This week we’re reviewing the major labor and employment cases argued in state and federal courts in Texas, as well as the impact their decisions will have on the workplace. For decisions by the U.S. Supreme Court, please visit our first entry in our 2018 employment law in review series.

Major Employment Law Updates and Decisions

Challenging local paid sick leave ordinances

On February 15, 2018, Austin became the first city in Texas to pass an ordinance requiring employers to provide eligible employees with paid sick leave. The ordinance, which obligates employers to provide one hour of sick leave for every 30 hours worked, was set to take effect on October 1, 2018. However, an Austin Court of Appeals temporarily blocked the law from taking effect in Texas Ass’n of Bus. v. City of Austin, Texas, No. 03-18-00445-CV, 2018 WL 6005551 (Tex. App. Nov. 16, 2018). A coalition of business groups argued that the ordinance is unlawful because it overreaches the state’s statutory power to set wages under the Texas Minimum Wage Act.

Interestingly, just one day before the Austin Court of Appeals issued the temporary injunction halting enactment of the Austin ordinance, the city of San Antonio voted to approve its own paid sick leave ordinance. The San Antonio ordinance is scheduled to take effect this August; however, the outcome of the ongoing battle in the Austin courts and Texas Legislature will affect whether it is seen to fruition, as many conservative state lawmakers have pledged to pursue legislation banning local governments from enacting such mandatory paid sick leave ordinances.

Concluding company uniform policy trumped by NLRA

In the case of In-N-Out Burger, Inc. v. NLRB, 894 F.3d 707 (5th Cir. 2018), the Fifth Circuit Court of Appeals was asked to determine whether a fast-food chain may prevent its workers from wearing buttons reading “Fight for $15” to show support for advocates pursuing a higher national minimum wage. The company stood firmly behind its uniform policy, which prohibits employees from “wearing any type of pin or sticker,” when instructing employees to remove their buttons.

The Fifth Circuit rejected the company’s argument that its “unique public image” and “safety concerns” constituted “special circumstances” under the National Labor Relations Act (NLRA) justifying its dress code. Highlighting employees’ right to engage in “concerted activities” under Section 7 of the NLRA, the Court deemed the uniform policy to be unlawful. Thus, employers wishing to enforce strict dress codes (such as those prohibiting employees from wearing buttons), should examine whether they will be able to justify such a rule with “special circumstances.”

Highlighting broad employer liability under Title VII

With the #MeToo movement, we have seen an increase in sexual harassment claims and cases over the past several years. The plaintiff in Gardner v. CLC of Pascagoula, L.L.C., 894 F.3d 654 (5th Cir. 2018) brought suit against her former employer claiming hostile work environment and retaliation after she was terminated for refusing to care for a resident of the nursing home she worked for who repeatedly harassed her on the job.

The Fifth Circuit’s decision highlights that under Title VII an employer may be liable for acts by a third party if the plaintiff can establish that the employer “knew or should have known” about the harassment and allowed it to continue. The Court reversed the district court’s grant of summary judgment in favor of the employer, noting that there was a genuine dispute of material fact regarding whether the employer took reasonable measures to prevent the harassment. This case underscores the broad reach of employer liability for the acts of third-parties (i.e. customers, vendors, patients, clients, etc.).

In addition to the protection for employees to be free from third-party discrimination, the Southern District of Texas explicitly recognized protection for transgender individuals to be free from employment discrimination under Title VII in the case of Wittmer v. Phillips 66 Co., 304 F. Supp. 3d 627 (S.D. Tex. 2018).

The Court acknowledged that the employee’s status as a transgender woman places her in a protected class; however, it then went on to grant summary judgment in favor of the employer because there was no evidence that the employer knew about her status as a transgender woman when it made the decision to rescind her job offer. In its in-depth analysis of Title VII protections, the Court confirmed that individuals can establish a prima facie case under Title VII by putting forward evidence of employment discrimination for failure to conform to sex or gender stereotypes. The language in this case will allow future plaintiffs to advocate for expanded Title VII protections based on transgender status and sexual orientation in Texas.

Rejecting same-sex harassment claim

In contrast to the above broad protections, the Texas Supreme Court in Alamo Heights Indep. Sch. Dist. v. Clark, 544 S.W.3d 755 (Tex. 2018), concluded that alleged instances of unwanted touching and sexually suggestive and offensive statements made by a co-worker of the same sex were not motivated by “sexual attraction or desire” and therefore not actionable under the Texas Commission on Human Rights Act (TCHRA).

In making its decision, the Court endorsed the employer’s “equal opportunity bully” defense and noted that “anti-discrimination laws – in their current incarnation – do not guarantee a pleasant working environment devoid of profanity, off-color jokes, teasing or even bullying.” According to the majority opinion, words spoken (i.e. sexual innuendos and comments) must be taken with regard to their overall context and motivation, rather than being taken at face value. It held that in this case, the sexually suggestive and offensive comments amounted to permissible bullying, rather than unlawful sexual harassment.

Refusing to enforce arbitration agreement lacking signature

Last summer, in the case of Huckaba v. Ref-Chem, L.P., 892 F.3d 686 (5th Cir. 2018), the Fifth Circuit Court of appeals voided an arbitration agreement signed by an employee because it lacked a counter-signature from the employer. The Fifth Circuit’s reasoning was based on the explicit contractual language that included phrases such as “[b]y signing this agreement the parties are giving up any right they may have to sue each other,” as well as a provision that the agreement “may not be changed, except in writing and signed by all parties.”

The Court concluded that this plain language indicated an intent of each party to be bound only by signing. Therefore, although it was undisputed that the employee had signed the agreement, the Court held that it had no effect without the company’s counter-signature. This case emphasizes the importance of carefully crafting arbitration agreements. Some courts have held that assent to an agreement can be manifested by performance; however, such manner of showing assent is unavailable when the explicit words of the contract require another form of assent (i.e. a signature).

The Only Constant is Change

Last year proved that employment laws are constantly changing and developing. Employers and employees should keep the above cases, as well as the SCOTUS cases from our previous post, in mind going forward, especially when dealing with issues such as drafting arbitration agreements and company policies, handling workplace discrimination, and deciding whether to give overtime and paid leave.

For assistance with employment and workplace disputes, contact Clouse Brown PLLC. Our attorneys are available to assist employers and business owners in solving problems dealing with trade secret disputes, covenants not to compete, and breach of fiduciary duty. We also negotiate, draft, litigate, and arbitrate employment contracts for senior-level and C-suite executives.

Keith Clouse

About Keith Clouse

Keith Clouse is an employment law specialist with over 25 years of experience representing senior-level and C-suite executives, business owners, physicians, and corporations in complex employment litigation, arbitration, and negotiations. High-level business executives, physicians, and other professionals consistently rely on Mr. Clouse for employment law expertise and advice on employment contracts, covenants not to compete, severance agreements, equity awards, trade secret disputes, and breach of fiduciary duty claims. He is Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization. He can be reached at keith@clousebrown.com.

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