable financial burden thereby necessitating state-level action to enforce federal laws. Opponents argue that immigration is exclusively a federal issue and that states should not interfere. The Supreme Court will now have its opportunity to opine on the issue (minus Justice Elena Kagan who will not participate in the case due to her work on the case while United States Solicitor General).

Basic Facts: SB 1070 was enacted by the Arizona legislature in April 2010. Among its most controversial provisions are those requiring police officers to check a person's immigration status while enforcing other laws (i.e. traffic stops, etc.) and making it a crime for an immigrant to intentionally fail to obtain and carry legal immigrant papers with him while in Arizona.

Previous Litigation: In July of 2010, United States District Court Judge Susan Bolton enjoined four provisions of the law on the eve of their effective date finding that the provisions were preempted by federal law. The provisions blocked by Judge Bolton:

Require local police officers to check a person's immigration status while enforcing other laws;
Make it a crime for an immigrant to intentionally fail to obtain and carry legal immigrant papers with him while in Arizona;
Make it a misdemeanor for an undocumented immigrant to apply for a job, publicly solicit a job, or work in Arizona; and
Allow police to arrest without a warrant any person the officer has "probable cause to believe" has committed a crime, anywhere, that would make the person subject to deportation.

Judge Bolton did not block certain other provisions of the law including provisions banning sanctuary cities and making it illegal to hire day laborers if doing so impedes traffic. Judge Bolton's order also allowed parts of the law mandating sanctions for employers who hire illegal immigrants.

A divided panel of the Ninth Court of Appeals upheld the District Court ruling in April, and similar laws are currently being challenged in Georgia, Alabama, Utah, and South Carolina.

Question for the Court: To what extent are states preempted by federal law from enacting measures relating to immigration? Do Arizona's laws go further than necessary to cooperate with federal government in enforcing immigration laws and instead create a separate immigration policy?

SCOTUS UPDATE: Supreme Court Agrees to Hear Appeal of Texas Redistricting Case

2011-12-13T00:00:00

SCOTUS UPDATE: Supreme Court Agrees to Hear Appeal of Texas Redistricting Case
by Jennifer Hebert
December 13, 2011

Perry v. Perez, et al
Perry v. Davis, et al
Perry v. Perez, et al

The United States Supreme Court has agreed to hear Texas officials' appeal of a controversial new redistricting plan. On Friday, the Court issued an order blocking use of the redistricting maps recently created by a federal judicial panel and setting oral argument for January 9, 2012. The Order issued by the Court on Friday effectively prevents Texas candidates from filing for office until a resolution is reached because of the uncertainty of which district the candidates may ultimately reside in and likely will result in a delay in primaries which are currently scheduled for March. Due to the time-sensitive nature of the issues raised, Texas Attorney General Greg Abbot asked the Supreme Court to intervene on an expedited basis last week.

The dispute over redistricting in Texas is especially contentious this year given the four new Texas congressional seats at issue. In fact, the map currently at issue isn't the first map to be challenged in the state this year. Democrats previously challenged the original map which was drawn by the Republican-led Texas legislature resulting in a federal judicial panel re-drawing the maps. Abbot now argues in the appeal that the new map is "fatally flawed" and should never be used in Texas elections.

While every state is required to redraw their district maps every ten years after the Census, Texas is one of only a handful of states required to have its district maps approved by the United States Justice Department under the Voting Rights Act of 1965.

25 More Charges Filed In 2011 than 2010

2011-12-16T00:00:00

25 More Charges Filed in 2011 than 2010
by Joseph "Trey" L. Wood, III
December 16, 2011

The Equal Employment Opportunity Commission (EEOC) reported that there were a total of 25 more charges of discrimination filed in the fiscal year 2011 (October 1, 2010 through September 30, 2011) than in 2010. While that doesn't sound like much, the total number of charges filed amounted to another record year: 99,947 charges. The EEOC also indicated in its Performance and Accountability Report that it reduced its backlog of cases by 10 percent and collected over $346 million dollars on behalf of alleged victims of workplace discrimination. That is the highest level of monetary relief ever obtained by the EEOC through its administrative process.

The EEOC's report also revealed that at the end of FY 2011, it was working on 580 systemic (class action) cases. During the year, the EEOC field offices completed work on 235 systemic investigations. Also a trend of concern for employers is the EEOC's focus on building enforcement partnerships with other federal agencies including the Department of Justice and the Department of Labor's Office of Federal Contract Compliance Programs (OFCCP).

Why You Should Be Concerned
It is evident that the EEOC is beefing up its arsenal against employers in an effort to increase the number of charges of discrimination that it handles. That means that complaints of discrimination that may have been looked at by the EEOC with a critical eye in the past, may now be more carefully evaluated. Accordingly, it is important for employers to understand that the EEOC is not a neutral governmental fact finder but, rather, an advocate for employees. If your company should receive a charge of discrimination, it is vitally important to treat the charge with a great deal of care and diligence in order to protect your rights.

2012 Limits on Transportation Benefits Issued by IRS

2011-12-18T00:00:00

2012 Limits on Transportation Benefits Issued by IRS
by Joseph "Trey" L. Wood, III
December 18, 2011

The Internal Revenue Service (IRS) has issued a new set of limits that are designed to assist employees with their daily commutes.

Parking
The monthly limit on the amount of parking benefits that can be excluded from employees' income for tax purposes will go up to $240, up from $230 in 2011.

Commuter Vehicles and Transit Passes
In 2011, the monthly benefit for those commuting in a highway vehicle/purchasing transit passes was $230. However, beginning in 2012, the amount drops to only $125 per month.

Officers Can Be Personally Liable for Non-Payments to Sub-Contractors or Suppliers under Texas Trust Fund Statute

2011-12-20T00:00:00

Officers Can Be Personally Liable for Non-Payments to Sub-Contractors or Suppliers under Texas Trust Fund Statute
by Jeremy Sanders
December 20, 2011

The Texas Trust Fund Statute (Texas Property Code Section 162) is a powerful tool available to a contractor or subcontractor (independent from a lien) that enforces payment for providing labor or materials on a construction project. The remedy under the Statute is particularly important for a claimant who has failed to perfect a mechanic's lien or bond claim. The benefits of the Statute may be claimed regardless of whether or not a lien has been perfected.

In summary, an owner, contractor or subcontractor violates the Statute when it intentionally, knowingly, or with the intent to defraud, retains, uses, disburses, or diverts trust funds without first fully paying all obligations incurred or owed for labor or materials furnished to the project. For example, when a contractor or subcontractor is paid, but then fails to pay its lower-tier subs or suppliers, the non-paying contractor or subcontractor is in violation of the Trust Fund Statute.

The statutory and case law hold officers of companies that misapply such trust funds personally liable and Texas law imposes both civil and criminal liability on any individual officer who violates it.

In the civil context, the officers, directors and agents of an owner, contractor, or subcontractor who are deemed to be trustees under the Statute, are personally liable for misapplication of trust funds. In other words, they can be individually sued in civil court and criminally prosecuted by the state. It does not matter that the individuals were working within a corporation or partnership at the time such funds were misapplied.

In regard to criminal liability, a trustee who intentionally or knowing misapplies trust funds amounting to $500 or more, commits a Class A misdemeanor. A trustee who misapplies trust funds amounting to $500 or more with "intent to defraud" commits a felony of the third degree.

The Trust Fund Statute offers protection for certain subcontractors or suppliers that qualify. However, it is advisable to read Texas Property Code Section 162 in its entirety to become familiar with the specific definitions and defenses available under the Statute. Although the Statute provides protection, each subcontractor or supplier should always perfect a lien on the property and not rely solely on the protection of the Statute.

Houston Touted as City of Opportunity at BoyarMiller's 2012 Real Estate Forecast

2011-12-15T00:00:00

NLRB Finalizes Rule for Quicker Elections

2011-12-22T00:00:00

NLRB Finalizes Rule for Quicker Elections
by Joseph "Trey" L. Wood, III
December 22, 2011

In our June 25 posting titled "NLRB Again Flex's Its Muscle," we made you aware of the NLRB's proposed changes to its rules governing union elections. The proposed rules would restrict an employer's ability to successfully stage its own campaign in opposition to a union's organizing efforts. As expected, on December 21 the NLRB published its final rule just prior to the Board's losing one of its most controversial, pro-union members, Craig Becker. While the final rule is not as punitive for employers as rules proposed in June, some key highlights to the rule include the following:

Employers will no longer be entitled to a hearing to determine who votes. This does away with the parties' right to a pre-election hearing to determine the voting unit. Under the new rule, challenges to voters would (most of the time) be challenged at the polls and then litigated afterward. This could potentially discourage voter turnout, particularly among those who tend to side with the company;
Eliminates the recommendation that regional directors should not schedule elections until at least 25 days after their decision to allow for sufficient time for review by the NLRB; and
Limits the bases upon which the NLRB will consider a request for special permission to appeal extraordinary circumstances when the issue of the appeal would otherwise evade review.

Given these changes, union elections will now take place within 21-25 days of the filing of a petition, rather than 42 days under the old rules. As a result of these changes, employers will need to be more proactive in educating their employees about the consequences of union representation, and educate supervisors to be more attentive to the signs which may point to union organizing activity. While certain trade organizations have sued the NLRB over the propriety by which the rules were enacted, the new rules are currently set to become effective on April 20, 2012.

NLRB Again Postpones Effective Date of Posting Requirement

2011-12-27T00:00:00

NLRB Again Postpones Effective Date of Posting Requirements
by Joseph "Trey" L. Wood, III
December 27, 2011

As a follow up to our previous posts, the NLRB has recently agreed to postpone the effective date of its employee rights notice posting rule at the request of a federal court in Washington, DC which is hearing a challenge to the rule. The Board has pushed back the effective date of the rule from January 31, 2012 to April 30, 2012. Hopefully prior to that date the court will provide some guidance on whether the rule will stick or not.

As you may recall, this rule requires most employers to post an 11- by-17-inch notice advising employees of the right to act together to improve wages and working conditions, to form, join and assist a union, to bargain collectively with their employer, and to refrain from any of these activities. It provides examples of unlawful employer and union conduct and instructs employees how to contact the NLRB with questions or complaints. The challenge to the rule filed in Washington, DC is one of several filed by business groups across the country.

“Disclaimer of Reliance” Provisions

2011-12-29T00:00:00

"Disclaimer of Reliance" Provisions
by Chris Hanslik
December 29, 2011

In recent years there has been an increase in acquisitions of privately held companies. While privately held companies do not always have audited financial records, they are typically valued based on financial performance. Buyers of these companies often request and review financial projections too. But can a buyer justifiably rely on the financial information provided during due diligence? Not if the purchase agreement contains a "disclaimer of reliance" provision.

Contract provisions disclaiming reliance on a party's representation may be enforced in limited circumstances to effectively bar claims of fraudulent inducement. In order to recover on a theory of fraudulent inducement, a plaintiff must prove that he or she justifiably relied on the opposing party's misrepresentations. Parties use waiver of reliance provisions to protect themselves from liability arising from allegations of false statements or representations made during the course of negotiations. A disclaimer of reliance will (1) disclaim all extra contractual representations; and (2) provide that the contracting parties are not relying on any representations made during the course of negotiating the contract. Provisions that clearly and unequivocally waive reliance can negate the reliance element necessary for a successful fraudulent inducement claim.

The Texas Supreme Court has enforced "disclaimer of reliance" provisions on several occasions. In doing so, the court has identified certain elements that it believes are most relevant to evaluating the enforceability of these clauses. They are:

The terms of the contract were negotiated, rather than boiler plate, and during negotiations the parties specifically discussed the issue which has become the topic of the subsequent dispute;
The complaining party was represented by counsel;
The parties dealt with each other in an arm's length transaction;
The parties were knowledgeable in business matters; and
The release language was clear.

When these factors are present a "disclaimer of reliance" provision may be enforced to preclude a claim for fraudulent inducement against the seller.

New Year, New Resolutions

2012-01-03T00:00:00

New Year, New Resolutions
by Joseph "Trey" L. Wood, III
January 3, 2012

It is once again that time of the year when we begin to look forward to a new year and new beginnings: Out with the old, in with the new. Something that is not so new is the federal government's increased scrutiny of the way employers treat their employees. From harassment and discrimination to wages and immigration, various government agencies have stepped up their enforcement efforts to prosecute non-compliant employers. That is an excellent reason why employers should resolve to provide EEO training for managers and supervisors in the new year.

In the voluminous pages of federal statutes and regulations dealing with the employer/employee relationship, you will not find anything that actually requires management training. However, some states, most notably California, do require training for managers and supervisors for illegal workplace harassment. Despite this absence of any federal regulatory law, there are many cases that have found that an employer's failure to provide such training was tantamount to a violation of the law itself. So, the assertion that EEO training for managers and supervisors is mandatory is not too far off-base.

The training itself should be provided to anyone with any supervisory authority over your company's employees. When supervisors and managers make decisions pertaining to employees, the law views those decisions as decisions of the company itself-not just the supervisor. Accordingly, supervisors and managers must be armed with an understanding, or at least an awareness of particular laws so that that the decisions they make in dealing with employees will be less likely to lead to potential liability for the company. The training should cover the basics such as:

What employees are protected under the law
How the law protects those individuals
Illegal harassment
Retaliation
Dealing with injured and disabled employees
Proper documentation and discipline

Certainly we cannot expect supervisors and managers to be experts on the law. However, with proper training we can expect those with supervisory authority to at least be able to spot tricky issues and ask for help in making decisions. That step alone makes the training process invaluable and will lead to a much happier, and prosperous, new year.

Lifting of Sanctions in Libya May Give a Boost to the Energy Industry

2012-01-04T00:00:00

Lifting of Sanctions in Libya May Give a Boost to the Energy Industry
by Edgar Saldivar
January 4, 2012

On December 16, 2011, the White House announced the U.S. has rolled back most of its sanctions on the Government of Libya. Specifically, the U.S. unfroze all government and Central Bank of Libya funds within U.S. jurisdiction, with limited exceptions - namely, assets pertaining to the Qadhafi family and former Qadhafi regime members. In coordination with the U.S., the United Nations Security Council also lifted sanctions on the Central Bank and the Libyan Foreign Bank on the same day. Additionally, UK Foreign Secretary William Hague stated that Britain is currently working to release about $10.2 billion in frozen Libyan assets.

The move by the U.S. freed up more than $30 billion in assets held frozen since February 25, 2011, when President Obama signed Executive Order 13566 in response to the violence that arose in Libya under the government of Colonel Muammar Qadhafi. The Department of the Treasury's Office of Foreign Assets Control subsequently issued a set of regulations to implement the Executive Order (76 Fed. Reg. 38562, July 1, 2011). The United Nations lifted sanctions imposed by U.N. Security Council resolutions 1970 and 1973 in an effort to halt the violence in Libya. Mr. Hague noted that the move "means that Libya's government will now have full access to the significant funds needed to help rebuild the country." The release of frozen Libyan assets also promises to facilitate the resumption of oil exploration and production in Libya. This means greater prospects for foreign investment in Libya, which sits on Africa's largest oil reserves, and greater opportunity for the energy industry.

The lifting of sanctions could not have been more timely for Libya and energy companies. According to a recent Bloomberg report, the transitional government in Libya seeks to raise output beyond pre-revolution levels by attracting international oil companies to Libya. The report mentioned that at the recent World Petroleum Congress held in Doha, Qatar, Europe's biggest oil companies, BP and Shell stated they aim to resume exploration in Libya, while French oil company, Total SA, seeks to develop new production in Libya after restoring output at fields that were shut down. Other companies that were already producing in Libya are now boosting their production levels, such as Houston-based ConocoPhillips, Spain's Repsol YPF SA, and Italy's Eni SpA. According to executives from BP, Shell, and ExxonMobil, international oil companies need access to new crude and natural gas deposits to meet the growing global demand. With the release of sanctions, Libya now has access to its funds to help in its negotiations with foreign companies as it seeks to rebuild its economy. Energy and oilfield service companies from Houston to Europe are likely to benefit from the resulting increased economic activity in the African nation.

Specifically, having fewer restrictions on dealings with Libya will likely create more opportunities for Houston's energy industry as local companies engage in further business transactions, form international partnerships, and enter into contracts to provide much needed services overseas.

BoyarMiller Announces 2012 Attorney Promotions

2012-01-04T00:00:00

The 5th Annual Houston Commercial Real Estate Forecast Breakfast Forum

2011-12-09T00:00:00

Oil & Gas Company v. Royalty Owner: Texas Supreme Court Rules in Favor of Due Diligence

2012-01-05T00:00:00

Oil & Gas Company v. Royalty Owner: Texas Supreme Court Rules in Favor of Due Diligence
by Jeremy Sanders
January 5, 2012

The Texas Supreme Court has ruled that mineral rights owners often bear the burden to make sure oil and gas operators don't underpay them — whether it's a mistake or outright fraud. On December 16, 2011, the high court issued an opinion reversing lower court findings that Shell Oil Co. must reimburse $72,532.09 to a Texas royalty owner named Ralph Ross.

In Shell Oil Co. v. Ross, No. 01-08-00713-CV (Tex. App.-Houston [1st Dist.] February 25, 2010, no pet. h.), Ross, a mineral interest owner, brought a breach of contract, unjust enrichment, and fraud action against natural gas lessee, Shell. Ross alleged that Shell failed to pay royalties in accordance with the lease agreement and that it fraudulently deprived him of royalties by making payments "based on an arbitrary amount even below the internal transfer price." He further alleged that Shell sent him royalty statements containing false representations that the royalties were based on actual sales prices.

A Houston area jury had found that Shell fraudulently reported lower prices for its natural gas to Ross and then underpaid him, violating the terms of their lease contract. A lower appellate court had upheld the finding for Ross. However, the Supreme Court found that Ross had an obligation to investigate further and conduct research of public records that could have alerted him to the underpayments by Shell. The high court did not seem moved by the fraud arguments and any bearing those findings may have had on a final decision on royalty payments.

"We hold that the fraudulent concealment doctrine does not apply to extend (the statute of) limitations as a matter of law when the royalty underpayments could have been discovered from readily accessible and publicly available information before the limitations period expired," wrote Justice Debra Lehrmann for the court. The court added: "[I]n this case, the Rosses could have timely discovered the underpayments through the exercise of due diligence."

This decision could trigger a number of lawsuits so that royalty owners can ensure through legal discovery that they are given accurate information from oil and gas operators. In addition, the Texas Supreme Court solidified the four-year limit within which a lawsuit for underpaid or non-paid royalties must be filed in Texas.

Commercial Motor Vehicle Drivers Banned from Cell Phone Use

2012-01-09T00:00:00

Commercial Motor Vehicle Drivers Banned from Cell Phone Use
by Joseph "Trey" L. Wood, III
January 9, 2012

The Federal Motor Carrier Safety Administration's final rule prohibiting Commercial Motor Vehicle (CMV) drivers from using hand-held cell phones while operating their vehicles went into effect on January 3, 2012.

Through the Pipeline and Hazardous Materials Safety Administration (PHSA), drivers hauling hazardous materials within a state are also included in the ban. Drivers who violate the rule will face civil penalties of up to $2,750 for each offense. The rule also provides that the employers are liable for violations by their employees with civil penalties reaching up to $11,000 for each violation. Since the Federal Motor Carrier Safety Administration will hold employers responsible for violations by their drivers, it is recommended that employers immediately implement a policy prohibiting such conduct by drivers in order to try and reduce, if not avoid these penalties.

The new rule restricts a CMV driver from holding a mobile telephone to conduct a voice communication, dialing a mobile telephone by pressing more than a single button, or reaching for a mobile phone in an unacceptable and unsafe manner (e.g. reaching for any mobile telephone on the passenger seat, under the driver's seat, or into the sleeper berth). Thus, a driver of a CMV who desires to use a mobile phone while driving will need to use a compliant mobile telephone (such as hands-free) located in close proximity to the driver that can be operated in compliance with this rule. Thus, the ease of "reach" or accessibility of the phone is relevant only when a driver chooses to have access to a mobile telephone while driving. Essentially, the CMV driver must be ready to conduct a voice communication on a compliant mobile telephone, before driving the vehicle. The only exception to the rule allows CMV drivers to use their hand-held mobile telephones if necessary to communicate with law enforcement officials or other emergency services.

Foreclosures by Property Owner Associations Now Subject to Judicial Approval

2012-01-10T00:00:00

Foreclosures by Property Owner Associations Now Subject to Judicial Approval
by Tim Heinrich
January 10, 2012

The 2011 Texas Legislature enacted several statutes related to the operation and administration of property owner associations in Texas. One significant legislative change is the requirement that, beginning as of Jan. 1, 2012, a property owner association may not foreclose on an assessment lien unless the association first obtains a court order authorizing the foreclosure.

A property owner association generally makes assessments on property in a subdivision so that it is able to pay for and maintain the common amenities in the subdivision. Assessment liens are often imposed on the real property at the time of its initial development in order to secure payment of these assessments. Homeowners purchase their property subject to these assessment liens.

Prior to this recent change in the law, when a property owner failed to pay his assessment, an association could foreclose its lien by non-judicial foreclosure. This foreclosure could occur without the requirement for court approval, in the same manner as a mortgage or deed of trust. The Texas Legislature imposed the requirement of judicial foreclosure for assessment liens in order to protect homeowners from perceived injustices occurring under the non-judicial foreclosure system.

As required by the statute, the Texas Supreme Court has adopted special rules for courts to expedite handling of foreclosure proceedings brought by property owner associations. However, it will now be more time consuming and costly for an association to enforce its rights to collect assessments.

Texas Railroad Commission Passes Fracking Disclosure Rules

2012-01-13T00:00:00

Texas Railroad Commission Passes Fracking Disclosure Rules
by Jeremy Sanders
January 13, 2012

The Texas Railroad Commission approved "landmark" fracking disclosure rules in December 2011 that rank as some of the most comprehensive in the nation.

Fracking, or hydraulic fracturing, is a process in which drillers blast a mixture of water, sand and chemicals deep underground to break up rock and retrieve oil or gas. The process has been widely utilized in the various shale plays around the country. However, the chemical content involved in the process — largely unknown for individual wells — has stirred environmental concerns.

The new Texas rules require disclosure of chemicals for all wells permitted on or after February 1, 2012. The rules also explain how landowners can challenge "trade secrets" claims, a provision that has troubled environmentalists because it allows industry to withhold information on certain chemicals for competitive reasons.

Drillers must reveal the names of all chemicals they use during fracking on a national website, fracfocus.org, also known as the FracFocus Chemical Registry. However, under House Bill 3328 passed by the Texas Legislature in the spring of 2011, oil and gas operators are required to reveal concentrations only for chemicals deemed hazardous to human health. That means about half of the chemicals disclosed by Texas companies will not publicly include concentrations.

"With this new rule, Texans will know more about what is going in the ground for energy production than about the ingredients that go into their sodas," Elizabeth Ames Jones, the Commission's chair, added in a statement.

New Construction Anti-Indemnity Laws Now in Effect

2012-01-16T00:00:00

New Construction Anti-Indemnity Laws Now in Effect
by Jeremy Sanders
January 16, 2012

The Texas legislature recently passed new anti-indemnity and anti-additional insured legislation that will bring significant changes to the construction industry. On June 17, 2011, Texas Governor Rick Perry signed House Bill 2093, which makes certain indemnity provisions in construction contracts void and unenforceable if they require a person to indemnify, defend, or hold harmless another party for a claim caused by that party's own negligence or fault. The bill also prohibits construction contract provisions requiring the purchase of additional insured coverage if the scope of such coverage would be prohibited when contained in an indemnification agreement. This legislation, which creates what will become the new "Chapter 151" of the Texas Insurance Code, governs construction contracts and consolidated insurance programs established on or after January 1, 2012.

In practical terms, the new construction laws mean that owners and general contractors can no longer require subcontractors to (1) indemnify them for the owner or general contractor's own negligence or (2) purchase insurance coverage for the owner or general contractor's own negligence. However, there are certain key exceptions. Among them, parties may continue to provide indemnification against claims for "the bodily injury or death of an employee of the indemnitor, its agent, or its subcontractor of any tier." HB 2093 also specifically excepts contracts for residential and public works projects.

Indemnification has been a topic of concern for subcontractors for several years. Upstream parties, such as owners and general contractors, have frequently required indemnification from downstream parties on a project, such as the mechanical contractors. For an indemnification agreement to be legally enforceable under Texas law, it needed to satisfy the "express negligence doctrine." The express negligence doctrine provides that parties seeking to indemnify the indemnitee from the consequences of its own negligence must express that intent in specific terms (and be specifically stated within the four corners of the contract). If a general contractor required a sub to indemnify it, the sub would have to indemnify the general contractor not just for the sub's negligence, but also for the general contractor's own negligence.

The reality of this shift in responsibility and risk of exposed liability has not always proved favorable for the downstream contractors. Nevertheless, certain contractors would often execute the construction contracts and take the risk of indemnity later in the project. This is where the legislature stepped in and changes were made. Under the new anti-indemnity laws, a general contractor can no longer require a sub-contractor to indemnify the general contractor for their own negligence. Even if a contract provision includes this indemnity language, the provision is unenforceable and the parties are prohibited from waiving this anti-indemnity provision.

With these new changes, owners and contractors should evaluate and revise their construction contracts and insurance programs to address any issues impacted by this legislation.

Supreme’s Back Church’s Employment Decision

2012-01-16T00:00:00

Supreme's Back Church's Employment Decision
by Joseph "Trey" L. Wood, III
January 16, 2012

On January 11, 2012, the United States Supreme Court ruled that a church that makes employment-related decisions with respect to its "ministers" is free from any employment discrimination suits brought by the affected employee. In a rare unanimous decision, the Court held that the ministerial exception acts as an absolute bar to such suits.⁽¹⁾

Background
Hosanna-Tabor Evangelical Lutheran Church and School is a member congregation of the Lutheran Church-Missouri Synod. The Synod classifies its school teachers into two categories: "called" and "lay." "Called" teachers are regarded as having been called to their vocation by God. To be eligible to be considered "called," a teacher must complete certain academic requirements, including a course of theological study. Once called, a teacher receives the formal title "Minister of Religion, Commissioned." "Lay" teachers, by contrast, are not required to be trained by the Synod or even to be Lutheran. Although lay and called teachers at Hosanna-Tabor generally performed the same duties, lay teachers were hired only when called teachers were unavailable.

After Cheryl Perich completed the required training, Hosanna-Tabor asked her to become a called teacher. Perich accepted the call and was designated a commissioned minister. In addition to teaching secular subjects, Perich taught a religion class, led her students in daily prayer and devotional exercises, and took her students to a weekly school-wide chapel service. Perich led the chapel service herself about twice a year.

Perich developed narcolepsy and began the 2004-2005 school year on disability leave. In January 2005, she notified the school principal that she would be able to report to work in February. The principal responded that the school had already contracted with a lay teacher to fill Perich's position for the remainder of the school year. The principal also expressed concern that Perich was not yet ready to return to the classroom. The congregation subsequently offered to pay a portion of Perich's health insurance premiums in exchange for her resignation as a called teacher. Perich refused to resign. In February, Perich presented herself at the school and refused to leave until she received written documentation that she had reported to work. The principal later called Perich and told her that she would likely be fired. Perich responded that she had spoken with an attorney and intended to assert her legal rights. In a subsequent letter, the chairman of the school board advised Perich that the congregation would consider whether to rescind her call at its next meeting. As grounds for termination, the letter cited Perich's "insubordination and disruptive behavior," as well as the damage she had done to her "working relationship" with the school by "threatening to take legal action." The congregation voted to rescind Perich's call, and Hosanna-Tabor sent her a letter of termination.

Perich filed a charge with the Equal Employment Opportunity Commission, claiming that her employment had been terminated in violation of the Americans with Disabilities Act. The EEOC brought suit against Hosanna-Tabor, alleging that Perich had been fired in retaliation for threatening to file an ADA lawsuit. Invoking what is known as the "ministerial exception," Hosanna-Tabor argued that the suit was barred by the First Amendment because the claims concerned the employment relationship between a religious institution and one of its ministers. The District Court agreed and granted summary judgment in Hosanna-Tabor's favor. The Sixth Circuit reversed the trial court's decision and recognized the existence of a ministerial exception rooted in the First Amendment, but concluded that Perich did not qualify as a "minister" under the exception.

Supreme Court's Decision and Significance to Religious Employers
Court's around the country widely accept the ministerial exception as a bar to employment discrimination suits by ministers. However, not all courts agree on who qualifies as a minister. The Supreme Court found that Perich was a minister, although not in the conventional sense of the word. However, the Court did not establish a bright-line test for who qualifies as a minister and, instead, indicated that a case-by-case approach must be used which looks at the totality of circumstances surrounding the individual's employment. While it is clear from this case that the ministerial exception applies to ministers, it does not apply to suits by other lay employees. Accordingly, religious employers must carefully analyze whether an employee qualifies as a minister before thinking that the ministerial exception will provide it with an absolute defense to any discrimination claims.

^{(1) Hosanna-Tabor Evangelical Lutheran Church and School v. Equal Employment Opportunity Commission.}

The United Nations Convention on Contracts for the International Sale of Goods – PART 1

2012-01-18T00:00:00

The United Nations Convention on Contracts for the International Sale of Goods - PART 1
What does it mean and how does it affect Texas businesses?
by Gus Bourgeois
January 18, 2012

The United Nations Convention on Contracts for the International Sale of Goods (CISG) is an international treaty providing a uniform international sale law for buyers and sellers of goods with places of business in different Contracting States. The CISG will also apply if only one party to the transaction is located in a Contracting State, if the terms of the contract, or operation of applicable "conflicts of laws" provisions, specifies that the Contracting State's laws will govern the transaction. The CISG was initially adopted by 11 countries in 1988, including the United States. It has been subsequently ratified by more than 60 additional countries, excluding, notably, the United Kingdom and India. Countries that have ratified the CISG are referred to as "Contracting States".

The purpose of the CISG is to provide a uniform regime for contracts for the international sale of goods, thereby introducing certainty and confidence in commercial exchanges. The idea is that such certainty would increase the volume of international trade, for the benefit of all Contracting States. In furtherance of that goal, the drafters of the CISG provided that the terms of the CISG are deemed to supersede the laws of the Contracting States with respect to sales transactions covered by the CISG, unless the application of the CISG is expressly excluded.

In other words, if you are a located in Texas, for example, and engaged in buying goods from, or selling goods to, a party located in another Contracting State, the terms of that transaction are likely governed by the CISG, even if the contract states that the laws of another jurisdiction (such as Texas) apply — unless the contract governing the transaction specifically says that the CISG does not apply. In my experience, many Texas businesses engaged in international sales transactions, if not most, have never heard of the CISG and do not realize that these transactions are governed by the CISG — until a problem arises.

What are the implications of the CISG for a Texas-based business involved in international sales transactions? When is it appropriate to specify that the CISG does not apply to a particular transaction — and how is that accomplished? We'll explore those answers to those questions in part 2 of the article.

Class Action Waivers No Longer Valid In Arbitration Agreements?

2012-01-19T00:00:00

Class Action Waivers No Longer Valid In Arbitration Agreements?
by Joseph "Trey" L. Wood, III
January 19, 2012

Earlier this month the National Labor Relations Board (NLRB) found that mandatory arbitration agreements which require employees to waive the right to bring class or collective actions are in violation of the National Labor Relations Act (NLRA).¹ This ruling means that any arbitration agreements which contain class action waivers and are required to be signed by employees as a condition of continued employment are no longer valid.

This is in direct contrast to what most employers felt following last April's ruling by the U.S. Supreme Court which validated the use of class action waivers in consumer arbitration agreements.² Following that ruling it was believed that companies could require employees to sign arbitration agreements in which the employees waived the right to bring class action actions against their employers. In fact, following that ruling this author opined the following:

Employers who use arbitration agreements with their employees may now wish to insert into their arbitration agreements language that prohibits employees from joining any class action against the company. For employers who do not use arbitration agreements but are fearful of the potential for class action matters, now may be the time to implement such agreements.

However, the NLRB held "an individual who files a class or collective action regarding wages, hours, or working conditions, whether in court or before an arbitrator, seeks to initiate or induce group action and is engaged in conduct protected by [the NLRA]." The Board continued, "When, as here, employers require employees to execute a waiver as a condition of employment, there is an implicit threat that if they refuse to do so, they will be fired or not hired."

The NLRB attempted to distinguish its decision from that of the Supreme Court by finding that class action arbitration in the employment context "is far less cumbersome and more akin to an individual arbitration proceeding." This plainly ignores the fact that many employment-related class actions involve thousands of employees. However, the Board emphasized that its holding was limited to only "employees" as defined by the NLRA. Accordingly, employees who act as supervisors or managers would not be affected. Finally, this decision involved the use of an arbitration agreement that was mandatory. If the agreement had permitted employees to sign or not sign the agreement without any fear of retaliation, the result may have been different.

What this Means for You
Certainly, if your company has arbitration agreements containing class action waivers that employees are required to sign as a condition of continued employment, this ruling jeopardizes the validity of the agreement. However, this case is not likely over and will, presumably, be appealed. What happens at the next level is anyone's guess. One alternative to class action waivers in the arbitration agreement may be to carve class action matters out of arbitration agreements, but require that the employee agree that any class actions be tried only before a judge, waiving a jury. At the end of the day, it will be important for all employers to weigh the potential risk of removing such waivers from agreements versus maintaining such clauses in the company's arbitration agreements.

¹ D.R. Horton, Inc.

² AT&T Mobility LLC v. Concepcion.

The United Nations Convention on Contracts for the International Sale of Goods – PART 2

2012-01-23T00:00:00

The United Nations Convention on Contracts for the International Sale of Goods - PART 2
What does it mean and how does it affect Texas businesses?
by Gus Bourgeois & Adam Wilhite
January 23, 2012

The United Nations Convention on Contracts for the International Sale of Goods (CISG) is an international treaty providing a uniform international sale law for buyers and sellers of goods with places of business in different Contracting States. The practical effect of the CISG is that, for example, if you are a business located in Texas and engaged in buying goods from, or selling goods to, a party located in another country that has ratified the CISG (a "Contracting State"), the terms of that transaction are likely governed by the CISG, even if the contract states that the laws of another jurisdiction (such as Texas) apply — unless the contract specifically says that the CISG does not apply. So what are some of the implications of having the CISG apply?

First, consider the statute of frauds, which (as codified by Texas' version of the Uniform Commercial Code) holds that a contract for the sale of goods with a price over $500 is generally not enforceable unless in writing and signed by the party against whom enforcement is sought. This long-standing bias against the enforceability of oral contracts is reversed under the CISG, which instead holds that a contract for the sale of goods under the CISG need not be in writing. Significantly, under the CISG, contracts for the sale of goods generally may also be amended orally, even if the original contract was in writing, unless the original contract expressly requires written amendment.

Second, consider the "battle of the forms", for example, when a buyer of goods issues to seller a purchase order with buyer-friendly terms and conditions, and seller issues an acknowledgment of the commercial terms of the order (price, quantity, etc.) backed with a separate set of different (seller-friendly) terms and conditions. In the absence of any other communication or conditions, seller's acknowledgement would generally be deemed to be acceptance of buyer's offer under the Texas UCC, and a binding and enforceable contract would be created. To the extent that seller's terms and conditions materially differed from buyer's, the different provisions would be considered to be proposals amending buyer's initial terms and conditions. Under the CISG, however, seller's response would be considered to be a rejection of buyer's initial offer, and a separate counteroffer. At this stage, either party could "walk away" from the proposed transaction, without obligation. In the absence of any further communication, if the parties thereafter "perform", the CISG would generally hold that the performance was pursuant to seller's terms and conditions, which buyer would have accepted by performance. Thus, in such a scenario, the CISG favors the "last form", while the Texas UCC favors the "next-to-last" form.

Third, while the CISG provides for many of the same types of damages in the event of breach as does the Texas UCC, the CISG provides an additional "self-help" remedy to buyers of goods. If the goods purchased do not conform to the contract, then the buyer may unilaterally reduce the purchase price in proportion to the non-conformity, even if the full purchase price has already been paid, unless the buyer can cure the non-conformity without unreasonable delay or inconvenience. There is no equivalent to this remedy under the Texas UCC, and obviously the exercise of such a remedy could be quite a surprise for an unsuspecting Texas seller.

While the differences between the CISG and the Texas UCC noted above are illustrative only, they support the idea that a Texas buyer or seller of goods may be better served by disclaiming the application of the CISG entirely. We'll discuss how and when to do so in part 3 of the article.