Legal Updates

Reminder From Texas That Oral Employment Agreements Can Be Enforced

A recent case from Texas serves as a good reminder that promises made in the workplace can be enforced under certain circumstances, even if they are not in writing. The Texas Court of Appeals was not persuaded by an employer’s argument that an agreement to continue providing sales commissions to its employee even after his employment ended was unenforceable simply because it was an oral agreement. The court explained that the agreement constituted an enforceable oral employment agreement of indefinite duration. Because the agreement could potentially be fully performed by the parties in less than a year, the agreement was not rendered void under the Statute of Frauds, which normally requires certain contracts to be in writing. See Kalmus v. Ella Oliver and Financial Necessities Network, Inc., No. 05-11-00486-CV (Tex App., November 20, 2012). Oral employment agreements can be enforceable in most states. In Georgia, for example, employees have successfully enforced such oral employment agreements to obtain, among other things, the right to participate in a profit sharing plan (see Wood v. Dan P. Holl & Co., 169 Ga. App. 839 (1984)) and the right to receive three months’ notice before termination (see Parker v. Crider Poultry, Inc., 275 Ga. 361 (2002)).

Employer Wellness Program Did Not Violate ADA

A decision by the U.S. Court of Appeals for the Eleventh Circuit may encourage employers to offset rising healthcare costs through the use of wellness programs and the implementation of fines for nonparticipation in such programs. According to the Eleventh Circuit, under certain circumstances the medical examinations and inquiries connected with wellness programs do not violate The Americans with Disabilities Act’s prohibition on “required” medical examinations and disability-related inquiries, even when employers charge fees for nonparticipation in such programs. Wellness programs can fall within the ADA’s “safe harbor” provision, which exempts certain insurance plans from the ADA’s general prohibitions, as was successfully argued by Broward County, Florida, in defense of a class action filed by one of its former employees after the County instituted a $20 bi-weekly nonparticipation fee. See Seff v. Broward County, Florida, No. 11-12217 (11th Cir., Aug. 20, 2012).

The former employee argued that the County’s wellness program did not qualify as a term of a “bona fide benefit plan” under the ADA, and therefore did not fall within the safe harbor provision, because the wellness program was not explicitly identified in the group health plan. The Eleventh Circuit rejected that argument, finding that the wellness program was a term of the group health plan because it was (1) part of the County’s contract with the insurer; (2) only available to group plan enrollees; and (3) presented as part of the group health plan in at least two employee handouts.

It is important to note that, while the County charged a fee for nonparticipation in its program, participation in the wellness program was not ultimately a condition for enrollment in the group health plan. Moreover, the insurer, not the County, utilized and had access to the information gathered from the examinations and inquiries. While pursuing a plan like the one utilized by Broward County may be attractive, obtain legal advice before instituting such a plan, especially if your business considers implementing the type of paycheck deductions used by Broward County, which tend to provoke litigation.

Court of Appeals Emphasizes Duty of Employer in Harassment Case

The Seventh Circuit Court of Appeals recently affirmed a finding of liability and reinstated a punitive damages award against an automobile manufacturer based on a jury’s reasonable conclusion that the employer did not promptly or adequately respond to an employee’s complaints of harassment. Although the employee was unable to identify who had left harassing and threatening notes in his toolbox and work area and vandalized his vehicles, the jury found that the employer could have done more to investigate and address the allegations. See May v. Chrysler Group, LLC, Nos. 11-3000 & 11-3109 (7th Cir., August 23, 2012). This decision highlights the need for every employer to take prompt and appropriate actions in response to employee complaints of harassment. Even in the face of egregious harassment by an employee, the employer can avoid liability by implementing reasonable policies and practices (including anti-harassment training) and by promptly investigating and taking reasonable steps to stop harassing conduct.

Georgia Non-Compete Law Effective May 11, 2011

The Eleventh Circuit Court of Appeals has ruled that Georgia’s new covenant laws (O.C.G.A. § 13-8-51 et seq.) greatly enhancing the enforceability of employment-related restrictive covenants in Georgia do not apply to contracts entered into prior to May 11, 2011. While the ultimate authority on this question of Georgia law is the Supreme Court of Georgia, which has not ruled on this issue, for now the ruling by the Eleventh Circuit in Becham v. Crosslink Orthopaedics (June 4, 2012) should be considered definitive: covenant agreements entered into prior to May 11, 2011, will remain governed by Georgia’s traditional common law, hostile to enforceability. For covenant agreements entered into on or after May 11, 2011, Georgia’s new laws providing for greater enforceability of restrictive covenants will govern.

EEOC Issues Guidance on Criminal Records

The Equal Employment Opportunity Commission recently issued new “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964.” The Guidance addresses the use of criminal records by employers when making hiring or other employment decisions. As general rule, Title VII does not prohibit employers from seeking criminal history information from applicants and employees, so long as the use of such information does not result in unlawful disparate treatment or disparate impact on the basis of race, national origin, or other classification protected by Title VII. The new Guidance consolidates prior guidelines on these topics and incorporates various federal court decisions published in the past two decades. EEOC provides examples of policies and practices relating to the use of criminal histories that will consistently support a defense that the practice is “job-related and consistent with business necessity.” The EEOC also suggests certain “best practices” to avoid liability, such as developing a “narrowly tailored” written policy for screening applicants based on criminal conduct, limiting inquiries about criminal records to those that would be job-related for the position, and maintaining the confidentiality of criminal records.

The Five Most Important Things Your Business Needs to Know Now About Georgia’s New Restrictive Covenant Law

Georgia’s new restrictive covenant law will become effective on November 3, 2010, if, as expected, Georgia voters ratify a proposed constitutional amendment on this year’s ballot. Here are five things your business needs to know right now:

1. Georgia’s new covenant law is likely to become effective immediately on November 3, 2010 – but will only apply to new contracts entered on or after that date.  The stage is set for Georgia voters on November 2 to approve an amendment to the Georgia Constitution that will dramatically change the landscape of employment restrictive covenants in Georgia.  If the amendment is approved, as expected, the new law will take effect immediately – but only prospectively.  Contracts dated prior to November 3 will continue to be evaluated (stricken or upheld) according to the traditional strict scrutiny analysis.  Only new contracts entered into on or after November 3 will be governed by the dramatically different new law.
2. Non-compete covenants are back!  Under the new law, non-competition covenants will reemerge as viable means for Georgia employers to protect their investments in human capital.  This means that qualifying employees can be prohibited from competing for up to two (2) years in a specified geographic territory.  Under the new law, the covenant need not precisely define the geographic scope as long as the maximum geographic scope can be reasonably determined at the time of termination.  Thus, it will be essential to specify the maximum geographic scope to a departing employee upon separation.
3. Customer non-solicitation covenants remain a good option, and are now even better.  Employers will be even better positioned to prohibit former employees from soliciting clients on behalf of a new employer.  While historically non-solicitation covenants have been a good option for Georgia employers, the new law permits non-solicitation covenants to be more broad, and more enforceable, than ever.
4. “Blue penciling” is now permitted, but is not mandatory.  Perhaps the most significant reversal from current law is that a court may now salvage an otherwise unenforceable covenant by modifying, or “blue penciling,” the invalid portions and enforcing the remainder.  This provision, however, is not mandatory — a court is not required to modify a covenant that is unreasonably overbroad, or if it appears that the employer was overreaching.  At this point, it is difficult to predict how often and under what circumstances Georgia courts will employ or reject the new “blue pencil” option.  Accordingly, even though the new law will allow more aggressive covenants, it is still important to draft reasonable covenants within the boundaries of the new law.
5. Your company’s “confidential information” can now be protected indefinitely, as long as it qualifies as “confidential information.”  For years, Georgia law has permitted employers to protect “confidential information” (i.e., proprietary information falling short of formal “trade secret” status) for only a limited period of time – usually about two years after separation from employment.  Now, employers can protect their “confidential information” and “trade secrets” for as long as the information remains sensitive and confidential.

Georgia’s new covenant law is complex and, because it is brand new, untested in the courts.  These headlines offer a summary of certain key aspects of the anticipated new law.  Please understand, however, that these headlines are merely summaries.  Restrictions and qualifications abound, so consult your attorney before undertaking to revise or draft contracts under the new law.

If you have any questions about this Employment Law Headline, or about any legal matter relating to your company’s workplace, please contact any member of our firm.