Ways to Avoid Defamation When Disciplining Employees

Every employer has the right to create a pleasant and productive workplace. Yet this goal can be elusive when a worker acts unethically or behaves poorly toward others. If the behavior was grossly unethical or offensive and the person was an “at-will” employee, you can usually fire him on the spot. However, some misconduct claims must be thoroughly investigated.

General principles to bear in mind when disciplining employees

If immediate firing isn’t appropriate, you must handle all investigatory matters in a private manner. You should also only inform those with a formal “need to know” regarding specific information you are learning. Always make sure to act in a non-discriminatory manner. You can never let anyone go in a way that violates their civil rights or unjustly defames them.

Here are some suggested steps your business should take while resolving problems with difficult employees.

Responsible ways to discipline workers

  1. Create a written policy that states how your office will interact with employees who are accused of wrongful behavior. While you should be consistent in taking certain steps, you must clearly state that your office always reserves the right to immediately fire at-will employees when circumstances justify such actions. When an exempt employee is involved, try to provide warnings and always listen to their side of the story. It’s a good idea to place this policy in an employee handbook and to reference it upon first hiring all employees – and during all periodic work evaluations;
  2. Investigate all accusations, especially when immediate firing isn’t necessary. Be sure to handle all interviews in a private setting, stressing the confidential nature of the process. If there is written or documented proof of wrongdoing, obtain copies of the materials;
  3. Create a separate investigation file for the accused employee. You should also create notes in the person’s regular personnel file – making sure only a small number of employees can review either folder. In very rare circumstances, it may be necessary to hire an outside group to handle the investigation for you. Your Houston employment law attorney can fully explain when hiring outside investigators may be necessary;
  4. Create a clear plan for each employee’s disciplinary investigation. Avoid making accusations or labeling someone as a “thief.” Let the person know that you are investigating the claims. When meeting with the individual, always take notes and have at least one other staff member present as a witness. You may want to ask the employee to sign a statement, indicating awareness of the investigation.  In order to get an employee to sign a form, you may need to note in it that his/her signature does not constitute any admission regarding wrongful behavior – only that the person knows certain claims are being investigated. Be sure to listen carefully to any defense claims the employee may offer – but do not let any meeting become confrontational. If tempers flare, note that you will reschedule the appointment for a later time;
  5. Do not publicize the investigation. Only share limited information about it with those who have a “need to know” regarding it;
  6. Once a decision is reached regarding discipline, advise the employee. Make sure your decision is based on fully objective and reasonable grounds – and note them in your files. Document what you’ve decided to do in the regular personnel file – and reference the separate investigative file where all detailed notes are kept. Do not allow anyone access to the main investigative file who doesn’t have a right to see it. Be sure to keep all investigative files for a lengthy time period in case future lawsuits are brought against your company;
  7. If you decide to terminate an employee, do so in an orderly fashion. Allow the person to gather together all personal possessions before leaving the building in a private fashion. If the fired employee was fired due to dishonesty – or any violent or inappropriate behavior – you may want security to escort the person off the premises. To protect the fired employee’s privacy concerns (and to avoid defamatory actions), you may want the exit to occur when few other employees are present;
  8. Do not share details about any firing with other employees. Unless there was documented criminal activity that all personnel may need to know about, you have a duty to maintain privacy regarding the exact reasons why you chose to fire an employee.

Always remember that you cannot discipline an employee for taking lawful advantage of any state or federal right. This can include taking time off under the Family Medical Leave Act after you’ve approved the temporary departure – or taking a military or pregnancy disability leave.

Additional behaviors to avoid when disciplining employees

  • Never jump to conclusions about any claim. Don’t allow yourself to be greatly swayed by reports made by one or two individuals. Be sure to speak with all key witnesses and interview the employee concerned – to hear his/her perspective on what happened;
  • Always be/remain reasonable and flexible. Don’t ever over-penalize an employee for a minor infraction. Also, if you’re having to fire a more senior, exempt employee, make sure you have fully documented all proven reasons (or “just cause”) as to why the employee must leave;
  • Seriously consider documenting verbal warnings. While this may not be necessary, it’s usually a wise move. One way you can document them is to send yourself an email, noting in general terms (using a computer at work) why you had to verbally discipline an employee on a specific date;
  • During regular employee evaluations, be sure to note any disciplinary actions taken and how they’ve been resolved. Always have the employee sign the evaluation, noting that the person recalls all that’s happened and how all situations have been resolved;
  • Avoid telling an employee after being disciplined that you’re sure the person is likely to have a bright, long future with the company. A court might later view this type of language as reasonable proof that you were creating a new employment contract, one providing some type of guaranteed or continuing employment – as opposed to the at-will status the employee once had; and
  • Don’t punish workers for trying to improve working conditions or wages during breaks or at other times when “off the clock.” Rights like these are normally protected under the federal National Labor Relations Act.

If you’re concerned about how to handle any employee discipline or firing issue, please feel free to contact one of our Murray Lobb attorneys. We can provide legal advice based on the specific circumstances that you relate to us — and help you decide when you may need to hire outside investigators to handle a specific claim. We can also draft professional language for describing your employee discipline policy in your employment handbook.

Be Careful When Creating a Company Policy on Moonlighting

When addressing employee management issues like moonlighting, it’s often best to seek out a middle ground. If you’ll first establish clear work standards that fully protect your company’s intellectual property and ongoing research and development efforts, you should be able to accommodate those who can responsibly handle a second job outside their regular work hours.

Perhaps the best way to create a balanced moonlighting policy is to first review your main concerns about allowing employees to do any outside work. You should then try to objectively embrace your employees’ reasons for wanting to take on another job. Although you do have greater freedom to dictate when exempt workers put in their hours, that’s not always the case when interacting with at-will employees who are paid hourly.

Here’s a look at the competing interests involved when trying to design a moonlighting policy for your unique workplace. That information is followed by some general guidelines that you’ll want to review with your Houston employment law attorney. Employees do have certain privacy rights about how they conduct their lives outside of work and those must be respected.

Legitimate reasons why employers often want to limit moonlighting

  • To protect the company’s intellectual property. No employer wants to worry about employees knowingly (or accidentally) sharing confidential, proprietary information with another employer – or using such information while starting their own companies. Non-disclosure agreements are crucial to protecting these types of rights;
  • To maintain control over employee schedules for valid staffing purposes. Many companies require employee flexibility with work schedules in order to cover the ongoing, often unpredictable nature of their work volume. For example, customer “help” or call centers often experience times of peak calling. However, these fluctuations can change from week to week – or even day to day. People hired to work in these environments can be legitimately required to forfeit or greatly limit outside work – if those unique requirements were clearly stated in writing prior to their hiring;
  • A desire to have employees provide the company with their very best efforts. When employees take on “second” jobs – they’ll often be tempted to put in too many total work hours each week. It’s completely legitimate to want every worker to show up on time each day, fully rested and able to adequately focus on their assigned tasks;
  • Safety concerns. Moonlighting frequently causes many people to lose sleep. When they show up to your workplace greatly fatigued, they can pose a serious safety threat to their own health – and that of their coworkers;
  • Loyalty and commitment. While a moonlighting employee can provide you with these desirable attribues – you have every right to expect them to demonstrate respect for your company while interacting with others.

Although these aren’t the only reasons you may want to carefully limit employee moonlighting – they do touch upon common concerns. Keep in mind that it’s your right to carefully monitor the quality of work of your moonlighting employees to be sure it doesn’t start to decline.

Some of the valid reasons many workers want to do some moonlighting

  • Additional money to support themselves and other family members. Regardless of what you’re paying each worker, everyone periodically encounters unexpected medical bills and other crises that require extra income;
  • A desire to realize their own entrepreneurial dreams. Few people can afford to simply quit their “day jobs” while trying to launch new businesses. If employees pursue this type of goal while using their own resources outside of regular work hours, there may be few issues. However, if their companies will cause them to compete for clients with your business, restrictions are fully justified;
  • An interest in taking on paid union work to improve conditions for themselves and others in their industry. Employers must tread lightly when trying to restrict such activities. While company loyalty is a legitimate concern, this isn’t necessarily violated if the workers are openly addressing key safety and health issues that affect all employees.

These are just a few of the many reasons why some workers are strongly motivated to take on moonlighting jobs.

General guidelines for drafting a moonlighting policy

  • Companies should rarely try to completely forbid moonlighting. However, as your Houston employment law attorney will tell you, it’s best to inform all “new hires” if their jobs may require sudden changes in their weekly schedules or limited overtime hours on short notice. Whenever possible, try to remain flexible with workers – or your best and brightest ones may leave so they can pursue moonlighting and other privileges elsewhere;
  • Decide if you need to specifically address this topic in your employee handbook. If you don’t wish to create a “moonlighting” policy, you can ask your attorney to provide you with hiring contracts (and/or) non-disclosure agreements. These will clearly explain to all employees that they’re legally forbidden to share any company trade secrets, research and development data – or other proprietary information – with outside parties without first obtaining express, written permission from your company. It’s also wise to have all employees sign non-compete contracts with your company before they start to work;
  • Consider requiring employees to obtain your permission before taking on “second” jobs.  Should you decide that you want to expressly forbid an employee from taking on a specific “moonlighting” job, always immediately speak with your attorney – to be sure you’re within your legal rights to do so. You’ll need to carefully document all your reasons to protect yourself from any future litigation;
  • Try to be accommodating when an employee indicates that s/he will not be competing with your company in any way. After all, it’s entirely possible that you may one day become a client of your employee’s fledgling new company. Of course, you should still periodically touch base with all moonlighting employees to be sure no conflicts of interest have developed since they started their second jobs;
  • Use periodic job evaluations to your advantage. During these, be sure supervisors ask questions that can help determine if the employee’s outside job is starting to compromise his/her ability to provide you with top-quality work.

Please feel free to schedule an appointment with one of our Murray Lobb attorneys so we can help you draft the various contracts you need to protect your company’s proprietary interests. We can also help guide you as you create (or update) your current employee handbook on this and other topics.

Should You Always Enforce Covenants Not to Compete?

Covenants not to compete are binding contracts that are designed to protect companies against exiting employees unlawfully sharing different types of proprietary information, “trade secrets” and intellectual property with their new employers and others and engaging in post-employment activities that can be detrimental to the company they left.

Before discussing whether it’s wise to develop an ironclad attitude toward enforcing these covenants, it’s helpful to review the basic reasons why these documents are usually drafted and what standards courts consider when deciding whether they should be upheld.

Companies must protect specific types of information

Whether your business sells cutting-edge security software or sends out consultants to advise clients in mostly rural areas, your employees often learn highly detailed information about how you help your clients. If you were to always let key employees leave and immediately put that proprietary information and knowledge to work for a competitor, your business might quickly lose its competitive edge and market dominance.

Therefore, many companies regularly require employees to sign noncompete agreements to prevent them from using what they learn while employed for a limited time post-employment. Should former employees violate these agreements, they (and their new employers) can often be sued in court.

Common types of proprietary interests you’ll usually want to protect

  • Trade secrets. Perhaps your company has invented a manufacturing process that should not be shared with any competitors. It’s also possible that you’ve designed a highly effective training program for your employees that makes them uniquely effective at handling their work. You clearly don’t want them to share those training methods with others;
  • Client databases. You’ll want to prevent all departing employees from reviewing any past buying practices, requests and needs of your clients;
  • Other highly confidential materials. These could include almost anything – perhaps you’ve implemented a specialized marketing plan that’s helped your business grow several times over during recent years.

These examples should help remind you of the many proprietary types of information you must protect by requiring your exiting employees to sign covenants not to compete.

Within such covenants, you’ll need to address various topics that may include the following ones.

  • A specific time period. Any time period must be reasonable, normally 1-3 years;
  • A description of the types activities the employee cannot engage in post-employment. You can list specific industries, customers or businesses the departing employee should not contact for a new employer;
  • A specific geographical area where the departing employee cannot work. You can state a certain region where the employee who left cannot compete with you for a set time period.

When evaluating the reasonableness of covenants not to compete, courts look to see if they are over-broad or too restrictive. While businesses have a right to protect certain information or “legitimate business interests”, they aren’t allowed to unfairly prevent a departing employee from pursuing most forms of gainful employment.

Should you always enforce your contracts containing noncompete clauses?

Although the most obvious response is to say you’ll always strictly enforce them, it’s important to recognize certain factors before suing someone for not honoring a noncompete covenant.

Please feel free to contact one of our Murray Lobb attorneys so we can help you draft any contracts you need containing covenants not to compete. We can that someone is currently asking you to sign – or assist you in enforcing or defending a lawsuit.

Why You Need to Create a Business Succession Plan NOW

Why You Need to Create a Business Succession Plan Now

Even when all owners of a company plan to work until the very end of their lives, there’s still a need for a viable business succession plan. After all, anyone can become totally or partially disabled as a result of a serious car accident or die of a deadly disease on almost any day.

When business owners hide from this reality, they often create havoc for all surviving partners or family members. Instead, it’s better to move forward at a calmer time to carefully address these types of possible future events.

Your Houston business law and estate planning attorney can help you decide on the best way to either pass your business on to others — or liquidate all the assets to meet your own needs and those of your survivors.

General questions you must answer yourself about any succession plan

  • What is the current market value of this business and all its assets?
  • Who is the best possible buyer? Do I prefer to sell the business to a co-owner, family member, employee or a third party?
  • Am I more likely to sell the business sooner rather than later? Am I interested in selling the company now due to health, retirement or other reasons?
  • Is this business tied to its current location? If not, would it be reasonably simple for the business to be moved elsewhere and successfully run by someone there?
  • What preferences do I have about how the sale should be financed? Am I willing to personally finance the loan? If so, what type of collateral should I require?
  • Which business advisors should I consult with while securing all the required contracts and other paperwork? Besides business and tax lawyers, do the specific assets of my company require me to consult with real estate agents, insurance and business brokers, bankers and financial advisors?

It’s often wise to start this process by locating and reviewing all your current business contracts and deeds. Next, give some thought to your company’s most productive and respected employees. Then, carefully determine the current market value of every business asset. Finally, schedule confidential, preliminary talks with any co-owners, family members who work for you, other key employees and perhaps one or two other potential buyers of your company.

Once these initial tasks have been handled – or while you’re completing them – it’s wise to meet with your Houston business law attorney.

Advantages and disadvantages of selling to different parties

Unless you’re the sole owner of the company and simply want to liquidate all the business assets and not sell (or transfer) the company to others, you must carefully evaluate each potential buyer and decide which one is best qualified to run the company in your absence.

  1. One or more family members. In most instances, it’s usually best to sell to only one family member, preferably one who is already involved in the business and respected by your employees. Ask your attorney about the best ways to prevent future challenges to any decision you make. One approach might involve drafting a buy-sell agreement that clearly states who is going to be running the company — and asks all others who currently work there (or own shares) — to sell their shares to the person you’ve named as your successor. This approach often helps minimize future family disagreements.

When selling a business to a family member, you may want to execute a self-canceling installment note (SCIN). Your attorney can explain why that may be useful;

  1. A key employee who is highly knowledgeable and well liked by other workers. The most common drawback to selling to a key employee is that the person may not be able to give you a large down payment in cash. Be prepared to execute a buy-sell agreement that clearly lists all the valuable collateral for any loan you may be willing to finance. You can also suggest that this employee try to obtain an SBA (Small Business Administration) or bank acquisition loan that will provide you with up to 70% or more of the purchase price upfront;
  2. You can sell your shares to your co-owners. Be sure to clearly indicate the sale’s price and all purchase terms;
  3. An outside third-party or competitor. Be very careful when selling to this type of buyer if you’re financially depending on the person to keep running the company. Due diligence is critical when evaluating every potential buyer.

Since this article only provides a broad overview of the types of issues involved when drafting a business succession plan, you’ll need to obtain competent legal help to handle this entire process. Should you already have some type of succession plan, we can help you decide if it’s time to update it.

All our Murray Lobb attorneys have the necessary experience to help you create a business succession plan that’s specifically tailored to your company’s unique needs. We look forward to helping you draft all the contracts and other documents you’ll need while selling your business.

 

Key Drafting Points for a Texas Employment Contract

Although Texas employers hire many workers on an “at-will” basis to make it easier to dismiss them (for reasons that doesn’t violate governing statutes), they also still provide employment contracts to others. After all, a well-drafted employment contract helps employers clearly establish what’s expected of their employees and makes it easier to protect proprietary information when workers leave.

If your company prefers to negotiate employment contracts with highly skilled employees, try to first meet with a Houston employment law attorney so that all of your most important needs and interests can be protected during the hiring process. And always be sure to communicate carefully with prospective employees since it’s easy to accidentally convey contract terms you may not have intended.

Before reviewing some of the important terms that should be included in most Texas employment contracts, it’s wise to note how some employment contract terms can become binding when set forth outside of contracts.

Ways employers may convey certain employment terms to job applicants or new hires 

Always carefully review the following ways that your company may be granting certain rights you didn’t intend to include in your formal employment contacts.

  • Through verbal agreements. Only allow a limited number of interviewers and other hiring staff to discuss key employment terms that may or may not be set forth in writing;
  • Statements made in offer letters. Always reread these before sending them out to make sure they do not contradict what’s in your written employment contract;
  • Provisions set forth in your employee handbook. (You should periodically ask your attorneys to review this material – to be sure it’s still current regarding new laws and recent court decisions);
  • All emails and faxes sent to prospective employees or new hires;
  • Statements made on workplace job notice boards.

While this list isn’t intended to be comprehensive, it should remind you that all written materials and formal conversations with applicants and new hires must be conducted carefully.

Here’s a look at some the terms you must properly address in your contracts.

Written employment contracts should always address these key terms and conditions

  • All core duties and responsibilities of the employee. It’s often wise to also note when the employee’s performance will be evaluated. For example, after the first 30 to 60 days – and then at other stated intervals;
  • Pay rate. This should be carefully discussed while making the initial offer and then documented in the employment contract;
  • All employee benefits, such as healthcare and stock options, should be listed and at least briefly explained;
  • Work locations and hours. If rotating shifts are required or if you strictly forbid working from home – you should set forth all these relevant restrictions;
  • Clear information indicating how employee disciplinary actions will normally be handled;
  • Reimbursement of approved expenses. If you do not cover any major expenses, you must state this very clearly;
  • How employee terminations are handled under different circumstances. This is a good place to possibly offer some type of severance pay if provided with two weeks’ notice (or some other time period you may prefer). You can then state that no general severance packages will be offered to those who fail to provide advance notice of their departure;
  • Dispute resolution terms. If you and the employee later have a dispute regarding the employment terms set forth in the contract, state whether you require the use of a specific form of dispute resolution — before any litigation can be pursued;
  • A reasonable covenant not to compete when employees are leaving. You should also include some type of clear statement that the departing employee must not disclose any trade secrets to others upon leaving.
  • A confidentially agreement. All employees who have any access to any company trade secrets, proprietary information or information the company deems to be of a sensitive or confidential nature must sign a confidentiality agreement.

If any of these terms are especially important to your company, give serious thought to asking all employees to not only sign their employment contracts – but to also initial certain paragraphs – clearly indicating that they were asked if they had special concerns or questions about those topics.

Please get in touch with one of our Murray Lobb attorneys once you’re ready to draft any employment contracts for new employees. We are also available to help you modify any of these contracts when various employment conditions change.

7 Good Reasons for Starting a New Business in Houston

Although Hurricane Harvey took far too many lives and delivered devastating blows to Houston’s economy and infrastructure back in 2017, the city has since rebuilt much of what was lost and is once again helping many entrepreneurs start new companies.

Some outsiders unfamiliar with the Lone Star State’s “can-do” attitude are a bit surprised to hear this good news. After all, Hurricane Harvey flooded 165,000 homes in Harris County — and dumped more rain in the Houston area than any other storm in recorded U.S. history.

Yet despite the $80 billion or more in damages, Houston is busy thriving again. In fact, the city’s growing economy surely played a role in CNBC’s decision to name Texas the best state for business in 2018. The following list sets forth seven key advantages that are enticing various entrepreneurs to start their companies here.

Strong reasons why Houston is fully ready to help “grow” your new business

  1. The city is home to excellent business incubators and accelerators. They include the Houston Technology Center (HTC), once referred to by Forbes as one of “Ten Technology Incubators Changing the World.” In fact, Texas has ranked HTC as its largest technology business incubator and accelerator. Other incubators in the city include Station Houston and Fruition Technology Labs.

Back in 2015, our Texas Governor’s Office created a statewide list of business incubators that may also still prove helpful. Regardless of the type of product or service you’re trying to develop, you should be able to find an incubator in Houston that can help you creatively launch your business. Most of them offer unique resources – and can help you locate venture capitalists and others interested in investing in new companies.

  1. Based upon foreign tonnage, Houston remains the biggest port in the country. Back in 2016, the port handled 68% of all the Gulf Coast’s container traffic. You can ship your goods just about anywhere in the world from this port;
  1. Forbes’ 2018 list of best employers included eight (8) based in Houston. If you start a company here and regularly network with other corporate leaders, you may easily get the chance to learn how these other highly successful businesses are managing to provide the best working environments for their employees;
  1. There’s plenty of highly desirable office space available for businesses of every size. Furthermore, it’s often easy to find “co-working spaces” that can readily meet the needs of smaller companies with limited budgets;
  1. Houston remains a business-friendly city with leading companies representing a wide swath of industries. Depending on which business incubator or accelerator you choose to join, there’s a strong chance you’ll have the chance to network with leaders in the fields of energy, healthcare, aerospace, nanotechnology and information technology – just to name a few;
  1. The cost of living is reasonable – and there are no state taxes in Texas. Many Houston entrepreneurs choose to live in affordable suburbs such as Webster, Stafford, Katy, Deer Park and Brenham. Statistics indicate that many thriving new businesses are also run in those same areas;
  1. Houston has a well-developed and diverse transportation system. METRORail, busses, freeway systems and other options provide reasonable means for everyone to live and work in this large metropolitan city. With careful planning, you should be able to get to meetings across town without delay on most days;

If you have any questions about a business that you’d like to start, please contact one of our Murray Lobb attorneys. It’s been our privilege to provide general business and legal advice to entrepreneurs creating new companies for many years. When you get in touch, we can also help you decide which type of business structure will best serve your needs.

Brief Overview of Texas and Federal Whistleblower Laws

All employers must respectfully interact with employees who report alleged wrongdoings in the workplace. Often referred to as “whistleblowers,” these individuals are trying to correct illegal practices or behaviors they believe are harmful to many. Although some whistleblowers may have improper motives, you always ignore them at your own peril – especially since there are Texas and federal laws designed to protect them under certain circumstances.

The following information about whistleblower laws and related activities can help you better understand why an employer must obtain timely legal advice from a Houston business law attorney once any employee threatens to file this type of complaint.

The Texas Whistleblower Act

This statute is found in Sections 554.001 (and following) of the Texas Government Code. It only provides protection against employer retaliation for public employees – not private ones. The law expressly forbids public employers from suspending, terminating or otherwise imposing adverse personnel actions employees who report alleged legal violations by the employer or co-workers.

However, the complaining party – who must report the alleged wrongdoings to the appropriate law enforcement authority – must undergo (exhaust) all employer grievance or appeals processes before being allowed to sue the employer. Under the Texas statute, all whistleblower lawsuits must be filed within 90 days of the reported wrongdoing.

Damages may include obtaining a legal injunction against the employer – as well as receipt of all back pay owed if the employee was terminated (or demoted) in a retaliatory move. Successful whistleblowers (who meet all statutory requirements), are also entitled to receive full reinstatement, all fringe benefits owed, full seniority rights, actual damages, reasonable attorney fees, court costs and a set maximum of possible other compensatory damages.

Furthermore, a supervisor found to have violated the complaining employee’s rights under this Texas statute (Section 554.008) can be forced to pay up to a $15,000 civil fine.

While the burden of proof is on the whistleblower, the possible penalties can be formidable.

Federal laws often relied upon by various whistleblowers

  • The Sarbanes-Oxley Act (passed shortly after all the illegal Enron activities). It mainly addresses the penalties available in the wake of fraudulent accounting practices.
  • The Dodd-Frank Wall Street Reform and Consumer Protection Act.
  • OSHA violations. Many construction workers and other employees file “whistleblower” complaints based on these Occupational Safety and Health Administration statutes and regulations.
  • Various Department of Energy laws and statutes.
  • Environmental Protection Agency (EPA) laws and regulations.
  • Federal airline regulations.
  • The False Claims Act (as recently updated).
  • The Fraud Enforcement and Recovery Act of 2009.
  • Hazardous waste regulations.
  • The Patient Protection and Affordable Care Act — and other government statutes related to the provision and receipt of proper medical care.

While this list isn’t intended to be comprehensive, it provides a general overview of the types of statutes and regulations often referenced in many whistleblower complaints.

The following information reviews the most common types of illegal retaliation some employers take upon learning that a whistleblower complaint has been filed.

Forbidden, retaliatory actions taken by some employers

  • Job termination. Far too many employers look for “clever” ways to fire complaining employees once they learn a whistleblower complaint may be filed.
  • Demotion. An aggrieved employee may be called in and told that there have been long-standing complaints about his/her performance – requiring demotion to a lower position with considerably lower pay.
  • Thinly disguised harassment on the job.
  • Retaliatory discipline. This may include the placement of highly negative performance reviews in an employee’s file – making it much harder for the workers to receive any future promotions or favorable recommendations upon leaving the job.
  • Blacklisting. Some employers will “discreetly” contact their peers throughout the same industry, purposefully designating the specific, complaining employee in hopes of preventing that person from every landing another job in that same field.

Two high-profile whistleblower events help explain how such actions often unfold

One of the best ways to gain a stronger understanding of whistleblower activities is to read all you can about how former Enron employee Sherron Watkins reported her concerns about her employer. You may also want to learn more about all the late FBI agent W. Mark Felt (“Deep Throat”) did to expose President Richard Nixon’s illegal activities tied to the Watergate scandal.

As one Texas Monthly article puts it, the Enron scandal involved highly questionable financial practices that included the creation of financial entities to help Enron conceal the company’s growing debt from Wall Street, regulators and the general public. The book Power Failure provides an in-depth look at how all of Enron’s troubles began and how its illegal activities ruined the lives of so many.

Conclusion

Always make sure your company (or government office) provides all supervisory personnel with comprehensive training on the proper ways to respond once a whistleblower complaint has been filed (or is referenced by an employee). And remember that retaliatory acts must be avoided since they’re illegal and often very costly.

If you believe an employee is preparing to file a “whistleblower” complaint against you, please contact one of our Murray Lobb attorneys right away. We can explain your legal rights to you and help you take the proper steps to respond appropriately. Timely intervention can prevent critical misunderstandings and unnecessary litigation.

Why It’s Often Wise to Moniter Employee Computer Usage

While all employees benefit from believing that their companies trust them, they must still accept the modern workplace reality that certain privacy interests must be carefully weighed against protecting valid business interests. Furthermore, employers have a need and a duty to make sure that all employees are putting in their fair share of time while completing assignments. No one should be allowed to waste valuable work time surfing the Internet or responding to personal emails while others are shouldering their proper tasks.

Do many employers regularly monitor computer and Internet usage?

At present, about 80% of large companies carefully monitor how their employees use workplace computers. They also routinely review all company website and social media postings and randomly review email exchanges and software downloads. Internet usage is also closely monitored. These practices can often help businesses avoid future lawsuits and financial losses.

Once your company decides to begin monitoring practices, you really should talk with your Houston business law attorney about all the legal concerns that can develop.

Before addressing other key issues involved with monitoring your employees, it will be helpful to note how many companies provide notice to their workers that their computer usage and Internet activities will soon be regularly reviewed.

When and how do employers bring up computer and Internet monitoring to employees?

  • At the time of hiring. You can make this a condition of accepting employment;
  • When all periodic performance evaluations are conducted. At the end of these sessions, you can produce a carefully worded document, asking for the employee’s written consent for monitoring their computer usage and business communications. It may be helpful to note how this can help protect some of their own interests — and limit the harassment that some employees might otherwise engage in if no such monitoring existed;
  • Include several paragraphs on the topic in your employee handbook. Always be sure that you later ask each new employee if they have any questions about this policy;
  • Place a warning above the company’s computer network sign-in page. This warning might reference the employee handbook – or the written consent form you should have already obtained from each employee;
  • Include a very clear and obvious “Notice” paragraph at the bottom of each outgoing email. This is an attempt to provide notice to third parties (such as non-business contacts who may include workers’ friends and family members who write to them at work – that any or all such emails are subject to monitoring and review).

Your signed consent forms should remind employees (along with the company employee handbook) that certain types of improper communications and usage of the Internet can result in disciplinary actions – and even firing.

As the following information indicates, your careful review of how employees are using their computers can prevent many serious workplace conflicts.

Harmful activities pursued by some using company computers, email and the Internet

  • Harassing behaviors. Making illegal and damaging statements in emails may constitute sexual, racial – or other forms of harassment;
  • Likewise, some types of email (or typed letters) may contain defamatory comments or illegal threats against others. No employee has the right to make serious threats against other employees or outside email recipients. These negative communications may simply imply that a specific person may lose his or her job if certain improper demands aren’t met;
  • Critical company information (like trade secrets and intellectual property) may be stolen and then shared with others;
  • Employees may download and then share copyrighted material or software, allowing others to make additional copies. This can also include the illegal download of porn materials — that are then sent off to others – or stored on your business databases;
  • Workers may accidentally share harmful email and general computer viruses while using their computers in unauthorized ways;
  • Employees may spend lengthy time periods surfing the net — unrelated to legitimate work assignments. Many companies wind up paying significant amounts of money each year for time that employees spent playing online games or enjoying other unauthorized Internet activities;
  • Some workers may maliciously sabotage company files and data for no apparent purpose;
  • Other employees may use their work computers and printers to complete tasks for their separate, private business needs.

Do employers have broad rights to monitor all employee activities at work?

Federal, state and even global laws can limit these rights. Also, most employers do not have the right to invade employee privacy by placing intrusive cameras or audio devices in restrooms or lunchrooms. However, they do have some specific rights to monitor how employees use equipment provided to them. And under certain circumstances, companies can even monitor how employees use their own personal computers while logged on to company networks and databases.

In general, any efforts you make to monitor employee communications must agree with the provisions of the federal Electronic Communications Privacy Act (ECPA). Fortunately, it does allow certain types of monitoring that fall within an acceptable “business purpose exception.” In other words, your monitoring efforts must have a direct tie to protecting a “legitimate business purpose.”

As already noted above, it’s crucial to discuss all these matters with your attorney to be sure your approach to computer monitoring will not subject your company to any employee or third-party privacy lawsuits.

What global, federal and Texas laws address all these various legal topics?

Keep in mind that companies regularly interacting with international clients or companies must be prepared to observe all the following types of governing laws.

  • The European Union General Data Protection Regulation (GDPR) – and the laws passed by many of its members’ individual states;
  • The Electronic Communications Privacy Act (ECPA)
  • The Stored Communications Act
  • Various federal wiretapping laws
  • Texas statutes and case law that your lawyer can review with you

Some general guidance is also available on the Texas Workforce Commission website.

Conclusion

Companies of every size must give all these issues considerable thought before buying any types of computer monitoring software. You’ll also need to decide which DLP (data loss prevention) solutions or strategies are most likely to meet your company’s unique needs. For example, do you want to prioritize software that helps with network traffic monitoring, keystroke logging, natural language processing – or other methods? You’ll also need to consider what types of data encryption practices may be useful to you.

Fortunately, there are many outside consultants who can help you carefully evaluate all the current computer monitoring software that’s available – so you can find the best products that fall within an affordable price range for your company.

Please feel free to contact one of our Murray Lobb attorneys so we can address your current questions about monitoring your employees’ business communications and usage of the Internet. We can also help you draft the types of privacy consent forms and other paperwork that can help you more proactively safeguard your company’s business interests.

Small Businesses Often Make Crucial Legal Mistakes

Even highly competent employees sometimes make serious legal errors while handling human resource, management, accounting and other business tasks. Since federal, state and local laws are constantly being updated, you must regularly speak with numerous employees to be sure they’re making timely and lawful decisions.

Should the feedback you receive concern you, it’s always best to consult with your Houston business law attorney to be sure you know how to promptly correct any possible errors. Lawsuits are often filed over very basic legal mistakes.

What are some of the most common legal errors that businesses keep making?

Most mistakes are made when employers try to be flexible with their rules. While compassion can go a long way toward helping you get along better with your employees, clarity and consistency are crucial. Always exercise caution when addressing the following issues.

  1. Each employee must be properly classified. You need to look at each position separately, based on all pertinent state and federal laws. If you simply decide to treat everyone as an “exempt” employee, you might be sued if you fail to provide proper overtime pay or adequate rest periods.
  2. Lunch breaks must be provided when required by law. Some employees may be entitled to a meal break after completing a specific number of hours during a shift.
  3. Make sure you’re properly labeling workers as either employees or independent contractors. You may hear from the IRS if you make this type of mistake. Take the time to speak with your lawyer about how you should carefully interact and communicate with independent contractors. Once a worker has strong legal grounds for believing that “employee” status has been conferred, you can be sued for specific benefits.
  4. You must be sure all employees understand what constitutes “sexual harassment.” If you’re sued in this field, one of your strongest defenses will be that you promptly trained all new managers and employees to help create a healthy work atmosphere. You must also develop a secure way for employees to submit complaints before problems escalate.
  5. You cannot punish or fire an employee for simply taking a leave of absence under the Family Medical Leave Act (FMLA). To protect yourself, keep accurate records of all employee evaluations being conducted at routine intervals. If you’re particularly concerned about the behavior of someone taking FMLA leave, ask your attorney when you should sit down with that employee to discuss why you’re carefully monitoring their work performance – before letting them go.
  6. Be sure to issue final paychecks on a timely basis to all employees who are leaving. Find out if you’re required to provide this type of check even before an employee has returned all employer-provided equipment, vehicles or other materials.
  7. You must handle making loans to employees in a very careful manner. While this is often a kind gesture, you must set up a formal repayment schedule. Never simply deduct a portion of what’s owed from each future paycheck.
  8. Be sure to properly handle all employer obligations under the Americans with Disability Act (ADA). You may need to make appropriate work accommodations and should always treat such workers fairly. Most disabled workers take great pride in being highly dependable and productive workers.
  9. COBRA healthcare coverage must be offered and administered properly. Give serious thought to creating a comprehensive package of this medical insurance paperwork so that it’s immediately ready to be given to qualified employees when they leave. Timing is critical so potential coverage won’t lapse.
  10. The Health Insurance Portability and Accountability Act (HIPAA) must be explained and handled appropriately. Employees have a right to privacy regarding their medical data and information – be sure you’re adequately protecting it while processing claims.
  11. Pension concerns must be addressed in a timely and proper manner. The Employee Retirement Income Security Act (ERISA) is a complicated law that requires extreme attention to detail. Always request legal advice when uncertain how to administer it.
  12. You must carefully handle all responsibilities under the Consumer Credit Protection Act (CCPA). You may need expert help calculating all your employees’ paycheck deductions for lawful wage garnishments – including those for child support and student loans. Look for highly respected software that may help your most experienced workers.
  13. Equal Pay Act. This law must be carefully followed since too many businesses keep failing to pay men and women fairly when handling similar work.
  14. Title VII concerns. Your company must avoid discriminatory practices when hiring, laying off and firing employees. Many businesses are learning to use multiple interviewers with highly diverse backgrounds so that fairness can be readily achieved.
  15. OSHA laws. You must make sure to keep adequate records covering all workplace accidents and injuries for an appropriate number of years — if you employ ten or more workers.

Should you have any questions about these topics, please contact your Murray Lobb lawyer to discuss your concerns. We have extensive experience providing legal advice to our clients so they can can readily comply with all federal, state and local laws.

Purchasing a Texas Franchise or Company Already in Business

Since only about twenty percent (20%) of new businesses survive past their first year, many savvy entrepreneurs prefer to buy a company or franchise that’s already up and running. That often proves wise – if the purchaser is willing to complete all the necessary research to make sure the current signs of financial success aren’t threatened by factors that no one is willing to disclose.

To make sure you handle all crucial due diligence inquiries properly, consider asking your experienced Houston business lawyers for the help and insights they can readily offer as you explore all the possible investment risks.

Once you’ve carefully answered the following questions — and analyzed the various concerns mentioned — you should be better prepared to decide whether to purchase a specific business or franchise.

Important business questions to answer – and key concerns to evaluate

  1. Is the product or service a good match for your interests and experience? People are often most successful when they feel passionate about the business they’re running. Should you be entering a field that’s unfamiliar to you, be prepared to hire different consultants as needed. Of course, if you’re buying into a franchise, the corporate headquarters will usually offer valuable training and products to help you;
  2. Why is the business for sale now? Is the current owner truly planning to retire or move closer to family across the country? Ask the current owner very direct questions. If you’re trying to buy a franchise, you’ll need to obtain a copy of the Franchise Disclosure Document. (This was formerly known as the Uniform Franchise Offering Circular or UFOC). It will fully inform you about a franchise’s financial, legal and personnel history;
  3. What business location is best for you? Be sure to ask the current owner to provide you with a breakdown of the business’ most regular customers. Are they residents of nearby neighborhoods — or simply commuters who work in the area? What types of seasonal downturns, if any, should you expect in business profits? Be ready to purchase zip code-based demographic reports that can provide you with information about your current customer base. There are also different types of geographic-information-system software programs that can help you evaluate consumer trends tied to local neighborhoods and the most recent census. (Always be sure your business location can offer adequate parking);
  4. Do you have adequate financial knowledge and good funding sources for your purchase? Be sure to have your Houston attorney review all the general business or franchise contracts tendered to you. Only work with a trustworthy financial consultant who can help you review each company’s current operating expenses. Also, obtain the help of a qualified lender you’ve dealt with in the past – or someone who comes highly recommended by business contacts you’ve known for years;
  5. Determine if you’re personally willing to take a “hands-on” approach to running the franchise or business. Be prepared to pay good wages to any managers you must hire. Good ones can “make or break” a successful franchise – or any other type of business. Be sure to tell any impressive managers and employees you meet that you may keep many current staff members on in the future – once you’ve reviewed all employee files;
  6. Be sure to personally observe the current quality of customer service. Ask about the specific training that helped produce the successful parts of it. Be prepared to provide an employee orientation and training program that honestly promises good wages and job benefits so employees will know how important they are to you;
  7. Network with similar local business owners and managers in the area. If necessary, consider taking one or more of them to lunch or dinner so you can pose insightful questions about their most difficult daily challenges doing business in the area;
  8. Find out what types of marketing plans are currently in place and if you can expect any corporate support in this regard. If you aren’t buying a franchise, contact the nearest small business administration (SBA) office to see what types of marketing and business planning programs they can offer to you;
  9. Plan on developing some type of regular community “presence” that can benefit everyone. This may take the form of financially sponsoring one or two local children’s sports teams. When you pay for the equipment and help secure uniforms – often emblazoned with your company name or logo — everyone will likely benefit;
  10. After you’ve completed all due diligence inquiries, visit pertinent local government offices. Check to see what types of new building permits have been issued – and find out if any new zoning changes will soon be enforced that could negatively affect the business you’re hoping to purchase.

Finally, read all you can about what has helped so many successful businesses and franchises remain profitable over recent decades. The more you learn about each of these companies, the more likely you’ll be to succeed in running your own franchise or new company.

At Murray Lobb, we’re always ready to help clients who may soon buy an operating business or franchise. We can guide you through all the detailed due diligence inquiries – and draft all the contracts and other documents you’ll need.