Minimizing Chances of Violence When Terminating Difficult Employees

Although some angry former employees who’ve been fired have tried to physically harm or kill their former employers and co-workers, there are constructive steps you can take to greatly lower the chances of any workplace violence. After all, most workers don’t suddenly begin doing poor work or behaving rudely to others. There is usually an extended time period when a person’s work starts to deteriorate.

If you’ll conscientiously conduct regular employee job evaluations that put each worker on notice of any deficits in their productivity or demeanor, being let go should rarely come as a surprise (unless there’s been a sudden, violent outburst or you’ve recently discovered illegal activity).

Here’s some specific advice about how your company or office manager should interact with employees once you’ve decided to fire them.

Workplace practices that may help a dismissed employee cope better when terminated

  • Privately inform the employee that you need to meet with him/her in your office.

No one likes to be embarrassed in front of others, so be discreet. Plan to have at least one other management employee present to witness the event. Once you start this meeting, be sure to briefly reference the other person present and then immediately tell the worker being fired that this is a permanent decision that’s been made after great consideration of all the relevant facts. (These words can help prevent an anguished exchange during which the employee may beg to stay on the job – or even unwisely threaten those s/he blames for the firing.)

Give serious thought to creating a folder with all the materials the employee will need inside of it. Then, tell the employee you’d like to go over the different forms, possibly including any severance agreement that your company may need signed and dated in your presence. If you employ 20 or more employees, be sure to include adequate information about how the employee can apply for (and most likely) receive health insurance through the COBRA program. (COBRA stands for Consolidated Omnibus Budget Reconciliation law.) And be sure to check with your Houston employment law attorney to see if Texas requires that you provide the person with any other health insurance information.

Remember to always speak in a calm and pleasant tone, even if the employee becomes a bit agitated or excited. Consider always having a company (or building) security guard on hand in the outer office, just in case an upset employee becomes unruly.

Be willing to stop and answer questions. After all, most people have many questions they need to ask at such an upsetting time in their life — even if they “should have known” this event was likely. Carefully explain exactly when a final check will be cut and explain how you will deliver the funds to the person being dismissed.

  • Obtain all remaining property that must be returned. When providing the employee with notice of the meeting, you should always give the individual a clear list of all proprietary equipment, keys and other materials that you expect to have returned to you in good condition. If the person has been entrusted with extremely important security codes, you might want to note that those are always changed when any employee leaves the company.

If any major piece of equipment is not returned, be prepared to discuss a reduction in the final sum of money owed to the person – unless you failed to state that policy in your employee handbook. If no prior notice was provided, you should speak to your attorney about the wisdom of deducting any amount of money from that final paycheck or payment of benefits owed.

In addition to all company vehicles, be sure to collect all ID badges, security parking tags not currently affixed to vehicles, beepers, cell phones and confidential company publications.

Finally, you should calmly allow the employee to express some moderate anger about the decision. Sit quietly – and at most, simply restate that the decision is final. By listening to the person, you’re affirming them to some extent, and that’s important to having the individual leave in a calmer state of mind.

Unless the employee becomes verbally abusive (not just angry or a little flippant), ask them to be prepared to leave with all their belongings right after the meeting. (Of course, you should have already conducted a thorough investigation of any reported wrongdoings by the employee – and given that person a chance to explain his/her side of any alleged wrongdoing.)

Note: Always be sure that the person has time to collect his/her belongings and remind them to check the employee lunchroom or any locker that may have been assigned. It’s also wise to state that you will not be discussing the dismissal further with any of the departing employee’s co-workers. As for references, try to state (if true), that your company normally only provides confirmation of employment dates, without further comments or explanations. (Be sure that’s already set forth in your employee handbook). If the person has remained calm, brief goodbyes to co-workers should also be allowed.

  • One other key point: always be specific during the dismissal process. Employees being let go really want to know why their work wasn’t satisfactory. Since people often feel completely out of control of their lives when they’re being fired – specific feedback helps them feel empowered and like they can bounce back with a new job. It can help to have copies of all recent job performance evaluations handy when meeting with any employee who is leaving.

If you liked the person but found their work unacceptable, you’re always free to tell them that you wish them well and hope they can find another position more in keeping with their most highly developed talents;

  • Decide in advance whether your company believes it should ever allow someone being fired to “resign” their position instead. This helps some people feel less angry and like they have retained some degree of self-respect. Of course, if you do choose to allow this approach, you should remind the departing employee (in writing) that s/he might still be legally viewed as having been fired.

However, be sure you avoid making any promises about the receipt of unemployment benefits when someone chooses to resign. To protect yourself, it’s probably best to tell the person (in writing) that they will need to check with the Texas Workforce Commission about such benefits, noting that all dismissals are usually handled on a case-by-case basis.

  • Formal outplacement services. While these are most frequently used by large corporations when laying off groups of employees, it’s wise to check on all the services that they provide. However, if you’re a smaller company or a solo office with a relatively small group of employees this probably won’t be practical. If nothing else, try to include a form in the “separation” or dismissal packet that provides the address of the nearest Texas Workforce Commission office, its website address, and the phone number for that office. People will usually be calmer if they have an idea about how they can immediately begin looking for a new job;
  • Provide clear information about what you’ll be including in the employee’s final paycheck. In Texas, an employer normally has six days to provide the departing employee with his/her final paycheck. However, if someone insists that they’re quitting the job, you can wait to issue their final paycheck at the time of the next scheduled payday.  See Texas Code Annotated, Labor, Section 61.014.

If you fail to pay a fired employee on time, you might be required to pay that person damages – and possibly even a penalty to the employee and the state.

And remember that in most states, you’re usually required to pay the employee for any accrued vacation time.

Gray areas can easily occur during dismissals

A bit too often, people get very angry when being fired. In some cases, they will storm off during your meeting, claiming that you can’t fire them – because they’re quitting. While you do not have to put up with rude or antagonistic behavior, you might want to calmly note that being fired might be the better option, if they prefer to sit and think about it for a few minutes.

However, you have no duty to try and counsel the person on this issue. Just be aware that when any employee says s/he is walking off the job, the law may not treat that person as fired – causing the individual to lose access to unemployment benefits.

If the departing employee really tried hard to do good work for many years and may just no longer be able to keep up with new job technologies, your company always has the option of covering the fee so that individual can go to a local personnel agency and receive one formal placement in a new position.

Final tips for carefully handling employee dismissals

  • As the Texas Workforce Commission notes, try to avoid dismissing or firing any employee “during the heat of the moment.” All future interactions will go much more smoothly if there are clear reasons for firing a person that have been documented over time – even though Texas doesn’t require warnings for at-will employees. Just try whenever possible, to treat anyone you wish to fire with dignity.
  • Make sure all your actions are backed by clearly stated company policies and procedures. The last thing any company needs is to be sued by an angry former employee who can reference an employee handbook that clearly indicates that you failed to properly handle his/her dismissal.
  • Be sure you always responded to all legitimate complaints made by the person you’re about to fire. The Texas Workforce Commission is often sympathetic to people seeking unemployment benefits who can document that certain workplace problems – that were formally reported and negatively impacted the person’s performance – were never properly addressed.
  • Try to only fire people early in the morning or late in the day – when few other workers are still present. And be sensitive enough to not provoke someone by firing them on their birthday or the day before a major holiday.
  • Check ahead of time with your accountant to be sure the employee doesn’t owe the company for any loan made against future paychecks.
  • While it was suggested above that you may rarely want to try and help a worker meet with a personnel agency, keep in mind many workers may try to abuse that privilege.
  • Never allow any employee who was just dismissed to log back into the company computer system. Irate people with moderate skills can easily wreak havoc on your database or other sensitive files.
  • Always have each staff person present during the termination meeting prepare a memo documenting what took place. This information can prove very useful later if your company is sued for wrongful termination.

Please feel free to contact one of our Murray Lobb attorneys if you need to ask any questions about specific issues involved with terminating an employee. We can also help you (re)draft your employee handbooks so that all procedures involved with firing employees are set forth clearly.

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.