Unintentional Partnership in Texas

Question: Can two or more persons create a partnership even though they did not intend to do so?

Answer: Yes, under certain circumstances.

   Generally, under Texas law an association of two or more persons to carry on a business for profit as owners creates a partnership, regardless of whether (1) the persons intend to create a partnership, or (2) the association is called a “partnership”, “joint venture”, or other name.  Partnerships are governed by Chapter 152 of the Texas Business Organizations Code.

   What this means is that two or more people could in fact cause the creation of a partnership even though they did not intend on doing so.  The consequences of being partners is the fiduciary duty which arises between partners. The Texas Business Organizations Code also sets forth factors indicating that persons have created a partnership. These factors include:

(1) Receipt or right to receive a share of profits of the business;

(2) Expression of an intent to be partners in the business;

(3) Participation or right to participate in control of the business;

(4) Agreement to share or sharing:

       (A) losses of the business; or

       (B) liability for claims by third parties against the business; and

(5) Agreement to contribute or contributing money or property to the business.

Interestingly, an agreement by the owners of a business to share losses is not necessary to create a partnership.

   On January 31, 2020, the Texas Supreme Court held that parties can conclusively negate the formation of a partnership under Chapter 152 of the Texas Business Organizations Code through contractual conditions precedent. The condition precedent was that the “venture” would not come into effect until the respective parties’ board of directors approved the deal.  The boards of the companies never approved the venture and thus that one provision saved one of the parties almost half a billion dollars:

Texas Supreme Court upholds Court of Appeals reversal of FIVE-HUNDRED-MILLION-DOLLAR trial court verdict. In Energy Transfer v. Enterprise, the high court dealt with a clause that contained conditions precedent to forming a partnership. Enterprise and Energy Transfer, two of the top ten largest energy companies in the United States, sought to re-purpose an existing pipeline or build a new one to transfer crude oil south as opposed to north. The two companies expressly rejected creating a partnership until two conditions precedent were met: 1) execution of definitive agreements memorializing the terms and conditions of the pipeline transaction that 2) received approval from each party’s board of directors. Subsequently, when the companies failed to get shipping commitments to cover the potential costs of the pipeline, Enterprise ended talks with Energy Transfer. Enterprise would eventually go into business with ConocoPhillips. Energy Transfer, believing Enterprise and Energy Transfer entered into a partnership agreement, sued Enterprise claiming breach of fiduciary duty. (Fiduciary duty is putting the wellbeing and interest of the person for whom they are responsible above their individual interests; the duty commands exceptional loyalty of the party owing a fiduciary duty.) The trial court awarded Energy Transfer damages totaling $535,794,777.40. Enterprise appealed, and the Court of Appeals reversed the trial court’s ruling and found for Enterprise. As a result, Energy Transfer filed for review with the Texas Supreme Court. Enterprise continued to argue no fiduciary duty existed because no partnership was entered into between the parties. The Texas Supreme Court agreed. The Court, applying long-standing freedom to contract law, held that parties could require conditions precedent to the formation of a partnership notwithstanding the Texas Business Organizations Code’s five factor partnership test.

   It is the general rule that when an agreement provides a condition precedent to the formation of a partnership, it will not come into existence until the condition has been met. However, such condition precedent may be waived and, if the parties actually proceed with the business, they may be held as partners even though the condition precedent has not been satisfied.

   Chapter 152 is not the sole source of rules for determining partnership formation. The determination of formation of a partnership should “include” the five factors listed in the section. Those factors are not exclusive. Principles of law and equity supplement the statutory partnership provisions unless otherwise provided by this chapter or the other partnership provisions.

What should persons do when looking into a business venture?

   First, the parties should enter into a written agreement, which can be informal, clearly stating that the parties are contemplating a business venture, or exploring the feasibility of a business venture; and that despite negotiations with third parties, expenditures of funds towards investigating the venture, reimbursement or sharing of expenses between the parties, no partnership shall be created “unless …….” (clearly and specifically stated).

   That “unless” is the condition precedent.  The condition can be approval of a formal agreement by the board of directors of corporations, by the manager or managers of an LLC, or the signed agreement for the formation of a partnership.  The condition could be the enactment of a trade agreement with another country, or even a minimum price making up the subject matter of the venture, such as the price per bushel of corn must be “$$$” before any business venture shall be formed, or as simple as requiring the respective wives of the parties to approve the venture in writing.

   Make sure oral agreements are disclaimed and a provision that the parties disclaim any reliance upon any representation made by, or information supplied by, the other party, and waives any claims for fraudulent inducement.

Should you need help understanding the laws surrounding General Partnerships, please contact one of our Murray-Lobb Attorneys.

Inter Vivos Gifts: Transferring Property or Wealth While You’re Still Alive

Stated simply, inter vivos gifts are those given by a donor to a beneficiary during the donor’s lifetime. Many families and individuals enjoy passing property or wealth on to loved ones, friends or charities in this manner. The term “inter vivos” is a Latin one that can be translated as “between living people.”

One of the chief reasons a donor makes this kind of gift is to help a beneficiary avoid paying unnecessary probate taxes after the donor passes away. Another motivation is to give the donor the personal pleasure of seeing the beneficiary enjoy the gift or funds. While other reasons may exist, those are among the most common ones.

The following material reviews some key legal terms you’ll want to know while working with your Houston estate planning attorney. There’s also a list of key factors required for a valid transfer of an inter vivos gift.

Legal terms often used when conveying wealth or property as inter vivos gifts 

  • Donor/grantor. Both these terms are used to describe the person making the inter vivos gift;
  • Beneficiary. The party designated as the recipient of the funds or property;
  • Settlor.  This term is often just used to refer to someone who creates a trust;
  • Advancement. When making a formal inter vivos gift, you should tell your lawyer if you want to treat a gift as an “advancement” against future gifts you’ve already designated for a beneficiary in your estate plan. That will mean that the value of the current gift will reduce the size or value of your later bequest to the specific beneficiary.  You can also just state that you do not want your current, inter vivos gift treated as an advancement against what you’ve designated for a person or group in your estate plan; 
  • Capital gains taxes. Keep in mind the tax consequences that can occur if you currently give someone an inter vivos gift like stock shares. For example, if you give someone an inter vivos gift of stock shares that originally cost you less than $3,000 – but are now worth over $10,000 — your beneficiary will likely have to pay a capital gains tax on that gift. To prevent this burden from being passed on to a beneficiary, you may just want to give the person cash to buy stock shares — or anything else they prefer;
  • Gift taxes. At present, every beneficiary who receives an inter vivos gift worth more than $15,000 must pay a gift tax on the amount to the IRS. Therefore, most people who give these gifts keep them under $15,000 for each recipient. You’ll need to ask your attorney what the limits are on the size of the inter vivos gifts that spouses may want to give each other.

Choosing to create a trust when transferring wealth as an inter vivos gift

Some grantors may not want to make direct cash or property gifts. Instead, they make want to make this type of gift by creating either a revocable or irrevocable trust. As may now be clear, these types of trusts take effect while the settlor is still alive. In contrast, testamentary trusts don’t take effect until the settlor dies.

Here’s additional information about both revocable and irrevocable inter vivos trusts.

  • The revocable inter vivos trust. This can go into effect (or become operative) during the settlor’s own lifetime. This type of trust can also be referred to as a living trust – one that is drafted so that it won’t have to go through the probate process;
  • The irrevocable inter vivos trust. This type of conveyance is designed to go into effect while the settlor is still alive. However, it cannot be revoked after the settlor has finalized it. People normally use this type of trust to help reduce the beneficiary’s potential tax debt.

Key information about making inter vivos gifts to minors

Since minors cannot receive large gifts of money or property directly, inter vivos gifts made to them require the use of a trust. A party must be named as the guardian of the trust to manage its contents (under court supervision) on behalf of the child – until s/he reaches the age of majority.

Conditions that must be met for a valid inter vivos gift to be made

  • The donor must have capacity. As a donor, you must be at least 18 years old when you make this type of gift;
  • The donor must have the proper intent. This requirement usually means that the donor intends for the gift to be transferred during his/her lifetime;
  • Receipt of the gift by the beneficiary. You must arrange a reliable form of delivery to the beneficiary. This means the donor/grantor (or settlor) will then no longer have control over the funds or other property;
  • Acceptance. The beneficiary must accept the gift. While most of us would readily accept an inter vivos from someone else – that’s not going to be true of everyone. In some cases, high taxes might be due on the gift — or the recipient may simply not want to accept any gift from the grantor or settlor.

Please feel free to contact one of our Murray Lobb attorneys with any questions you may have about making legal gifts to others for current delivery – or to be received later as part of your personal estate plan.

Understanding the Purpose and Benefits of HB 4390

Texas and many other states have recently been passing new data breach protection laws to be sure that consumers receive timely notification after their most sensitive personal information has likely been breached or stolen. In June of 2019, HB 4390 was signed by Governor Greg Abbott. It became effective on January 1, 2020.

What HB 4390 is designed to accomplish – in general terms

Known as the Texas Privacy Protection Act, this legislation amends pertinent portions of the Texas Identity Theft Enforcement and Protection Act (“TITEPA”) set forth in the Texas Business & Commerce Code. In addition, the Texas Privacy Protection Act creates the Texas Privacy Protection Advisory Council that’s currently studying the data privacy laws of other states and countries.

HB 4390 requires this council to report its findings to the legislature by September 1, 2020 – so more comprehensive consumer privacy legislation can be considered during the next session of the Texas Legislature, beginning in January 2021.

New notification duties after suspected data breaches in the future

Now that the Texas Privacy Protection Act has gone into effect, the following new rules must be obeyed by all companies doing business in the state.

  • HB 4390 has added a new deadline. Consumers must be timely notified when there’s been a definite or suspected data breach (of sensitive personal information). This notification must be made within 60 days of the date when the apparent breach was discovered.
  • As amended by HB 4390, the TITEPA requires businesses to provide notice of certain types of data breaches to the Attorney General of Texas. More specifically, notice is mandatory when a breach has compromised the data of 250 or more Texas residents. This notice to the AG’s Office must also cover the following topics.
  1. The nature and circumstances of the breach must be described – and information must be provided about how the compromised data has been used (if known);
  2. There must be a statement about the number of Texas residents who were affected by the breach and when notifications were sent out;
  3. The reporting party must describe any measures taken to address the consequences of the breach;
  4. The AG’s Office must also be told whether any additional, corrective measures (regarding the suspected breach) are planned in the future; and
  5. There must be a statement about whether any law enforcement agency is currently involved in investigating the reported breach.

At present, at least 17 other states have established similar timeframes for reporting data breaches, usually between 30 to 90 days after the breach was discovered.

The Texas Privacy Protection Act also created the TX Privacy Protection Advisory Council

As was briefly noted above, this council will be meeting regularly until it tenders its required report to the Texas legislature by early September 2020. It’s hard to know if the group’s recommendations will be very comprehensive since some legal experts are concerned that Texas is rather hesitant to pass the full panoply of data breach protections that may be necessary. Far stronger measures were rejected – when HB 4390 and another bill were first proposed in Texas.

Better protection for victims of data breaches will likely be affected by the views of those currently sitting on this council. Here’s a look at the membership of this group.

  • Three of those who are on the council are members of the current Texas House of Representatives;
  • Three others are Texas senators;
  • Nine seats on the council were reserved for representatives of a wide number of industries including: consumer banking, technology, internet, medical profession, retail and electronic transactions, telecommunications, cloud data storage and social medial platforms;
  • Just two members of the Texas Privacy Protection Advisory Council are either members of a nonprofit organization that regularly evaluates data privacy issues from the viewpoint of consumers – or are professors at a Texas law school (or other higher educational institution) who have had important work published regarding data privacy.

Hopefully, most Texans will be pleased with the legislation that will eventually be passed based on this group’s recommendations.

Please feel free to contact one of our Murray Lobb attorneys if you have any additional questions about how this new legislation may affect your company either before or after you experience a data breach. We’re also available to address any of your other general business law needs — and we can readily draft the contracts and other legal documents you need to run your company each day.

Workplace Evaluations: Skills, Aptitude, Psychological and Lie Detector Tests

Ideally, every job applicant should be fully tested and evaluated before being hired for any position. However, state and federal laws impose certain restraints on the specific types of tests that can be given to job seekers. While skills tests are usually the most critical and widely accepted exams, care must be taken to administer them fairly and accurately.

Here’s a general overview of the types of job applicant rights you must respect while using any of the types of tests referenced above. As will be referenced below, all tests must be given in full compliance with the Americans with Disabilities Act (ADA).

Skills and aptitude tests – evaluating clerical, computer software and other job skills

A general rule of thumb that can guide you about many tests is that they must be specific to the types of skills that a job requires on a regular basis. Therefore, it’s usually fine to find out how fast a potential clerical employee can type or how much someone knows about repairing and maintaining computer systems if you’re hiring a computer help desk employee.

While you can usually test most the job skills of the disabled, you may need to make some accommodations in how you administer such tests. Cornell University’s publication entitled, Pre-Employment Testing and the ADAis well worth reviewing to gain a better understanding of job testing requirements. Just keep in mind that certain timed tests may need to provide slightly longer completion times and accommodations may need to be extended to applicants who’ve made their special testing needs known to you, in advance.

Although general aptitude tests can still be given using multiple choice tests, great care must be taken to avoid formats that may mainly reward test-taking skills over a job candidate’s ability to properly handle future job tasks. Short-answer questions based on factual job topics may provide greater insights into a person’s capabilities.

Psychological testing of job applicants

Although some employers still place great value on these types of tests, they are no longer highly favored. Two of the chief reasons that employers are thinking twice about administering these types of tests is that they can sometimes illegally discriminate against certain job applicants or invade their privacy regarding their moral and religious beliefs.

Employers should only administer psychological profile tests that have been scientifically validated, indicating direct correlations with a worker’s job performance. Another potential problem with psychological testing is that the ADA does not allow medically oriented tests to be administered to applicants who are disabled — if it might help discern their disabilities.

In certain situations, the ADA may also require you to revise a psychological or other test if an applicant claims it tests skills related to his/her disability (such as hearing capacity) – that are not regularly required for the job.

Lie detector or “honesty” tests for job applicants and employees

In general, the federal Employee Polygraph Protection Act – with only limited exceptions – prevents employers from requiring job applicants or employees to undergo lie detector tests. While certain types of unique applicants or employees may have to take such tests – including those wanting to provide armored security services (or dispense pharmaceuticals) – restrictions must still be honored as to how such tests are administered and evaluated.

Most of the time, in the few instances when a larger employer might want to administer this type of test, it’s normally only used when there’s reasonable suspicion that an employee may have embezzled from the company or committed other workplace theft.

At present, experts on this topic indicate that it’s nearly always best to restrict the use of any type of “honesty” test to situations where an employee may need to handle cash.

Always remember that in order to protect your company or business from any possible future claims of discrimination, you must make sure that all job applicants take the required tests at the same basic time in the hiring process.

Every employer may want to create a copy of this EEOC document designed to help determine the best job candidates — while fully complying with all federal laws.

Please feel free to contact one of our Murray Lobb lawyers if you need legal advice about administering specific tests to any of your job applicants or employees. We also remain available to discuss any other legal concerns you may have – and can readily draft a wide range of contracts and other documents you may need while conducting daily transactions with your business customers and other parties.

Crafting Effective Job Descriptions and Ads

Creating the type of job ads that attract large pools of highly qualified candidates takes careful thought and planning, like every other important business task. Besides providing an accurate job title and listing the main duties of a position, you need to let job applicants know if a specific job will fit in with their current lifestyle and priorities.

Of course, you must also describe the minimum job qualifications and what you require in the way of prior experience and training. And all of this must be done in a manner that carefully avoids discriminating against anyone.

While drafting a proper job description may sound a bit intimidating, it can be done with relative ease if you’ll start by making a list of the key facts you need to communicate – while still making the job sound highly desirable. The job ad itself should be considerably shorter, in keeping with the online or print forum where you’ll be placing it.

Here’s a closer look at some of the broad topics and details you should always try to include.

After picking an appropriate job title — add a clear list of essential job duties

Since all jobs tend to change a bit over time, it’s a good idea to visit briefly with the person who recently supervised the worker in the vacant position. This will let you know if your old job description needs to be updated or expanded. Next, make a list of the most common tasks the person hired will need to handle on a regular basis. Always start by listing the most time-consuming job assignments.

Also, be sure to indicate if the open job is an entry-level, mid-level or senior-level job. And you’ll need to note whether the position involves training or supervising other employees —

and what percentage of the employee’s time may be devoted to such tasks.

What type of academic background – and prior job experience – are you seeking?

To avoid potentially discriminatory language, it’s wise to indicate that you’re looking for someone with either a college degree “or equivalent experience.” Be sure to also specifically list any professional licenses or certificates that the person must have already earned. Likewise, you should clearly state whether it’s a job that may frequently require over-time, weekend shifts or travel.

When you fail to mention such factors, you’ll likely end up interviewing people who would never have applied had you provided that crucial information.

Make one list of all the required skills – and a separate list of all desired skills

If the work requires clerical skills, you might indicate a minimum typing speed and then list the specific types of software program skills required. If you need someone who is bilingual, make it very clear if you’ll expect complete fluency.

Should you believe the job requires the ability to work well under pressure while meeting strict deadlines, it’s always wise to include that information, too.

Provide a brief description of the job culture, if possible

If your company is in start-up mode, be sure to share that since there are people who know that they usually do their best work in more stable or established work environments. Likewise, if you’ll be expecting this person to always work in-house – or remotely on one or more days – try to indicate that as well since some workers either strongly prefer that lifestyle or know that they do their best work in an office setting where they can readily consult with others on a regular basis.

Consider indicating the desired new hire’s personality type and work traits

If the person you want to hire needs highly developed interpersonal skills – perhaps because it’s a receptionist or job training position — you may want to mention that as a desirable strength. Likewise, if the new employee will be conducting considerable research for your firm, it’s fine to say that you’re looking for someone with strong analytical skills and keen attention to detail.

Unique job demands or requirements

In order to avoid creating problems for yourself with the Americans with Disabilities Act and other legislation designed to protect specific job applicant and employee rights, it’s best to note unique requirements in your job ad so applicants will clearly know what’s required in advance.

Here are some job demands that should always be noted in your full job description provided to all selected applicants prior to job interviews.

  • Night shifts. Let applicants know if the new person may have to regularly tackle night shifts, in keeping with your company’s changing needs;
  • Ability to lift and/or carry small or large objects of a certain weight. People deserve to know in advance if they’ll need to lift heavy boxes or other objects on a regular basis. When possible, try to provide an accurate range of weights involved;
  • Use of personal vehicle. Be sure to note this and indicate that any job offer will be conditional, based on an applicant providing a recent copy of an acceptable driving record;
  • On-call work shifts. If this employee must be available on an on-call basis during certain days or weeks – on a regular schedule — be sure to note this since it lets those with unique family obligations (or physical limitations) know whether the job is still a desirable one for them.

If your company does federal contracting work – keep EEOC requirements in mind

When a business does this type of work, it must always note in any job ad that all applicants will receive full consideration, regardless of their color, race, sex, national origin or religion. Many companies simply note this at the end of their ads by indicating that they’re an EEO (Equal Employment Opportunity) Employer. 

Even some companies who aren’t required to include an EEOC statement include one so that their applicants will be fully aware that they’re encountered an employer dedicated to fair hiring from a fully diverse group of applicants.

Additional comments about legally risky, outdated jargon & online “keywords”

Remember to use gender-neutral labels like “salesperson” as opposed to salesman and “server” in place of waiter. Likewise, “general repair person” is better than “handyman.” It’s also preferable to indicate you’re seeking to fill a “part-time position” than to indicate that you’re looking for a college student.

Finally, give thought to obtaining direct advice – or even job-writing templates – from one of the major online job boards like Monster.com, Indeed.com or Careerbuilder.com. They can also help you with selecting the most useful “keywords” that you’ll want to include in your ad.

Please feel free to contact one of our Murray Lobb attorneys whenever you need any advice about how to properly attract and interact with job applicants – or if you need help with any employee management issues that may arise. Our firm can also supply you with any employee contracts and other general business documents.

Determining Fault After an Employee’s Accident in a Company Car

One of the most awkward moments for any worker is getting into a vehicle accident while driving a company car. Since every employee wants to be viewed as highly responsible, this type of event requires sincere humility while explaining the circumstances of the accident.

If the employee was clearly at fault and using the company car for personal reasons at the time the collision occurred – liability issues can quickly multiply – especially if a third party was injured.

Before noting some of the key factors that must be evaluated when this type of event occurs, here’s a quick review of some insurance policy definitions.

Insurance policies that may be involved when an employee has a vehicle accident

  • Commercial auto policy. The coverage or protection this type of policy offers to a company can be crucial following an accident. It’s designed to protect the business from having to cover all the personal injury expenses and property damage. Brokers often speak of this as a business auto or commercial auto policy;
  • A general liability policy. Most employers carry one of these because it offers protection against all kinds of third-party legal claims, including those that might be filed after a third party falls down and is injured on company property – or hurt during an auto accident caused by an employee driving a company car;
  • Worker’s compensation insurance. All employers of a certain size should carry this type of insurance that normally provides benefits to workers injured on the job – including those who were handling official business in a company car when a vehicle accident occurred;
  • A policy rider. An amendment to an insurance policy. Some employees who choose to use their personal cars for business add a special rider to their personal auto insurance policies to provide coverage if they get into an accident while handling company business. Depending on the employee’s relationship with the company, some employers will reimburse the employee for the added expense this type of rider adds to the employee’s basic auto insurance policy.

Once liability for the accident is determined, one or more of the policies referenced above will have to be used to cover all the injury expenses and property damage repairs.

The legal doctrine of respondeat superior and employer liability

When an employee is driving a company car at the time of an accident (while actively handling assigned business tasks) – that s/he did not personally cause – the employer will normally be responsible for paying for all the damages.  However, since various jurisdictions apply aspects of the respondeat superior doctrine differently, it’s important to check with your Houston business lawyer to find out exactly how this doctrine is applied in Texas.

Stated in general terms, respondeat superior usually indicates that the principal (employer) is normally responsible for most activities handled by the employee (agent).

One or more of the employer’s insurance policies (in addition to worker’s compensation), will normally cover medical expenses and the costs incurred due to property damage. However, insurance companies often quarrel over whether the employee was clearly handling business tasks at the time of the accident — and if s/he had current authorization to use the company vehicle.

Liability can shift when an employee was totally or partially responsible for the accident

The circumstances surrounding each accident will normally determine the exact percentage of damages that an employee must pay under his/her own policy. Whether any type of indemnity is offered to the employee usually depends on whether the third party involved caused the accident.

In most cases, an employee who caused a collision will be held fully responsible for all damages under his/her own personal auto accident policy.

However, when a third party caused the accident, there are still specific circumstances that will allow an employer to deny all liability. Several of these exceptions are set forth below.

  • The “frolic or detour” exception. If the employee was running a personal errand at the time the accident in the company car occurred, she must normally cover all the damages under her own personal auto accident policy;
  • The employee was under the influence of alcohol or drugs at the time of the accident. Once this has been conclusively established, the employer may be able to deny all liability;
  • The accident did not take place during normal business hours. However, there can be exceptions – like when a salesperson is traveling to his/her next sales destination on behalf of the company;
  • The employee was an independent contractor using his/her own vehicle. Potential liability for all types of vehicle accidents should be clearly spelled out in each employee’s company paperwork – before that individual can handle company business in any vehicle.

It’s always wise for an employee who was just in a company vehicle accident to request a timely meeting with company officials as soon as that person’s health allows. Everyone may benefit if a

compromise regarding liability can be reached – unless the employee’s behavior was clearly unacceptable.

If you have any questions about how your business or insurance provider should handle a specific type of accident involving a company car, please feel free to call one of our Murray Lobb attorneys. We can provide you with our legal opinion and possibly suggest legal paperwork you might want to have every employee sign before ever issuing any of them a company car for their use.

Key Issues Targeted by EEOC in Recent Lawsuits Filed Against Employers

Periodically reviewing the most recent cases filed by the EEOC (Equal Employment Opportunity Commission) against various companies can help remind your office of the federal employment rights that must be regularly extended to all job applicants and current employees.

Far too often, employers fail to protect workers against hostile work environments and many different forms of harassment and discrimination.  Employees being sexually or racially harassed can never do their best work. This also holds true for people mistreated due to physical disabilities, religious beliefs – or their national origin. These types of illegal activities are constantly monitored by the EEOC so that equal employment rights can be guaranteed to everyone trying to get hired or hold down a job.

What follows is a brief review of some recent cases filed by the EEOC against companies they believe have violated federal employment laws. While some of these actions have been resolved, others are still awaiting a final ruling.

New EEOC cases reveal the broad spectrum of employment rights regularly enforced

  • A Dallas pregnancy discrimination case was decided against the employer. A receptionist working for Smiley Dental Walnut spoke to human resources to inform them that she was pregnant. After being ordered to tell her supervisor this news, the young woman complied. During the conversation with her supervisor – who noted that she did not wish to keep training the young woman since she might leave relatively soon — the pregnant employee was fired.

The U.S. District Court for the Northern District of Texas, Dallas Division, ruled against the employer. Attempts to settle prior to litigation failed. Injunctive relief (sought to make sure the company never repeated this same type of illegal behavior in the future) was sought and awarded – along with back pay and other damages. The company was ordered to pay $20,000 to the wronged employee;

  • Walmart was ordered to pay $5.2 million for intentional discrimination against a disabled employee. The mistreated worker had dutifully worked around his developmental disability, deafness, and visual difficulties for 16 years. However, a new store manager came in and demanded that new medical paperwork be submitted to document all the employee’s disabilities. The disabled employee was then suspended temporarily from his job.     

However, once the requested paperwork was produced, Walmart cut off further communications with the disabled man — basically resulting in his termination. The EEOC prevailed in this case in which $5 million of the award was for punitive damages;

  • Two female nurses filed an EEOC complaint about unequal pay. The women had job experience equal to that of a male nurse – yet the women were paid less. All three nurses complained about this issue. The EEOC won the case on behalf of the female nurses, noting the importance of closing the pay gap that often works against women in this country;
  • A case was filed involving discrimination based on national origin and religion. Three Pennsylvania employees from Puerto Rico were working for a caster and wheel company when they were subjected to workplace harassment based on their national origin and their religious (Pentecostal) beliefs. Oddly enough, it was the plant manager who was making the derogatory remarks when the harassed employees decided to report his illegal and upsetting behavior. The three employees were then subjected to retaliation (in the form of lesser work assignments) for complaining about the way they were being treated.

The EEOC stated in its pleadings that company managers should always act respectfully as role models—and never be the ones who harass their own employees;                                          

  • A sexual harassment lawsuit was filed on behalf of two female employees. The EEOC alleged in its lawsuit that the defendant hospitality companies created an abusive and hostile working environment for two of its female employees. The women complained about sexually rude comments and behavior directed toward them by their manager.

When the employees complained to their supervisors and others, nothing was done to improve their situation. In this case, a request was made for both compensatory and punitive damages – along with back pay for the two women. This suit is still pending;

  • A disability discrimination case was filed based on the way a hearing impaired job applicant was treated. When a problem arose during the hiring process related to the applicant’s hearing disability, the employer failed to accommodate her reasonable request to simply be interviewed in person and not over the phone. The company never responded to the job applicant’s email proposing this simple alternative.

Instead, four other applicants (who didn’t require any type of accommodation) were then interviewed and one of them was chosen for the job opening. The EEOC lawsuit requests lost wages, punitive and compensatory damages – and injunctive relief to prevent the employer from repeating this type of discrimination against other job applicants (or employees) who have disabilities in the future;

  • A racial slurs and harassment case. A man hired as a deckhand by a New Orleans transportation company was subjected to offensive racial epithets and conduct. When the man asked for help in stopping this behavior, the situation did not improve. Soon thereafter, a rope tied in the form of a noose was dropped near this harassed man on the deck where he was working.

The EEOC described these wrongful acts as “deeply offensive.” The government is seeking injunctive relief against the transportation company – along with compensatory and punitive damages — and any other relief the court decides is necessary.

Each of these new cases and decisions document how common intentional acts of workplace discrimination still are in this country. All employers should consider requiring annual training for every employee in hopes of seriously discouraging all forms of workplace discrimination and harassment.

Should you need help interpreting any of the federal (state or local) laws that are designed to protect employee rights, please contact one of our Murray Lobb attorneys. We’ll be glad to help you analyze any problems that you may have — or help you draft any new workplace contracts or employee handbook sections related to this (or any other employment law) topic.

Overview of Small Business Administration Online Courses

Ever since our government created the SBA (Small Business Administration) back in 1953, it’s been working hard to promote, assist and protect America’s small business interests. Chief among its goals is to help entrepreneurs as they try to create and “grow” new companies.

During recent years, the SBA has been offering online courses that can help people focus in on creating viable business plans – while also securing adequate funding for their initial marketing and other needs. Whether your business is still in the planning stages – or already gaining traction – you can benefit by taking several of these courses.

SBA classes can greatly help many business owners

  • The All Small Mentor-Protégé Program. Like most of the courses offered, this one allows you to glance at a course transcript or outline before starting the class. This 30-minute program is designed to help entrepreneurs decide if they’re businesses are ready to sell goods or services to the federal government. If you believe your business is ready, you can take this course and use the certification of completion while applying for acceptance into this mentor-protégé program;
  • Business opportunities. This 30-minute class (offered on a self-paced basis), helps entrepreneurs learn how federal contract procedures work and what they must first do before trying to sell goods to the federal government;
  • A course on gaining a competitive advantage for your company. This SBA class teaches students how to accurately evaluate their competition, create a brand, seek out potential customers and decide how best to set prices for their goods and services;
  • Financing your business. There are many ways to come up with the money you’ll need besides funding it yourself or obtaining a bank loan. This class explains the basics facts about venture capital, crowdfunding, angel investors, grants and other sources. You’ll also gain a better idea how to figure out your exact start-up costs and other expenses;
  • Legal requirements for a small business. This course explains many basic aspects of employment law that must be understood before trying to start a company. One key topic looks at how you must responsibly hire and fire employees. Be sure to speak with your Houston business law attorney during the earliest stages of starting your company to make sure you’re complying with all applicable state, local and federal laws;
  • Social media marketing. Every small business owner must learn how to properly market goods and service to the public using social media platforms like Facebook, Twitter, Pinterest, LinkedIn, YouTube, Tumblr and others. This course also teaches students how to reach their prime or target audiences based on such factors as age and location;
  • Growing an established company.  At some point, most companies find themselves facing unexpected competition or a change in market forces that makes them need to retool their approach to winning new customers. This class will help you determine if your company is ready to expand and how to carry out that goal. It also teaches important growth strategies;
  • A course on buying a company already in business. Terms like due diligence are explained so that students will understand the critical need to learn all they can about any business before buying it,
  • The special cybersecurity needs of small businesses. This course helps acquaint owners with some of the ways they can try to protect themselves against major cyber threats that can take down websites and otherwise disrupt normal business transactions. There’s also a related class that describes useful ways to prevent general crimes from being committed against your company.

All the courses referenced above may prove useful to a large percentage of new businesses (or those needing to reinvent themselves). The following brief synopses are related to classes created for unique groups of entrepreneurs.

SBA classes designed for the needs of specific individuals and groups

  • Special contracting opportunities for veteran entrepreneurs. Nearly one in ten U. S. businesses are owned by military veterans. Since these men and women often face special burdens after serving our country, the government has created unique programs to help them find profitable ways to support themselves and provide jobs to others;
  • A course designed for Spanish-speaking young people. Titled Jovenes Emprendedores, this class provides key guidance for those who need business training materials taught and presented in Spanish). There is also a class designed for young entrepreneurs who are native English speakers;
  • Business development class for Native American businesses. Students in this class will learn more about the 8 (a) Business Development Program that’s been specially set up to help many small business owners facing economic disadvantages;
  • Entrepreneurship program for women over 50. Given the high number of seniors now needing to remain in the workforce past normal retirement age, this course is perfect for older women wanting to get new businesses off to a good start. Those who take this course may also want to review the materials designed for the more general WOSB (women-owned small business) Advantage class.

The courses referenced above are just a sampling of the roughly 63 free classes available to anyone who has 30 minutes (or more) to spend mastering these core topics. Should you decide to contact the SBA directly or online, they may be able to provide you with additional online and community resources that can help you get your business off to a promising start.

Please feel free to contact one of our Murray Lobb attorneys while trying to start up a new company – or purchasing one that’s already helping customers. We appreciate the opportunity to help all our clients succeed in all their new business endeavors.

Update: Department of Labor Issues New Rule on Overtime Pay

The Department of Labor issued a final rule in September of 2019 that could allow an additional 1.3 million more American workers to become eligible to receive overtime pay. This new rule becomes effective on January 1, 2020.

One key focus of the new rule is to update the earning thresholds that exempt certain professional, executive and administrative employees from the FLSA (Fair Labor Standards Act) minimum wage and overtime pay guidelines. The new rule is also designed to allow employers to count portions of some bonuses and commissions toward meeting the required salary level.

These adjustments are being made to recognize the increase in employee earnings that have occurred since these salary thresholds were last reviewed in 2004.

Earning levels and other specific issues addressed by the new DOL rule

  • Changes are being made to the “standard salary level.” At present, the enforced earning level is $455 per week – and that’s being raised to $684 per week (or $35,568 for an entire year);
  • There’s an increase in the total annual compensation requirements for workers categorized as “highly compensated employees.” The current enforced level of $100,000 a year is now being raised to $107,432 annually;
  • Employers can now count nondiscretionary incentive payments, bonuses and commissions paid at least once annually. These sums can now be added to help satisfy as much as 10% of what’s now known as the standard salary level – recognizing how pay practices are evolving;
  • Salary levels have now been revised for specific groups of workers. These include people who labor in U. S. territories – or individuals employed by the motion picture industry.

Some of the many earlier overtime pay guidelines that still apply

  • Unlimited overtime hours.  The FLSA (Fair Labor Standards Act) still allows exempt employees age 16 and older to work an unlimited number of overtime hours during any one workweek;
  • Timely payment of overtime. Employers must pay for all hours worked, including overtime, on each regular pay day;
  • When overtime pay is required. Once a non-exempt worker has put in at least 40 hours during any one calendar workweek (which can begin on any day of the week), the overtime pay rate applies.

If you have any questions about how the new DOL overtime pay rule may affect your workforce, please give one of our Murray Lobb attorneys a call. We’re also available to provide legal advice on many other important topics – and can draft any contracts or other documents you may need.

Properly Handling Background Record Checks of Potential Employees

All companies must proceed cautiously while trying to create safe, productive and pleasant work environments. The best approach is to develop standard procedures for running background checks and investigations for all applicants who will be handling similar tasks — without regard to any discriminatory traits or characteristics.

First and foremost, you must obtain each job applicant’s written permission to run checks on their job and educational records, criminal background history and financial credit status. Should any of the information you obtain make you no longer wish to consider a specific job applicant, you must inform that person about each report’s negative findings – since all potential employees have the right to refute and correct such data.

Always be sure to also treat all applicants with equal respect and remind them that you’re simply trying to learn all you can about your top applicants. And be sure to state in writing that providing false information can cause individuals to be immediately dropped from further consideration – or be fired in the future when such misinformation is discovered.

Here’s additional information about the types of errors that can appear in background checks, how you might allow job candidates to respond to negative findings — and tips on exercising special caution when sensitive data appears on either sex offender registries or terror watch lists.

Types of negative information & errors that may be uncovered during background checks

Hopefully, most of your searches will just reveal that your applicants have provided their correct names, full address histories, all job information for recent years, accurate Social Security numbers and other basic data. However, chances are that at least some of your potential employees will need to explain about one or more of the following findings.

  • Past arrests or conviction records. Always pay close attention to the types of behavior or crimes involved, when the events occurred and how (if true) that history might affect your work environment. If you still wish to hire a person with some type of negative arrest or conviction, remember that you have a legal duty to create a safe work environment for all your employees. Also, bear in mind that future claims of negligent hiring could prove very costly to your company.
  • Fraudulent or grossly misleading information about the applicant’s academic background or work history. As noted above, make sure that all your application forms clearly indicate that providing false information on such forms (or on a resume) can be immediate grounds for dismissing an applicant from further consideration. Should you believe that any applicant may have simply made a typographical or innocent error on the forms, always allow the person to provide corrected information. Just be sure to respond to the discovery of such false information in the same manner for every applicant;
  • Misleading or inaccurate driving record information. If you’re hiring someone to deliver packages or goods for you – or drive others around on your company’s behalf, you better make sure they have an excellent driving record.
  • A very poor credit score, a bankruptcy or other signs of major financial problems. Always be sensitive and careful when asking applicants to explain this type of information;
  • The person’s name turns up on a sex offender registry or a terrorist watch list. Given the number of people who are burdened with very common names, always reveal what you’ve learned to the individual in a calm manner, preferably with at least one other human resources staff member present. If you still want to hire a person whose name was on one of these lists, always first speak with your Houston employment law attorney.

Your lawyer can tell you how you should go about carefully determining a person’s correct identity and if it’s too risky to hire someone. It may even be necessary to contact the Department of Homeland Security if the person is listed on a terrorist watch list. (Do keep in mind that even the government knows that it can be very time-consuming to remove a name wrongfully added to a terrorist watch list);

It’s crucial to maintain a standard of fairness that applies to all applicants

Be sure your company’s hiring policies provide specific time limits on when applicants must provide you with corrected information after background checks turn up negative or disturbing information. Always apply that same standard to all applicants. If someone needs more time, you should only allow a one-time extension that applies equally to others.

How long must you keep all job application forms and background check information?

The EEOC (Equal Opportunity Commission), the Department of Labor and the FTC (Federal Trade Commission) each provide slightly different guidelines on how long certain records should be kept. Overall, it’s a good idea to keep a copy of all application materials and background information for about two years. Of course, if any job applicant or employee files a lawsuit against your company, that person’s records should be kept until all legal proceedings and appeals have come to an end.

Make sure all employee records are stored in a restricted area where only one or two senior human resource officials have access to them. Once it’s time to destroy the records, it’s wise to carefully shred, burn or pulverize the data so that the material can no longer be read.

Of course, some employers keep all resumes and job application forms in case they later have problems with an employee — or come across information that indicates that the background check failed to disclose fraudulent claims were contained in those documents. Some firms just scan all such data into secure databases.

Since credit background checks are governed by the Fair Credit Reporting Act (FCRA), be sure you understand the terms of that legislation and how it impacts your specific workplace. Also, always keep in mind that the State of Texas also has laws and regulations that can impact how your company handles background checks and employee records. It’s always wise to periodically touch base with your lawyer to find out if any of these laws have recently changed.

Please feel free to contact one of our Murray Lobb attorneys so we can provide you with the legal guidance you may need while hiring employees or simply running your business. We can also provide you with any contracts you may need — or review the contents of your current employee handbook.