A majority of Americans oppose forced arbitration accoding to a recent survey. See HR Lawyer post. In a nationwide survey of 800 citizens, 59% opposed forced arbitration clauses in employment and consumer contracts. 59% support the Arbitration Fairness Act, a proposed statute in Congress. Support crosses political and gender boundaries. Even after voters hear arguments pro and con, only one-third support mandatory arbitration.
Ohio Employer's Law Blog points out that according to a recent article, mandatory arbitration does not live up to its expectations. See blog post. Jon Hyman at Ohio Employer Blog refers to a recent ABA article finding that in one study, mandatory arbitration was 30% more expensive and 25% longer than traditional litigation. The average costs and fees in an employment arbitration were $102,338 as opposed to $70,491 for litigation. The average life cycle for an employment arbitration was 21 months as opposed to 17 months for litigation.
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The US Supreme Court issued a ruling in Rent-A-Center West v. Jackson. The Supremes have found that an arbitrator should resolve issues regarding the enforceability of an arbitration agreement, and not the courts. See decision. This is an unfortunate decision. Simply based on policy grounds, arbitrators earn income by hearing arbitrations. So, they have ample incentive to find every arbitration agreement enforceable, regardless of the circumstancess of the agreement.
As the dissent points out, a challenge to the enforceability of the arbitration agreement under the facts in Rent-A-Center would be made by an arbitrator. Not said is the fact that many arbitrators are not lawyers. I cannot imagine how a non-lawyer would deal with issues regarding contract issues.
Arbitration agreements have become very common in the work place. Arbitrations have many pros and cons, but mostly cons where employees are concerned. As Workplace Prof points out, the Federal Arbitration Act, passed in the 1940's, was never intended to apply to situations in which the arbitration agreement is not a true arms-length agreement. See post. The FAA is being applied to situations in which the parties do not have comparable bargaining power. See Workplace Prof's description of a case in which bank customers alleged forgery of their signatures on a so-called agreement to arbitrate disputes with a bank. Yet, the federal court still applied the FAA and ordered the bank customers to arbitration.
It perverts contract law to force parties claiming fraud or forgery to subject themselves to a psuedo contract. It is equally perverse to pretend that employers and employees can negotiate in good faith an agreement to arbitrate employment disputes.
City Manager who "terminated" his employment under clouds of a scandal demands his severance pay. See San Antonio Express-News story. Ron Cain, who was City Manager for the town of Windcrest, a San Antonio suburban city, stepped down at the suggestion of the City Council. This was all prompted by a scandal involving his brother and millions of dollars spent or not spent on Rackspace, a large employer in Windcrest. Mr. Cain's lawyer admits that nothing in his employment agreement provides he would be entitled to severance pay. But, the lawyer adds, the intent of the drafters of the agreement was that Ron Cain would severance benefits if he resigned.
It sounds to me like the newspaper report did not get this quite correct. There is no right to anything just because the drafters of an agreement might have intended it. To the contrary, there is a principle in the law that anything considered but rejected for the agreement was probably deliberately rejected. So, I cannot hazard a guess as to what Ron Cain's lawyer is suggesting. But, generally, under Texas law, there is no right to severance pay. The only right to severance would be a matter of contract, if there is a contract.
Not to mention that the City Manager's conduct is being investigated. This request sounds a little "nervy."
So, you have a LInkedin account. As with most users, many of your contacts are co-workers. You leave your employer and send messages to your contacts on Linkedin. Is that a problem? It is a problem, if you have a non-compete with your former employer in which you agreed to not contact former your former co-workers. That is what happened in one recent lawsuit. The former employer, an IT staffing firm, learned of the messages and filed suit against the former co-workers. See report.
The former employee had signed a non-compete agreement in which he agreed to not solicit former co-workers. So, sending an email to all his contacts, co-workers and others, which said, "Hey, let me know if you are still looking for opportunities," sounds like solicitation.
So, yes, as the report explains, now, when an employee leaves a company, that employee may have to "un-friend" his/her former co-workers. In this case, the non-compete clearly prohibited solicitation of former employees.
Under the Texas Payday Statute, terminated employees are not entitled to their vacation pay when they leave their job. So explains Russ Cawyer in this post. The same statutory provision applies to sick leave or severance pay. Such benefits are owed to the employee only if the departing employee has a valid contract providing for those benefits. You can view the Texas Payday statute here.
A frequent issue arises concerning the right of an employer to deduct debts from an employee's paycheck. Texas Workforce Commission recognizes three occasions when an employer may make such deductions: 1) in response to an order from a competent court, such as for child support; 2) state or federally mandated withholdings; and 3) when authorized in writing by the employee. See TWC info.
So, for example, when the employee owes payments on a loan to the employer, the employer may not deduct those payments from the paycheck. Even if the employer has a signed loan agreement, the employer may not deduct those payments without written authorization from the employee.
But, the other shoe is that TWC will probably do nothing more than send letters to the employer finding them at fault. I have personally never heard of TWC taking stronger steps than sending letters to the miscreant employer.
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My colleague in California, Gene Lee, has written a couple of nice entries about how to read an employment contract. See this post for part 1 of his series on reading contracts. Note the information regarding which state law governs the contract. In today's business world, employment contracts frequently involve two, three states or more. It can make a huge difference regarding which state law governs. Just because you are hired in Texas for a Texas employer does not mean Texas will law will govern.
See Gene's second post for Part 2 of how to read an employment contract. Note his final advice: a contract helps, but a contract is no substitute for having a lawyer in your corner. I know many employees essentially draft their own contract. A self-written or borrowed contract is better than no contract. But, the best plan is to consult with a trained employment lawyer whenever you sign or draft a contract.
Texas law on non-compete agreements is stricter than many states. In Texas, the non-compete can be enforceable only if the employer provides some sort of confidential information in exchange for the non-compete agreement. Typically, the employer provides some trade secret or other proprietary information. Mike Maslanka pens another excellent post and discusses the state of non-compete law in Texas. He discusses the case of Marsh USA Inc, Et Al v. Cook. The lower court of appeals found that since no confidential information passed from employer to employee, then the non-compete signed by Rex Cook is not valid. Marsh argues that the mere exchange of money serves to make the non-compete binding. As Mike explains, the arguments are cloaked in legal jargon. But, in reality, they reflect core Texas values, such as supporting individual entrepreneurs versus securing the fruits of hard-won business success.
The Texas Supreme Court has accepted the case for appeal. If Marsh wins, then non-compete agreements will become much more common,as my friend Chris McKinney notes.
Halliburton/KBR has dropped its petition for certiorari to the US Supreme Court in the Jamie Leigh Jones case. See report. Ms. Jones is the lady who was raped in Iraq by KBR co-workers. She retutrned to the US to find that she had sgned an arbitration agreement which would have prevented most of her case from going before a jury. KBR has fought very hard to keep her case in arbitration. The employer lost on appeal with the Fifth Circuit. It looks like that decision will now become the final decision. The Fifth Circuit found that rape was not related to her employment, and, therefore, not properly a part of an arbitration agreement. Therefore, the rape allegations would go to trial.
Ms. Jones was gang raped in Iraq and the locked up by company employees. In withdrawing their petition for certiorari, KBR is effectively withdrawing its request for appeal. The company was motivated in part by the Franken amendment which prohibits arbitration for companies that do business with the Department of Defense.
An employment relationship that went bad. It happens all the time from Burger King to any corporate boardroom. When it happens in Lubbock, Texas to a major college coach, it becomes big news. Mike Leach filed his Third Amended Petition in state court alleging breach of contract, wrongful termination, among other things. He has added new facts suggesting "outside forces" conspired to get him evicted. But, as with any employment relationship, prior issues also serve as background evidence. He had a difficult negotiation of his contract just last year.
It is safe to assume Coach Leach had a "just cause" termination clause in his contract. Otherwise, none of these new facts would be relevant. If he did indeed abuse a player, then "just cause" means he could be fired without having to pay the remainder of his contract.
"Just cause" means he could only be fired for a just or good reason. Just cause is the opposite of "at-will." Not all, but very many individual employment agreements contain some form of a just cause termination clause. What is a just cause will be up to a jury. Texas juries can be very conservative. Coach Leach would have to show that Texas Tech did something more than reasonably rely on complaints from a concerned parent.
Texas Workforce Commission is supposed to enforce the Texas statutes regarding wages. A statute is a law passed by the state legislature. TWC provides a summary of the Texas Payday Statute at: http://www.twc.state.tx.us/ui/lablaw/pdlsum.html. Many employees want to know when must an employer pay the last paycheck? Frequently, many employers withhold the last paycheck until Joe Employee turns in his tools, pays for a damaged rear view mirror, turns in her uniforms, or whatever.
But, the employer cannot do these things. An employer cannot hold the final paycheck until an employee turns in tools or whatever. The employer must pay the last paycheck within six days of the last day. Texas Labor Code Art. 61.014. But, this law has no real teeth. The employer can incur a criminal penalty for missing this deadline. But, few District Attorney’s would have the time to prosecute what they see as a relatively minor crime.
Well, it must be getting ready to snow in July, because the Texas Supreme Court issued a pro employee decision. See Mike Maslanka's post. In a 9-0 vote no less, they found in favor of a group of employees who stuck around when an employer was being sold. Management had told the employees that if they stayed until the comnpany was sold, they would receive 5% of the sales price. They stayed. But, the company reneged and refused to pay them the 5%. The employees sued on basic contract principle: if you take action based on a promise, then that promise becomes a contract. The company defended on the basis that the employees could have terminated the employees at any time. Thus, the promise was illusory.
The Texas Supremes disagreed, finding that if the employer's argument was accurate, then any wage, salary or pension would be illusory. So, yes, if an employer promises a percentage of the sales price, and the employees rely on that promise, then that promise becomes an enforceable contract. Venegas v. American Energy Services (Tex. 12/18/09).
You work for a company. Things are going well. But, the company still has not paid you everything you are entitled to under your compensation agreement. You become unhappy. A start-up lures you away. The start-up competes directly with your old company. You had signed a non-compete agreement with the old company. But, you think why should you honor the non-compete when the company did not honor your compensation agreement. In caselaw, we call that the "doctrine of unclean hands." One cannot seek equity without first being equitable itself. One cannot come to court seeking equitable relief if that person does not himself have clean hands. So, you think, the employer cannot come to court seeking equity when the employer itself has not been equitable.
Well, you, the employee, lose this argument. You lose at least before the San Antonio Court of Appeals in Central Texas Orthopedic Products, Inc. v. Espinoza. The Court found that since the breach did not grow out of the agreement which is the subject of the suit, the doctrine of unclean hands does not apply. They are separate transactions, found the court. That is, the failure to pay under the terms of the compensation agreement was a separate transaction from the non-compete agreement. One agreement was signed in 2003, while the other was signed in 2007. As Russ Cawyer says, this decision continues Texas' trend toward supporting non-compete agreements.
See Workplace Fairness for a nice summary of non-compete agreements.
Once again, Mike Maslanka writes a nice post, summarizing a complicated area of law. See his post summarizing the law on non-competes. Look at his summary near the end. You can successfully attack a non-compete agreement on various theories: 1) the information provided to the employee was not truly confidential, 2) the confidential information was provided too late to be of any real benefit to the employee and it could not serve as consideration, 3) and the usual: the non-compete was too broad in geographical location or length of the agreement.
Eight ways to lose a non-compete case. See gruntled employees blog to see how an employer can lose a lawsuit regarding a former employee who has apparently violated a noncompete agreement. The post provides a nice summary regarding what to avoid.
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You are asked to sign a non-compete agreement by your employer. But, you are not sure you want to sign. What do you do? One IBM management employee deliberately signed in the wrong place. He wanted more time to think about signing it. He signed in the space where the employer would sign. Then, he went to work for Dell. The Second Circuit Court of Appeals finds for the employee in this recent decision, IBM v. Johnson. See post.
Mandatory arbitration holds few benefits for the employee. In the labor union context, it is helpful. The union and employer can pick the arbitrator they want. Both union and employer have knowledge of the different arbitrators and their particular biases. So, both sides can make an informed selection when they choose arbitrators. But, that does not work in the non-union context. Because in the normal at-will situation, the employee may go to arbitration only once in his/her life. She will have no knowledge of the different arbitrators. Instead, the employer will go to arbitration far more often and will have more knwowledge of the different arbitrators.
And, the cost is huge. One typical case: the employee was required to pay half the arbitrator's fee (usually about $250/hr with a minimum of $2000/day), filing fee of $500, case filing fee of $1000, additional filing fee of $2750, $150 daily hearing fee. These are huge fees for someone who may have ben terminated.
Then, if you lose, you may have to pay the other side's legal fees - $207,000 in one case. In another case, the arbitrator derived half of his annual income from the employer.
One study found that employees won 21% of the time in mandatory arbitration while winning 56% in California state courts. I know there are occasional significant wins for employees, but generally, employees do worse in arbitration than they do in traditional courts. The cost alone makes it virtually impossible for any employee to pursue.
And, since the employers do more arbitrations, the arbitratraors will favor them. The arbitrator gets work only if they get picked by one side or the other. Over time, the arbitrator will favor the side that hires him/her more often.
The reliance on arbitration needs to change. It is harming a great many employees. Support the Arbitration Fairness Act now pending in the Senate.
An interesting decision on non-compete agreements. The Court of Appeals in Houston found a non-compete reasonable. See: Gallagher Healthcare Ins Services v. Volgesang. The former employee was an insurance broker for Gallagher Healthcare. After twelve years, she resigned to work for a competitor. The non-compete provided that the employee could not have contact with 80 customers she had done business with in the prior two years for another two years working for the competitor. The court found this provision a reasonable substitute for the customary geographical limitation. So, instead of the typical geographical limit, this non-compete provided the employee could not contact for two years her prior customers. See more at Russ Cawyer's post about this case.
Those employee handbooks are so pretty and well-written. When your boss said they were binding, you probably believed her. But, no, thoese handbooks are usually nothing more than a guideline. They are not at all binding, if the employer did its homework. See Russell Cawyer's post explaining how to be sure they are not binding. I have talked before about how these handbooks are almost always not binding.
But, of course, the trick the past few years has been how to make sure the overall handbook is not binding but make sure the arbitration clause *is* binding. Employers do love those arbitration clauses.
Russell Cawyer reports that the recent state legislative session amended the statute regarding non-compete agreements. The new law allows physicians access to patients seen within a year. The current law restricts the ability of employers to draft non-competes regarding geographic distance, time and activity. This new provision adds this one category in regard to physicians.
NPR has a good story on the evils of mandatory arbitration in the workplace. Unfortunately, it is all too accurate. Mandatory arbitration simply does not work well in the non-union workplace. It favors employers over employees. Note the experience of one arbitrator who ruled against the company one time, after finding in favor of the credit card companies 19 previous times. She was removed from the list of potential arbitrators.
The problem with arbitration in the workplace is that arbitrators are employed or hired for a case only when both sides agree. Both sides are presented with a list of potential arbitrators. Both sides can strike whoever they wish. Employers go to arbitrations multiple times. Employers will have an institutional memory of who rules which way. An employee will generally go to arbitration only once. The arbitrators understand this. If they want future employment, they must find in favor of the employer.
Support the Arbitration Fairness Act now before Congress.
Arbitration has been around forever for labor disputes. Unions and their employers have long relied on arbitration as a relatively inexpensive way to resolve disputes. In the labor context, the arbitration process is set up through a collective bargaining agreement. The arbitrator is picked by both sides from a list of some 10 ore more names. The unions and employers know more or less who the arbitrators are and how they will approach various issues. The unions and the employer share the fees for the arbitration. Arbitrators receive anywhere from $150 to $500 per day. Fees for renting a room, travel, etc. can add up to another $500 per day. Since the fees are shared, the incentive is for arbitrators to not favor either side. This approach has some fairness to it. The entire process is negotiated.
By going to arbitration, unions give up jury trials, but instead, they get a quicker system to resolve workplace issues.
But, in the past 10 years or so have these arbitration style processes have invaded the non-union context. Employers have seen them as relatively inexpensive and just as fair. But, that is simply not true. Unlike labor unions, your average employee involved in non-union arbitrations will participate in an arbitration only once in his/her life. The employee knows nothing about any of the possible arbitrators on the list. The employee cannot afford $500 per day for an arbitrator. The courts have imposed some limitations, but still, the employee is expected to pay some fees in most non-union arbitrations.
Its a tough deal for employees. So, why have arbitrations? Well, mostly because the employer want them, or think they want them. There have been one or two instances of arbitrators awarding sizeable awards to employees. But, most employees cannot even afford to get into the door of an arbitration.
But, at least one defense lawyer finds arbitrations to be not worth the trouble for employers. In his informal survey, he finds many defense lawyers who agree with him. The process has grown, in part due to many lawyers and employees pushing to get some of the same protections they would have in court.
But, across a range of consumer disputes, arbitrations appear to be here to stay.
Arbitration for labor unions has been around forever. Arbitration has only been in use for the last 10 years or so. Employers started establishing policies for arbitration in employee handbooks in the late 1990's, in response to a few key court decisions. At first, most employment lawyers who represent employees were very concerned. National Employment Lawyers Association (NELA), of which I am a member, has sought to reverse this trend for many years.
The issue is that arbitration means a supposed neutral person will hear both sides regarding the employment dispute. That means there will be no judge or jury. Often absent are the tools we normally use in a lawsuit: discovery about the evidence held by the other side. confronting witnesses, etc. Worse, to gain access to an arbitration, an employee must agree to bear some of the costs of the arbitration. Since there are many, various fees and since some arbitrators charge $500/day or more, the costs quickly add up.
Now, a sister organization to NELA, Employee Rights Advocacy Institute has found in a survey that 59% of potential voters oppose forced arbitration in employment and consumer agreements. The support is the same whether they be Republicans or Democrats.
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