In the years following the “Me Too” movement, the USA has seen tremendous legislative efforts aimed at curtailing sexual harassment in the workplace.

At the federal level, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA) came into effect on March 3, 2022. Under this law, an employer cannot mandate forced (confidential) arbitration of claims related to sexual harassment and sexual assault. It also renders class action waivers of sexual harassment and sexual assault claims unenforceable.

The US Congress also passed the Speak Out Act, which became effective December 7, 2022. This law renders unenforceable any non-disclosure and non-disparagement clauses related to allegations of sexual assault and/or sexual harassment and that are entered into “before the dispute arises”. This means that, unless a dispute related to sexual harassment or sexual assault is being resolved by virtue of a settlement containing confidentiality and non-disparagement language, a broad-sweeping confidentiality and non-disparagement language in other agreements may not be enforceable. This could impact multiple standard agreements, including typical non-disclosure agreements and severance agreements. Those templates should be examined for compliance with these new laws.

Texas passed sweeping legislation (effective as of September 2021) imposing more stringent sexual harassment laws on employers in the state. Key changes under the law include:

• additional time for employees to bring claims;
• expanded coverage to any company with one or more employees (previously 15 or more employees);
• personal liability for supervisors or managers or anyone else acting directly in the interests of the employer; and
• liability if the employer fails to act “immediately” once the employer or its agents knew (or should have known) about the harassment.

In the wake of “Me Too”, legislators have made great strides in enhancing liability associated with sexual harassment in the workplace and prohibiting common workplace policies and agreements (ie, confidential arbitration, confidentiality, and non-disparagement) that were viewed during the “Me Too” movement as tools that perpetuated serial harassment within organizations.

It is difficult to gauge whether employee political beliefs or affiliations impact the types of claims employers face directly, given that federal employment laws largely avoid regulating a private employer’s decisions based on political beliefs or affiliations. Consequently, unless there is a state-specific law or local ordinance providing such protections, it is not unlawful per se to discriminate on the basis of political beliefs. There are circumstances where a neutrally applied political stance could impact other laws (eg, Title VII) – for example, where taking the position that a company does not hire members of a certain political party results in persons belonging to certain protected categories being excluded from employment. In addition, the National Labor Relations Board (NLRB), which regulates union and non-union workplaces, scrutinizes activities connected to political expression or affiliation closely. Although employers take neutral positions when it comes to political beliefs among employees in many circumstances, larger organizations in differing industries have taken public stands or provided their employees with certain benefits to circumvent politically motivated state laws – for example, those concerning abortion – in certain regions.

Federal (and, in some cases, state) wage and hour disputes are typically front and center when aggrieved workers step into a plaintiff’s lawyer’s office. The combined effect of the potential damages and the relative ease of pursuing those claims on a class scale through a collective action creates added pressure that can drastically increase the extent of any exposure. There is also a risk of claims under the Worker Adjustment and Retraining Notification Act (the “WARN Act”) in the event of a “mass layoff” and large-scale reductions in force. To that end, employers should be mindful of whether large-scale reductions in force would include a disproportionate number of individuals of select protected classifications.

Under the Biden administration, the NLRB has been more active and aggressive in pro-employee rulings. The National Labor Relations Act (NLRA) was passed by congress in 1935 to encourage collective bargaining by protecting workers’ full freedom of association. While many have viewed the NLRA as antiquated because it protects union activity and organizing efforts, there has been more NLRB activity with the new surge of organizing efforts in the USA.

Even outside of a unionized workforce, the NLRB safeguards employees’ right to engage in protected concerted activity. This means that discussions or comments regarding wages, hours, working conditions, or other terms and conditions of employment by more than one employee – or by someone speaking on behalf of others – cannot be restricted and is protected under the NLRA. The NLRB has cracked down on company social media policies in recent years where these policies appear to restrict protected concerted activity by employees on social media.

In McLaren Macomb, Case 07-CA-263041, the NLRB ruled that an employer cannot demand that a laid-off employee refrain from publicly disparaging the company or otherwise keep confidential the terms of the employee’s severance as part of a severance agreement. The NLRB decision overruled decisions of the board issued just a few years prior. The Biden NLRB reversed course and found that an employer’s use of severance agreements that contain sweeping non-disparagement and confidentiality provisions interferes with a laid-off employee’s Section 7 rights. In response to this ruling, employers using severance agreements with confidentiality and non-disparagement clauses should ensure the clauses are narrowly tailored and contain appropriate language to carve out conduct protected by Section 7 of the NLRA.

Companies from overseas expanding into the US market should be aware of these NLRA regulations and ensure that their policies – especially policies that might limit employee ability to discuss wages and other terms of employment – are not restricted.

Since the COVID-19 pandemic, there has been a union boom in the USA and – while Texas is still predominantly a right-to-work state – union activity is on the rise.

History of the Unions

Unions in the USA surged during the Second Industrial Revolution in the late 1800s and early 1900s. However, in the 1970s and 1980s the USA experienced the age of computers and a presidential administration (under Ronald Reagan) that was largely anti-union. Between 1975 and 1985, union membership fell by five million. By the end of the 1980s, less than 17% of American workers were unionized. Until recently, unions were traditionally thought of as being only for the public sector or certain industries (eg, the airline, transit and automotive industries).

Post-pandemic Union Activity

The COVID-19 pandemic changed so much about the world. One place where this change is most apparent is in the labor market. What the USA experienced immediately after the pandemic had not been seen for decades or maybe ever – employees are asking for more and they are, in many respects, controlling the market. This has tapered off a bit as experts predict a US recession; however, in the meantime, there has been a large resurgence of unions.

The current union activity in the USA is in markets and industries that have not traditionally been unionized – in particular, retail and hospitality. Recently, more than 200 Starbucks stores officially voted to unionize according to the NLRB. First-ever unions have also been formed at an Apple Store in Maryland, Trader Joe’s grocery store, and the national retailer, REI. What differentiates this union activity from previous union activity is that it is concentrated among young workers and sometimes college-educated young workers who feel overworked, underpaid and overeducated for the jobs they have. Many have decided to band together to demand more. According to Gallup data from 2021, there is a 77% approval rate for unions among young adults aged 18 to 34.

Why Employees Join Unions

Generally, the top reasons employees cite for joining a union are:

• “the company ignores my complaints and does not care about me”;
• “my boss does not respect me”;
• “the company does not care about safety”;
• “I do not like my pay or benefits, or I do not understand how pay and benefits are calculated and awarded”; and
• “my boss plays favorites and I am not treated fairly”.

Companies need to be aware of these issues and make sure that they are being addressed in the workplace. Even in states like Texas that are largely anti-union, there is growing popularity for union organization.

When determining how to define, structure and implement a global entity within the USA, there is no “one-size-fits-all” approach. The analysis will depend on, among other things, the type of business and the location of its operations. Unlike many jurisdictions across the globe, the US system of government has different layers of legislative and regulatory considerations – both on the national scale and at the state level.

Federal Laws

When it comes to the federal regime, there is no escaping its applicability, as it applies to any location within the country. Most of the employment laws affecting companies at the federal level pertain to antidiscrimination, anti-harassment and anti-retaliation under a myriad of statutes. These include, among others, Title VII of the Civil Rights Act (addressing race, color, national origin, sex, and religion), the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Occupational Safety and Health Act, and the Family and Medical Leave Act. In addition, the Fair Labor Standards Act (FLSA) governs the federal government’s wage and hour and related compensation requirements. This law also governs when an employer can classify a worker as a contractor, as well as when businesses can pay employees a salary versus by the hour (with overtime).

State Laws

Turning to the state legal regimes, by selecting their location, businesses have more discretion in terms of formation and operation. State-specific jurisdiction issues will only arise when the enterprise conducts business in the state or has a contract that is applied according to that state’s law. State politics can vary quite drastically. Accordingly, foreign businesses can expect completely different experiences – from a legal standpoint – depending on their selected jurisdiction. Traditionally, the more conservative voting states have been more business-friendly. However, recent political movements centered on social issues have changed that situation to make it more nuanced. In addition, state legislatures are now finding themselves at odds with the business community on certain issues. Any selection of jurisdiction will require a detailed analysis.

Texas

Texas has one of the most business-friendly regulatory schemes in the USA. Apart from the federal requirements, which apply in every state, Texas has very few requirements or restrictions on how businesses choose to define the employment relationship. Businesses should consider the regulatory scheme of the state when recruiting talent in the USA. Recruiting in compliance-heavy states like California and New York will impose more obligations on employers than sourcing candidates in states like Texas.

The COVID-19 pandemic had an enormous impact on immigration and this looks set to continue for the foreseeable future. For much of the pandemic, citizens of many countries were completely prohibited from entering the US Department of State embassies. Consulates around the world with the responsibility of issuing nonimmigrant and immigrant visas to the USA were shut down for many months. This, of course, caused an enormous backlog of applications that will take time to process.

When the consulates reopened, visa interviews remained hard to come by, with candidates having to wait weeks or months for an appointment. Even now, there is a waiting list of more than a year for visa interviews in some countries. The effects of state department shutdowns will likely continue to be felt for the foreseeable future. Thus, employers must allow for a delay in the application process when arranging for their foreign workforce to start employment in the USA.

Additionally, many H-1B workers in the past few years have taken advantage of the work-from-home opportunities and have relocated to areas outside their approved H-1B locations without filing amendments to their H-1B petitions. This causes a change of status for employees and impacts the renewal of visas, requiring the employees to return to their previous country. Identifying and remedying these issues far in advance of the renewal process may alleviate complications.

In Texas (and throughout the USA), the hiring process typically includes a written application followed by in-person and/or virtual interviews between the candidate and the HR department, the hiring manager and/or the recruiter. As the application is the first opportunity for the employer to obtain information regarding a candidate, it is critical that an employer’s application form complies with the federal, state and local laws.

“Ban-the-Box” Legislation

Whether an employer can ask about criminal history (arrests and convictions) at all in the application process, or only after a conditional offer, varies by state and local law. How far back in the candidate’s life questions can be asked also varies. Specifically, 37 states and 150 cities and counties have adopted what is referred to as “ban-the-box” legislation.

This typically requires removal of conviction and arrest history questions from job applications and only allows background checks to be performed once a conditional offer is extended. It also sets the time period covered. Similar restrictions are also in place for credit checks of job applicants. For states where the questions are allowed on an application form or after a conditional offer, the employer must still ensure that the employee has signed a proper authorization prior to doing the check and that the requisite notifications are sent out once the check is done.

Texas Law on Criminal History Inquiries

At the state level, Texas has no law restricting an employer’s ability to ask about criminal history on a job application form. However, the city of Austin prohibits most employers from asking questions about criminal history until after making a conditional offer of employment.

When a Texas employer is running a background check into criminal history, the check can only go back seven years if the position pays less than USD75,000 annually. However, this seven-year rule does not apply to higher-paying roles. For such positions, the check can go all the way back to the applicant’s 18th birthday.

Other Application Questions That Can Cause Issues

Background and credit checks are not the only areas in the application process that can cause an employer issues. In Texas (and across the USA), it is illegal to discriminate against an employee based upon a candidate’s gender, age, race, citizenship, etc. Given that many of these facts can be gleaned from an application, some employers have chosen to remove many questions from their application form that would elicit information related to these protected characteristics, including questions about:

• birthdate;
• dates graduated from high school, college, etc;
• dates worked at former employer;
• candidate’s preferred pronoun;
• a gap in employment;
• candidate’s title (eg, Mr, Miss or Mrs); and
• salary/pay history.

Although much of this information may be offered by the candidate during the interview process, it is important that the application does not appear to be prying into these facts at the outset. If information is volunteered, employers can consider this – provided that no hiring decision is made based on the candidate’s membership of the protected class.

Some nationwide employers prefer to have a uniform application form across jurisdictions that complies with the stricter laws, while some prefer to customize an application form according to the local laws. Either way, ensuring the application form is compliant is the first step towards a compliant recruiting process.

AI in the hiring process is intended to automate many of the tasks recruiters and hiring managers handle – such as scheduling interviews, resume checking, and answering basic hiring questions – so that the focus can be on greater priorities. Although AI comes with many pros, an employer must be aware of the potential shortfalls of the technology, too.

Pros

Advertising openings

Rather than burdening an employee with posting openings on job boards, attending career fairs, and scouring LinkedIn for potential candidates, AI can help automate this process as openings become available by auto-posting openings across career sites and pushing openings to potential candidates in a fast and efficient way.

Screening

One of the most timesaving benefits of AI is its ability to sort through resumes quickly, searching for relevant education and work history, and screening candidates to ensure they have the basic requirements for the position. This helps to ensure that hiring managers spend their time reviewing qualified candidates.

Response time

AI can also help improve communication with candidates when they are applying, interviewing, and posting interview feedback. Chatbots can be programmed to respond to the most common questions sent to recruiters and HR without any employee involvement. AI can also reach out to qualified candidates to gather more information and set up an interview.

Neutralizing human bias and increasing diversity

Although AI has its own bias risks discussed here, it is a great tool to neutralize human bias in the recruiting and hiring process. By way of an example, data shows that job descriptions written with masculine or feminine verbiage will attract that gender of applicants at a very high rate. However, augmented writing platforms can write gender-neutral job descriptions that will increase the diversity of applicants.

Additionally, AI-enabled systems can be programmed to ignore information such as gender, race and age when reviewing resumes and applications, thereby helping to ensure that no discrimination occurs. While not a perfect art, conscientious vendors that have conducted validation tests for their algorithm can provide employers with evidence that the program does not introduce bias.

Cons

Overlooking candidates

As beneficial as AI’s ability to find suitable candidates can be, AI has also been shown to overlook or even reject candidates that would be a great fit because AI is programmed to look strictly for certain data points and keywords and reject all else without further review. Thus, nuance and differences in someone’s education or experience – or even errors in how this information was entered or formatted – may cause a candidate to be rejected even though they are qualified. This is where the AI’s lack of human judgment can become a hindrance.

Learned and/or programmed bias

Despite popular perception, AI does have the potential to be biased. Properly developed AI can help prevent human bias, but the technology’s need to learn through pattern can – when paired with training data – cause the AI to penalize certain words associated with a particular gender, generation, race, etc. By way of an example, if the AI learned from training data that male candidates tended to have more experience in technical roles, the AI might then learn to penalize words like “women’s” or “Ms”  and overlook women or put them at a disadvantage. Even when this bias is unintentional by the employer, it is the employer’s responsibility to ensure its hiring practices do not discriminate based on protected characteristics. Therefore, if the AI causes a group to be discriminated against, the employer can be liable.

Americans with Disabilities Act violations

An AI-enabled system may violate the Americans with Disabilities Act if it improperly screens out an individual based on a disability, whether or not the employer intends this result.

The Americans with Disabilities Act prohibits businesses with 15 or more employees from discriminating on the basis of disability. Among other things, the Americans with Disabilities Act requires employers to provide reasonable accommodations to individuals with disabilities, including during the application process, as well as during the employee’s employment.

The following are examples of a potential violation:

• the AI-technology itself may be difficult for someone with a disability – for example, someone who is visually impaired or who needs extended time – to use and does not accommodate them;
• when a job requires a candidate to be able to perform certain physical activities, the AI-enabled system may elicit information about a disability that results in the candidate being screened out, despite their ability to perform the job with reasonable accommodations (as required under the Americans with Disabilities Act);
• the AI’s programming rejects applicants who indicate they have a significant gap in employment history, where the gap is the result of a disability; or
• the AI’s use of a personality test that delves into an employee’s “optimism” may screen out someone with mental illness.

Restrictive covenants include non-disclosure agreements, non-solicitation agreements, and non-compete agreements. In January, 2023, the US Federal Trade Commission (FTC) proposed a ban on the use of non-compete and certain non-solicitation agreements, with narrow exceptions (including in connection with the sale of a business). The FTC accepted comments on the proposed rule until April 19, 2023, and is now in the process of reviewing the comments to draft and issue a final rule. Companies using non-competes and non-solicitation agreements in the USA should monitor the activity concerning this FTC ban in order to evaluate if and when it goes into law. 

Until a federal ban goes into effect, restrictive covenants are a product of state law. There is no “one-size-fits-all” approach, as different state jurisdictions will apply restrictive covenants differently based on that particular state’s regime.

Non-competes in Texas

In Texas, non-competes are authorized by the Business and Commerce Code. To be enforceable under Texas law, a non-compete must meet all of the following criteria:

• the non-compete must be “ancillary to or part of an otherwise enforceable agreement”;
• the non-compete must contain reasonable limitations as to time, geographical area and scope of activity; and
• the non-compete must not impose a greater restraint than is necessary to protect the goodwill or other business interest of the employer.

Drafting Considerations for Non-compete Agreements

Texas and most US states recognize a business’s ability to restrict competition (work or ownership in a competitive business) and solicitation of employees and customers or clients of the business. Many jurisdictions, including Texas, require any restraint on trade to be ancillary to or part of an otherwise enforceable agreement. This means a “non-compete” or “non-solicit” agreement cannot be the only part of the contract. There must be provisions that are part of a separately enforceable contract that provides recognized consideration. Although some jurisdictions allow for simple continued employment as consideration for the restrictions, many states (including Texas) require something else – for example, access to confidential information and trade secrets, specialized training, or the exchange of equity interest (separate and apart from basic compensation).

The restrictions must also be reasonable in not unlawfully restraining trade. Typically, this requires a reasonable time period (two years or less in most situations), reasonable restriction of geography (areas where the worker performed work) and reasonable restrictions on scope of activity (performing the same job for a competitor).

Drafting Consideration for Non-solicitation Agreements

Enforceable customer and employee non-solicitation provisions often require narrowing down to employees with whom the employee worked or customers to whom the worker sold goods or services. What is or is not reasonable is determined by a case-by-case analysis based upon the industry, level of worker, and other market-based factors. The most important thing for a global company to identify is what specific information and resources that company wishes to protect, so it can carefully tailor any restrictive covenants to protect those. Failure to heed these limitations can result in a court striking or failing to enforce the covenants as written. This is true even in Texas where restrictive covenants are routinely enforced.

Federal Pressure to Limit Non-competes

There has been a lot of movement and development across the country to curtail or substantially limit non-compete restrictive covenants. The federal government even tried to regulate non-compete agreements; however, those bills have not become law and there is no indication they will in the near future.

The biggest privacy issues facing companies as a result of the COVID-19 pandemic stem from the intermingling between the personal and professional lives of workers caused by the drastic rise in consistent remote work. Prior to the pandemic, remote work was not unheard of; however, it was not the norm it is presently. Accordingly, there are both worker-specific and business-specific considerations to which companies must pay attention.

From the worker end, companies must make sure that none of their monitoring equipment or systems unlawfully intrude on the worker’s right to privacy. That level of privacy varies by state. In Texas, employers should adopt policies making it clear that the employee has no right to privacy on company equipment or systems.

From the company end, businesses must require and enforce adequate protections to ensure their confidential information and any trade secret material does not become compromised (either by accident or intent). This requires heightened attention to information security and meticulous enforcement of policies and practices for remote workers or those who regularly deal with such information outside of the confines of a business’s physical premises.

The “Black Lives Matter” and “Me Too” movements have impacted discrimination, harassment and retaliation issues in the workplace in at least two ways – namely, reporting procedures and workplace training.

Workplace Training

Even in more conservative states such as Texas, employees want more training surrounding these social justice issues. They want to learn about implicit bias and how to identify and try to eliminate it. In addition, they want to know that their employer is investing in training across the company that will help to make it a place of equity and inclusion. What can be seen in the USA is a great shift from simply trying to recruit and retain diverse talent. Employees want more than that now. Not only do they want a diverse workplace, they want a workplace where everyone feels like they have a sense of belonging. That is inclusion. Diversity is not enough. Employers must work toward and invest money in making their workplaces a place of equity and inclusion if they want to retain top talent.

Reporting Procedures

Employees are much more likely to speak out about injustices they perceive in the workplace than they once were. The social justice movements of the past few years have emboldened US workers to speak out and speak up when they see something. Companies should make sure that they have reporting procedures in place and that their employees are educated in how to file a complaint.

One way companies can control workplace issues and ensure that they are being addressed appropriately is a robust complaint procedure. Having a robust complaint and investigation procedure will also give the company some litigation protection in the event of a post-employment claim.

In the USA, workplace safety standards are set and enforced by the federal Occupational Safety and Health Administration (OSHA). OSHA has specific regulations that must be followed with regard to general safety, training and reporting, as well as industry-specific regulations. When a potential violation, injury or death is reported, OSHA will conduct an inspection, determine the violations, and assess fines against the employer.

In additional to the federal program, 22 states also have state-run safety and health programs, which are at least as effective as OSHA (if not more strict). However, Texas does not have a state-run program and defers to the federal OSHA program.

In the event of a workplace injury, all states except for Texas require that employers hold workers’ compensation insurance for their employees. The insurance is intended to cover all costs for treatment for a workplace injury and lost working time as a result of the injury. In Texas, employers may opt out of workers’ compensation insurance and handle workplace injuries through their own benefit plan. This saves the employer the cost of workers’ compensation.

At-Will Employment

When facing termination of the employment relationship, companies should look to see whether the employee is party to any employment contract or collective bargaining agreement that governs the termination or employment relationship itself. The default rule in 49 states (including Texas) is that employees are “at will”, meaning the employee or the business can terminate the employment relationship for any reason or no reason at all, so long as the reason or no reason is not “illegal” – something that is typically tied to a protected classification.

Employment Contracts and Collective Bargaining Agreements

If there is an employment contract, the business must determine what steps – if any – are needed to end the relationship. By way of an example, some employment contracts may require a severance payment or certain notice if the employee is terminated without cause (which should be defined in the agreement). A collective bargaining agreement will typically require “just cause” (as defined in the agreement) for an employer to terminate employment.

Best Practices to Minimize Risk

Assuming there is no contractual relationship or collective bargaining agreement with the employee that governs the termination, the employer should still ensure it has legitimate business reasons for the termination and no decision is tied to a protected classification or in response to a workplace complaint. There are many state and federal statutes that protect against discrimination, harassment and retaliation, which employers should heed.

The best defense against such a claim is to ensure that the employer documents important events during the entire employment relationship. In Texas, there is no requirement that businesses use progressive discipline to coach an employee, but it can serve as a valuable legal defense to any claim of unlawful action.

Additionally, having clear and concise policies and guidelines (often found in an employee handbook) – in addition to appropriate non-disclosure and confidentiality agreements for private information – will help establish the rules and framework that will govern the employment relationship. Pay and position adjustments during the employee’s tenure, as well as performance reviews, should likewise be documented. Perhaps the most significant defense to employment claims concerns the real-time documentation of performance or conduct issues of employees. Many employers opt to implement progressive discipline polices, which typically (albeit not in all cases) require levels of warning or addressing of the performance or conduct issue before an ultimate termination.

Contractual disputes arising in an employment context are typically split into two groups:

• wrongful termination in breach of an employment agreement; and
• failure to compensate employee per their contract.

How Do Contractual Claims Come Up?

Generally, in Texas, unless there is an agreement, all employees are at-will. As discussed in 6.1 Addressing Issues of Possible Termination of the Relationship, this means that the employee and employer can terminate employment for any reason, provided that the reason is not illegal – ie, it does not relate to discrimination, retaliation, whistle-blowing, etc.

However, an employer can choose to enter into an employment agreement that sets out a specific term of employment and under what circumstances the employee and employer can end the relationship. This is typically referred to as termination “for cause”. In such situations, disputes arise concerning:

• whether proper cause was present to end the employment;
• whether the terminating party followed all the requisite steps to terminate the employment; and/or
• whether any severance is required.

These disputes are highly variable depending on the contract language, including the remedies set out in the agreement. The main remedy is typically the “benefit of the bargain” or what the party would have received had the breach not occurred. Additionally, in some situations, the prevailing party will be entitled to their attorney’s fees incurred.

Contract Disputes About Compensation

Contractual disputes can also arise when the employee’s employment contract sets out how they will be paid (salary, bonuses, equity options, etc) and the compensation is not paid according to the contract provisions. Contractual disputes regarding pay also typically arise when an at-will employee has a commission agreement and disputes that their commissions have been calculated and paid correctly under the contract.

The above-mentioned contractual disputes can be filed in court or arbitrated if the contract provides for this.

Contractual Disputes That Occur Even When an Employee Is At-Will

When an employee is at-will, contractual disputes can still arise if that employee has other agreements with the company (eg, a non-compete, non-solicitation, or confidentiality agreement).

There is currently a trend in the federal government and among some states to ban non-compete agreements or significantly weaken them. Texas has not taken any such legislative steps and will enforce an otherwise enforceable restrictive covenant agreement.

When an employee is violating their non-compete or non-solicitation agreement, employers have the ability to seek immediate relief from the court in the form of an injunction or protective order that prohibits the employee from competing and improper solicitation. Such relief can become permanent when warranted (see 4.1 Restrictive Covenants for more information).

The two most common types of wage and hour disputes that arise in the employment or employment-related context surround the failure to pay overtime for non-exempt hourly workers and what aggrieved plaintiffs characterize as “misclassification” of exempt workers. For other niche businesses, such as restaurant operators, common claims relate to tip pooling and tip credits.

Texas Law and the FLSA

Texas follows the federal wage and hour laws. Under the federal law governing wage and hour disputes (the FLSA), when determining pay structure, employers must determine whether the employee is exempt or non-exempt. Different analyses can be used to determine this, based on the duties performed and how the worker is compensated. If the employee is “exempt” from overtime, then the employer need not track the employee’s hours and the employee can be paid a salary. If, however, the employee does not meet one of the exemptions, the employer must compensate the employee on an hourly basis, pay at least a minimum wage (USD7.25 per hour nationally and in Texas, albeit higher in other states), and accurately record the employee’s hours worked. If the non-exempt employee works more than 40 hours during one workweek, the employer must pay that employee time-and-a-half more than the hourly wage rate for every additional hour.

Damages under the FLSA

Employers who violate the FLSA are liable for economic damages in the form of unpaid overtime wages. If there is a violation, the employee is also entitled to liquidated damages or “double damages” that match the amount of the unpaid overtime wages, unless the employer proves it acted in good faith and had reasonable grounds to believe its actions did not violate the FLSA. Additionally, if the employee proves the violation was willful, the statute of limitations period extends beyond the standard two years to a third year. In the largest category of damages, workers are also often entitled to recover their attorney’s fees if they prevail.

Under the FLSA, the focus on whether an employee is exempt from overtime often turns on how the company pays its workers, regardless of how much money the worker earns. The company must pay the employee on a salary basis. A recent Supreme Court decision, Helix Energy Solutions Group, Inc v Hewitt, examined a pay practice that purported to meet that salary basis requirement for a group of workers who earned as much as USD200,000 annually. Helix compensated these workers on a “day rate” and no overtime under the premise that these workers met the highly compensated employee exemption and far exceeded the USD107,432 threshold. The Supreme Court, however, disagreed and held that these workers were non-exempt because the “day rate” payment did not satisfy the salary basis requirement for the exemption. Accordingly, regardless of the amount of money earned by the employee group, the company could not take advantage of the overtime exemptions because it did not pay the employee at least USD684 per week in salary – even though the daily rate exceeded that total. The day rate basis was not a salary, as it depended on the worker performing work on particular days, whereas a salary method is the same amount of pay regardless of the amount of work performed.

In the wake of US social justice movements “Black Lives Matter” and “Me Too”, employees are much more likely to speak out against discrimination, harassment and other injustices they perceive in the workplace. Many of these complaints will qualify as protected activity under the US employment laws that prohibit retaliation. Given that the number of employees speaking out about workplace misconduct (whether right or wrong) is increasing, employers must be mindful of the potential legal risk associated with taking adverse employment actions against any employee who speaks out.

One way to control some of these risks is for the business to implement a robust complaint procedure with multiple avenues through which employees can submit reports of workplace misconduct. The employer should treat these complaints confidentially and should thoroughly investigate each complaint it receives. Limiting who has access and knowledge about these complaints and investigations will maintain confidentiality, and it will also reduce the risk of any actual or perceived retaliation against employees who submit claims.