Duncey’s Caps, Inc. hired Bud Dunop as its new human resources manager for 2018.  Bud quickly determined that Duncey’s needed a formal employee policy handbook.  Included within the handbook was an arbitration agreement requiring employees to arbitrate all claims against Duncey’s relating to the employee’s employment.

Bud then held training and review sessions with all Duncey’s employees.  At the end of each session, each Duncey’s employee was required to log into a computer with their own self-created password.  Once logged in, the employee was given the opportunity to fully review the handbook and the arbitration agreement.  The employee was then required to click a box stating that he or she “acknowledges” receiving and reviewing the handbook, and that by clicking the box they “agreed” to abide by the handbook and the arbitration agreement. The employee was then required to enter their initials and click “submit.”

A few weeks later, one of Duncey’s employees who electronically acknowledged the handbook was injured on the job.  The employee filed a lawsuit.  Will Duncey’s be able to get this lawsuit sent to arbitration? Continue Reading Are Your Employees’ Electronically-Signed Agreements Enforceable?

N. O. Smelz, owner of Smelz Rug and Carpet Cleaning, learns that Brite Bank has submitted a request for proposal to clean the carpets at their 15 branches in the DFW area. When Smelz reads the request he notices it includes a diversity provision that requires at least 10% of the total amount paid by Brite to go to a vendor, or a subcontractor, that is a minority-owned, woman-owned, veteran-owned, LGBT-owned, or disabled-owned business. Smelz is concerned because he doesn’t fall into any of those categories, and he doesn’t believe any of his long-time suppliers do either.  But because his cleaning company has the best reputation around, Smelz submits his proposal anyway.  Will Smelz get the contract?         Continue Reading Supplier Diversity Policies

Agreeing with Benjamin Franklin that there is nothing certain except death and taxes, Sketch Wood and his partner Minnie Brix, owners of Wood & Brix, and their 200 employees are certain that the new tax law will affect them, but they are a bit overwhelmed. Looking for an overview, Sketch asked his favorite non-tax lawyer to hit some of the high points of the first significant reform of the U.S. tax code since 1986. Continue Reading New Tax Law – Impacting Your Small Business and You

Frustrated with the high number of employees that did not show up for work in the fall and winter last year, Jim Duncey, the owner of Duncey’s Caps, Inc., issues a memo to all employees that they must provide proof that they got a flu vaccine shot by January 1, 2018 or they would be fired.  Tommy Goinmyownway protests, saying that his religious beliefs prohibit him from getting vaccinations.  New Year’s Day comes and Tommy is fired after he doesn’t provide the required proof.  As he is escorted out of the plant Tommy threatens to sue Duncey’s for discrimination.  Does he have a claim? Continue Reading Sticking it to Your Employees During Flu Season

“Big” Bob Brothers is concerned that his company, Big Brothers Security Systems, is losing out on customers because his salesmen and installation teams are slacking when they are out of the office.  Brothers reads a newspaper article about another company that is putting microchip implants containing radio-frequency identification tags (RFID) into his employees in order to make sure they aren’t doing “off the clock” stuff while on the clock.  Brothers sends a memo to employees explaining that they will all be chipped the next month, and anyone refusing to chip will be terminated.  Can Brothers “big brother” his employees like that?   

Continue Reading Can I “Chip” Away at my Employees’ Privacy?

US Customs and Border ProtectionLast week Emma Grant’s line cook and 25 other undocumented employees at her bar-b-que restaurant Emma Grant’s Bar-B-Que were working the lunch shift when it was raided by Immigration and Customs Enforcement personnel, apparently at least in partial response to a recent executive order. Can the President of the United States do that? Can this be a problem for Emma Grant and her bar-b-que restaurant?

Executive Orders

Recognized since George Washington as being authorized by Article II, Section 1 of the Constitution that provides “the executive power shall be vested in a President of the United States of America,” there have been more than 13,000 issued, in one form or another, since 1789. Notable executive orders were Abraham Lincoln’s Emancipation Proclamation and Franklin Roosevelt’s mandatory registration of aliens from World War II enemy countries. FDR also holds the record, by far, of the most Executive Orders at 3,721; next closest is Woodrow Wilson at 1,803. To date, President Donald Trump has issued twelve executive orders. Suggested as undoing many of President Barack Obama’s policies, here’s a list and short summary of each. The Federal Register details the executive orders transcripts, numbers and disposition tables from Herbert Hoover to date.

The Legal Reality

But what about Emma’s exposure? Yes, as the employer of the undocumented workers, Emma Grant could have liability. Employers must verify the identity and employment authorization of each person hired after Nov. 6, 1986 and complete and retain Form I-9. Failure to do so can result in civil fines ($539 for each at the first offense and up to $21,563 for each after multiple offenses), criminal penalties (when there is a pattern or practice of violations), and debarment from government contracts.

Tilting the Scales in Your Favor

Get a completed I-9 for each employee. Undertake reasonable and diligent investigation, if appropriate. For key employees, consider undertaking steps to secure their legal residency in the United States.

Riding her beloved Packers late-game win against the Dallas Cowboys, Allfer Funn, owner of Con Genial, is polishing her cheese head hat and dusting off her Super Bowl Squares Pool from last year in anticipation of the Big Game in a couple of weeks. Electing not to “Reinvigorate [Her] Super Bowl Office Betting Pool” as some have suggested, she does, however, decide to up the ante from $10 a square on her 10 x 10 grid to $20 a square. Just good clean office fun to build morale, right? It’s not illegal… or is it?

The Legal Reality?

Yes, it’s illegal in any number of ways. It’s illegal gambling in Texas. And, for Allfer, organizing the Pool is likely “bookmaking” – receiving more than 5 bets in a 24 hour period. Under the gaming laws of all 50 states, it’s a bet with a prize that is won or lost solely by chance. Because squares pools involve randomly assigned numbers, the contest is entirely based on chance and thus illegal unless (in a state other than Texas) it falls within a state-specific “recreational gaming exception.”

And there’s more.

Beyond Texas, the federal Professional and Amateur Sports Protection Act of 1992 also prohibits gambling, specifically on professional and amateur games. Should Allfer Funn or her employees elect to bet online there’s always the federal Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) which Tilting commented upon in 2011 that prohibits nearly all types of online gambling.

Notably, the UIGEA exempts most fantasy sports competitions, classifying them as games of skill rather than games of chance – except for the Super Bowl. A fantasy football competition is based upon a single game with a limited number of outcomes as well as a limited number of players/teams from which participants can choose, whereas the Super Bowl is viewed as a game of chance rather than a game of skill.

The Practical Reality?

As reported in a Houston KTRH NewsRadio 740 interview last year by Tilting’s own Cleve Clinton, “It’s illegal. Now, realistically and practically, is anybody going to do anything about it? No.”

In the same interview, Clinton told KTRH that Texas law has such a broad definition of gambling, that technically any betting pool violates state law.  Whether or not the state chooses to enforce that depends on a few factors.

“The first thing you really want to look at is how big of a pool are we talking about, the second thing is who’s running it, and the third, will someone (the organizer) profit by it,” says Clinton.

Allfer may want to reconsider and not increase the pool size from a total of $1,000 to $2,000.

Good Clean Fun?

Notwithstanding that gambling on the Super Bowl is illegal, Allfer Funn should be wary of potential retaliation and hostile work environment claims from employees either excluded from or uncomfortable with office gambling.  What happens if an employee snitches? The Texas Penal Code seems to offer “testimonial immunity.”

Tilting the Scales in Your Favor

While Texas does have strong laws against gambling, most low-stakes office pools should be all right, as long as they are run by an individual and not the company, and nobody takes a profit or fee off the top for organizing or running the pool.  “It risks becoming a problem when you get out of bounds on size or (scope),” says Clinton. It is best for Allfer Funn that she not manage the Super Bowl pool. And, she should check Con Genial’s employee manual to make sure that she is not stepping out of bounds of her own company policy. Finally, Allfer should be cognizant of the objection of any employee and respond accordingly. Go Packers!

Read more: Houston KTRH NewsRadio 740 Super Bowl Betting Pools May Be Illegal

Tilting the Scales articles: Internet Gambling in the U.S.March Madness Basketball GamblingWanna Bet? Betting About Baseball Returns to the News

HiResGunner Gunter employs dealership manager Sayles and computer technician H. Packard (“Pack”) at Falconaire’s Fine Ford and pays these “white collar” employees $40,000 per year. In busy sales months, each averages 50-60 hours a week without paid overtime. Do the new FLSA regulations affect Gunner?

Yes. Effective December 1st, Sayles and Pack must either be paid for their overtime hours or to avoid this mandate, their minimum annual salary must be $47,892 (up from the current $23,600 minimum per year) assuming they are Fair Labor Standards Act “white collar” employees (i.e., executive, administrative or professional) under the exemption, and not otherwise entitled to overtime pay.

The Labor Department estimates the new rules affect some 5 million exempt workers, predominantly in Texas, California, Florida, Illinois, New York and Pennsylvania, which have the largest number of newly eligible workers – 200,000 or more in each state. Of those numbers, hardest hit are lower-wage businesses and service industries like hospitality and retail, which identify the new rules as “Career Killers.” Rather than increasing salaries, many business may elect to reclassify professionals as hourly workers and reduce hours, adjust or remove existing benefits and flexibility (including loss of their more prestigious titles) or cut base salaries. “Comp time” (working overtime for future days off) is not an option for these newly eligible overtime workers. Even with labor reductions, the projected additional administrative costs to businesses to track hours of more employees and updating payroll systems are estimated to cost $745 million.

Employers who fail to comply after December 1st risk Department of Labor (DOL) investigation. More daunting, perhaps, is the threat of private litigation, including class action litigation – a risk with substantial downside potential.

Tilting the Scales in your Favor

Evaluate your current employees and salary levels to assess your company’s possible DOL exposure. If you elect to reclassify employees from “overtime exempt” to “overtime eligible”, develop comprehensive plans to (1) determine new hourly rates for impacted employees; (2) revise or update current timekeeping programs and policies to reflect the changes; and (3) implement training for both managers and employees addressing the changes. Congress may attempt to redirect these changes with legislation, but it’s more likely that the results of the November election  will dictate whether that momentum is sustained. Consider using a Checklist.

For more insight on cutting edge employment issues, including federal changes to overtime exemptions, visit the Texas Employer Handbook blog, written by Gray Reed employment partner Michael Kelsheimer.

Having started as a bookkeeper and worked his way (fifteen years later) to become controller of the Bunz in the Oven family owned business, Swendoll Hugh felt underpaid andbusinessman hiding envelope with money in pocket at jacket under-appreciated by Bertha Bunz and her highly successful business. When Swendoll’s grandmother passed away, he “borrowed” funds from Bunz in the Oven to cover funeral expenses. Easily repaying the money without detection, Swendoll “borrowed” again and again, and eventually quit repaying the “loans” amounting to hundreds of thousands of dollars. What’s the crime? How could that have happened? What might Bertha and Bunz in the Oven have done to discover Swendoll Hugh’s embezzlement earlier?

It’s a crime to steal all or part of the money or property entrusted to you for management or monitoring. Beyond merely stealing, embezzlement is also a violation of a special position of trust. For embezzlement of money or property valued over $200,000, Texas penalties include a fine of up to $10,000, at least five (and up to 99) years in prison, or both.

Be Vigilant.

Embezzlement often occurs when there is a lack of accounting controls. For smaller companies with minimum gross revenues, missing money is more obvious and the cost to implement necessary controls may be cost prohibitive. Yet, as the company and its gross revenues grow, so must accounting controls.

Embezzlement can be as simple as issuing and then voiding a check to a customary vendor at a time when the expense is expected, and then issuing a check for an identical amount to cover personal expenses. According to news accounts, that’s exactly what the controller of Collin Street Bakery did on his way to stealing nearly $17 million from the landmark Corsicana business.

Look for These 4 Warning Signs.

Beyond making prudent accounting changes to match your business success—and avoiding placing trusted employees into a predicament tempting their violation of company trust—these warning signs should alert you to be more vigilant:

  1. Significant Lifestyle Changes. Just like the Collin Street Bakery controller who spent millions on watches, cars and vacation homes, that were noticed and ignored for years, unexplained upgrades in automobiles, exotic vacations and expensive apparel merit close attention and perhaps investigation.
  2. Financial Difficulties. Employees with constant financial troubles have a greater incentive to steal and can generally rationalize almost any behavior when faced with enough pressure from friends, family and creditors. Often not intending to commit fraud, many act out of desperation.
  3. Never Wants to Take a Vacation. Certain types of fraud have to be monitored to maintain and remain undetected. The perpetrator will be unwilling to take a vacation and risk detection.
  4. Constantly Works Overtime and Wants to Take Work Home. Embezzlers often avoid the watchful eyes of co-workers. They need privacy and might work late or take work home to eliminate unannounced visits from fellow employees when dealing with incriminating evidence.

Tilting the Scales in Your Favor.

Trust but verify. Be vigilant. And, be careful. Your self-indulging employee may have won the lottery or inherited from a rich uncle. It might be prudent to offer aid to an employee with a sudden death in the family. Cross-train employees so that trusted, dedicated employees can confidently go on vacation knowing that a competent co-worker is filling in. Consider re-arranging the workloads of those constantly working overtime to improve their work-life balance.  Explore the value of both a periodic financial audit by your outside accounting company and their examination of your appropriate financial safeguards.

Wanting to expand out of North Dakota before the Christmas season, Homer’s Christmas Tree Farm picked Bubba’s Christmas Farm in the Texas Panhandle. Knowing that Bubba’s employee, Skeeter Jones, was critical to Bubba’s continuing success, Homer required Skeeter to sign a new employment contract complete with non-competition and non-solicitation provisions under North Dakota law. When Skeeter decided to quit and open his own Christmas tree farm several months later, Homer called his lawyer Haven O’Sham in a fit of fury demanding that the non-compete be enforced against Skeeter in Texas. But which law applies, North Dakota or Texas? Homer’s lawyer insists Texas; Skeeter’s lawyer argues North Dakota law which would make the non-compete unenforceable. Who’s right?   Which state law applies? Hang on, this one is a little complicated and a departure from the customary short answer.

Texas Non-Compete Law.

Non-compete agreements are generally enforceable in Texas, so long as they are reasonable geographically, in length of time and in their scope, and so long as the employer gives up something of value such as confidential information about pricing, customers, marketing or the like.

North Dakota Non-Compete Law.

Unfortunately for Homer, North Dakota law prohibits any non-competition agreement except when: (1) you sell the goodwill of a business and limit the non-compete to a city or county; or (2) partners in a partnership agree not to carry on a similar business in the same city as the partnership.

The Winner?

Probably Homer and Texas law. Most courts if given the opportunity will enforce their own state law against their own residents. Recently the United States Court of Appeals for the Fifth Circuit addressed an argument similar to Homer’s that Texas law should apply. In Cardoni v. Prosperity Bank, Prosperity Bank acquired F&M Bank and Trust out of Oklahoma. As part of the deal Prosperity required F&M’s employees in Tulsa to sign new employment contracts that contained non-compete agreements. The contracts were governed by Texas law. The employees quit and went to work for a competitor in Tulsa. Prosperity tried to obtain an injunction to enforce the non-competes, but the employees said Oklahoma law governed, and that Oklahoma law prohibited the non-competes. The court of appeals agreed, holding that Oklahoma had a materially greater interest than Texas in determining the issue because the bankers performed most of their work in Oklahoma, and Tulsa was identified as the place of performance in their contracts. Because Oklahoma prohibits non-compete agreements, those provisions in the bankers’ contracts were invalid.

Tilting the Scales in Your Favor.

Because each state’s laws differ widely, to successfully enforce important provisions such as non-compete agreements, carefully review your options with your attorney. Properly done, Homer almost certainly would have crafted a Texas employment agreement and successfully enforced the non-compete against Skeeter without having to argue about whether Texas or North Dakota law applied. Yet, final results do depend on the circumstances. There is no “one size fits all.” Enforcement of non-compete agreements are becoming more common place.

What about Generic Non-Compete Forms from the Internet?

Generic internet non-compete and employment agreements are just that – generic – and sometimes more expensive to try to enforce than they are worth. As a general rule you should always avoid generic forms from the internet for almost any legal issues. They usually cause more harm than good.

Merry Christmas and Happy New Year to all!