Five Provisions All Executives Should Have In Their Employment Agreements

It is often assumed that executives have more job security than most employees. But, executives know that is not necessarily so. Executives lose their jobs because of mergers, acquisitions, shifting political winds in the C-Suite, falling share prices, and a host of other reasons, both compelling and capricious. Given this uncertainty, executives should protect themselves by ensuring that their employment agreements contain the following five provisions.

1. A Narrow Definition Of “Cause” For Termination

Employment agreements typically provide severance payments to terminated executives, so long as they are not terminated for “cause.” Accordingly, the employment agreement should contain a narrow – not a broad – definition of “cause.” An example of a narrow definition of “cause” is: “conviction of a felony, embezzlement, theft, or gross misconduct connected with work.”

2. A “Notice And Cure” Provision

A “notice and cure” provision requires the employer to provide written notice of its grounds for termination to the executive, and then allow the executive a period of time (often 30 days) to cure the problem. Often, employers do not want to take the time to comply with a “notice and cure” clause. In those situations, having such a clause frequently results in the employer offering the executive enhances severance to “agree” to resign and release any claims they may have against the company, including the company’s non-compliance with the “notice and cure” provision.

3. A Clause Allowing For Resignation – With Severance – For “Good Reason”

Employment agreements usually do not contain provisions that allow an executive to resign, and still be entitled to severance pay. A “good reason” clause provides for that to occur, so long as the executive resigns for “good reason.” Typically, “good reason” is defined to cover situations where the executive is not given sufficient resources to perform their duties, their duties or pay are reduced, or they are required to relocate.

4. A Pro-Executive Fee Shifting Provision

Executives should seek to include a provision in their agreements providing that, if the executive sues the company based on an alleged breach of the employment agreement, the company must pay their attorneys’ fees on a month-to-month basis, whether they win or lose the lawsuit. So long as the provision is crystal clear about this, a court will enforce it. Given the attorneys’ fees that litigation tends to generate, this type of provision can give the executive substantial leverage in any legal dispute with the company.

5. A Clear And Broad Change Of Control Provision

A change of control provision provides that, in the event of certain triggering events, including a change of the company’s ownership, the executive is entitled to specified payments and benefits. Vague and ambiguous change of control agreements often result in litigation over whether such a change has occurred, and it is not unusual for executives to lose such lawsuits. To avoid this fate, executives should insist on change of control provisions that are clear and easy to understand and apply. In addition, change in control provisions vary widely – some provide payments and benefits only if the executive’s employer is purchased and the executive is terminated as a result, whereas others are triggered merely by a sufficient change in ownership, or such a change, coupled with a material change in the executive’s duties. Executives should seek as broad a change of control provision as possible.

Bonus Tip: A Short And Narrow Non-compete Agreement

Executives are often required to sign non-compete agreements to either be hired, or to obtain stock options or restricted stock. Texas law has changed, so that now most non-competition agreements are enforceable. And, a court is especially inclined to enforce a non-competition agreement against a well paid executive. But, there is still opportunities for executives to negotiate short non-competition agreements – we have seen some as short as six months – that are narrow in scope, so that if they leave the company, they can be reemployed in the industry quickly.

Posted in At Will Employment, Houston Employment Law, Houston Executive Lawyer | Leave a comment

Fifth Circuit Reminds Plaintiffs That Not Every Unpleasant Experience At Work Is Something They Can Sue Over Under Title VII’s Anti-Discrimination Provision

In Stroy v. Gibson, 896 F.3d 693 (5th Cir. 2018), opinion here, the plaintiff, Stroy, was an African-American doctor for the VA. Dr. Stroy believed that the VA implemented a peer review of his patient care decisions because of his race, so he filed suit against the VA under Title VII of the Civil Rights Act of 1964, which prohibits, among other things, race discrimination in employment. The VA moved to have Dr. Stroy’s case thrown out on summary judgment, and the district court granted the motion. Dr. Stroy then filed an appeal to the U.S. Court of Appeals for the Fifth Circuit in New Orleans, Louisiana. The Court of Appeals affirmed the district court decision. It noted that only “adverse employment actions” may be grounds to sue under Title VII. “Adverse employment actions” are “ultimate employment decisions . . . such as hiring, firing, demoting, promoting, granting leave, and compensating.” Under this standard, the VA’s implementation of a peer review was not an “adverse employment action,” as it did not adversely affect Dr. Story’s job responsibilities, pay, or privileges. As such, Dr. Stroy could not sue for discrimination under Title VII based on the VA’s decision to implement a peer review of his patient care decisions.

This cases illustrates the point that while employees may experience a wide array of annoying, irritating, and upsetting things in the workplace, only employer-initiated “adverse employment actions” may be grounds for a discrimination claim under Title VII.

Posted in At Will Employment, Discrimination, EEOC, Houston Employment Law, Houston Executive Lawyer, Houston Retaliation Law, Human Resources | Leave a comment

Fifth Circuit Holds That A Supervisor’s Gender Related Comments Are Not “Direct Evidence” Of Gender Discrimination In Pay

In Herster v. Board of Supervisors of Louisiana State Univ., 887 F.3d 177 (5th Cir. 2018), opinion here, the plaintiff, Herster was a female part-time instructor at LSU. LSU had hired her husband at its law school, and then found her a job as a part time instructor in its art school. Herster later complained that she was paid less than male instructors because of her gender. She complained to her supervisor, who allegedly said, “I thought you were a trailing spouse. I thought you were going to have children and be happy, like Jackie Parker.” The supervisor also allegedly called Herster a “princes,” and repeatedly told he she should just have babies and be happy.

Herster sued, claiming that her supervisor’s alleged comments constituted “direct evidence” of gender discrimination in her pay. The trial court threw that claim out on summary judgment. Herster filed an appeal, and the U.S. Court of Appeals for the Fifth Circuit in New Orleans, Louisiana affirmed the trial court’s ruling. The Fifth Circuit recited the rule that direct evidence is evidence that proves discrimination on its face. The court found that the supervisor’s alleged comments did not meet this requirement, because they required an “inferential leap . . . to prove that Herster was paid less because of her gender.” As such, the alleged comments did not constitute “direct evidence” of gender discrimination. The court also found that Herster’s proof did not circumstantially show gender discrimination in her pay. Thus, the court affirmed the district court’s decision to throw out Herster’s pay discrimination claim on summary judgment.

This case demonstrates that it often takes far more to win a discrimination case than a handful of inappropriate comments by a supervisor.

Posted in At Will Employment, Discrimination, Houston Employment Law, Houston Executive Lawyer, Houston Retaliation Law, Retaliation, Whistleblower | Leave a comment

Fifth Circuit Finds Employee’s FMLA Retaliation Claim Doomed By Proof That Employer Fired The Employee Based On A Good Faith Belief She Had Been Dishonest About Being Unable To Work Due To Illness

In DeVoss v. Southwest Airlines Co., 903 F.3d 487 (5th Cir. 2018), attached here, DeVoss, an airline flight attendant called in late to work and invoked a commuter policy to justify her tardiness. After she was told that the commuter policy did not apply, and that she would be assessed attendance points for being late, DeVoss stated that she was sick, and missed three days of work. Southwest investigated (including by reviewing the recording of the at-issue call), concluded that DeVoss had lied about being sick, and fired her. DeVoss sued, claiming that the real reason she was fired was because she had allegedly taken FMLA protected leave a month before she had been terminated. The district court threw DeVoss’s case out on summary judgment. DeVoss filed an appeal to the U.S. Court of Appeals for the Fifth Circuit, in New Orleans, Louisiana.

The Fifth Circuit affirmed the district court’s ruling. The court observed that what mattered is not whether DeVoss had actually been dishonest or not, but whether Southwest believed in good faith that she had been dishonest, and terminated her employment based on that belief. In reviewing the evidence, and time line of events, the court found that there was no evidence to suggest that Southwest did not truly believe that DeVoss had lied about being sick, and that it had fired her based on that good faith belief. As such, whether or not DeVoss had actually been dishonest, the district court was correct to grant summary judgment in Southwest’s favor.

This case demonstrates that in FMLA retaliation cases, and many other types of cases, when an employer takes an adverse employment action based on a truly honest, good-faith belief that an employee has committed a terminable offense, a claim of retaliation or discrimination will not be successful.

Posted in At Will Employment, FMLA, Houston Employment Law, Houston Executive Lawyer, Houston Retaliation Law, Retaliation, Uncategorized | Leave a comment

New Fifth Circuit Disability Harassment Case Again Emphasizes The Importance Of Complying With An Employer’s Complaint Policies And Procedures

In Patton v. Jacobs Eng’g Group, Inc., ____F.3d ____, No. 16-30879, 2017 WL 4784586 (5th Cir. Oct. 24, 2017) the Fifth Circuit again emphasized the importance of employer complaint policies and procedures, and demonstrated the impact they can have on the outcome of a harassment case when the plaintiff fails to comply with them.

Patton had childhood onset fluency disorder, which caused him to stutter and have anxiety. Coworkers and even his supervisor relentlessly mocked him over his stuttering – calling him names and imitating him in insulting ways. Noise made his condition worse. His workplace was noisy, and he asked to be moved to a less noisy area, which he said would reduce his stuttering and anxiety. The Company did nothing, and the resulting stress from the harassment and the noise caused Patton to have a panic attack while driving, resulting in a car wreck that he never returned to work from. Instead, Patton sued Jacobs for harassing him because of disability. The district court dismissed his case on summary judgment, and the Fifth Circuit affirmed.

Many harassment cases are thrown out because the alleged harassment is not severe or pervasive – meaning it is not bad enough to be illegal. But, here, the Court found that the alleged harassment Patton suffered was severe or pervasive – meaning it was bad enough to actually be illegal. But, the Court agreed the claim was properly dismissed anyway because the district court determined that Patton failed to show that Jacobs did not take prompt, remedial action addressing the harassment, in that he unreasonably failed to follow Jacobs’ handbook’s instruction to report any such harassment to the Human Resources Department. Patton did not challenge the district court’s determination on that point on appeal, and thus he “forfeited his objection to this determination.” Thus, Patton’s case was thrown out and he obtained no recovery at all.

This case teaches that, while there are some narrow exceptions, in most circumstances, if the employee fails to follow their employer’s complaint policies and procedures for reporting harassment, they will be unsuccessful suing for harassment in court, even if they really did suffer severe or pervasive harassment.

Posted in ADA, At Will Employment, Houston Employment Law, Houston Retaliation Law | Leave a comment

“Bring Your Child To Work Day” Debacle Results In Employees Suing – And Winning – For Retaliation

In E.E.O.C. v. EmCare, Inc., 857 F.3d 678 (5th Cir. 2017), the Fifth Circuit affirmed a jury verdict finding that an employer had illgally retaliated against its employee for complaining about sexual harassment.

McKinney, a CEO of an EmCare division, repeatedly sexually harassed women at work. Trahan (a male) and others complained to EmCare about it, but nothing was done. On “Bring Your Child to Work Day,” McKinney told an employee that ”there is no way [her daughter] is 15 with breasts like that.” The employee and two others, including Trahan, complained. Six weeks later all three of the employees who complained were fired. The EEOC sued, and all three prevailed at trial. EmCare appealed only as to Trahan, claiming that the decisionmaker who allegedly decided to fire him, the divisional COO, had no knowledge of any of Trahan’s complaints about McKinney, so he could not have fired Trahan because of his complaints.

The Fifth Circuit affirmed the judgment. It noted that McKinney and the divisional COO were executives in the same division; there was evidence McKinney knew about Trahan’s complaints; and evidence that McKinney discussed Trahan’s performance and termination with the divisional COO. The Fifth Circuit found that from all this evidence, a reasonable jury could have logically inferred that McKinney told the divisional COO about Trahan’s complaints.

Alternatively, there was substantial evidence that EmCare’s HR VP knew about Trahan’s complaints, and that she orchestrated and participated in the decision to fire him. Thus, even if the divisional COO did not know about Trahan’s complaints, there was sufficient evidence that the HR VP did, and that she was also a decisionmaker, which would independently be enough to hold EmCare liable.

This case illustrates the reality that where employers fire employees very shortly after they make legitimate complaints of sexual harassment, lawsuits for retaliation often follow. And, unless the employer can clearly and convincingly demonstrate that it had a solid, non-retaliatory reason for firing the employee, or that the decisionmaker absolutely did not know about his or her complaints, juries often find that retaliation occurred. The case also teaches that when the facts are as bad as they were here, the court of appeals may also understandably take a dim view of the employer’s appeal from a losing jury verdict.

Posted in At Will Employment, EEOC, Harassment, Houston Employment Law, Houston Retaliation Law | Leave a comment

Fifth Circuit Decision Shows That Just Because The EEOC Found In The Plaintiff’s Favor Does Not Mean That The Plaintiff Has A Winning Case In Court

In Alkhawaldeh v. Dow Chem. Co., 851 F.3d 422 (5th Cir. 2017), the Fifth Circuit affirmed a summary judgment ruling against the plaintiff in a retaliation case, despite the fact that the EEOC had previously found that the employer had retaliated against him.

In October 2009, Alkhawaldeh, a Muslim employee of Dow Chemical Company, was given a 1 rating (out of 5) and placed on a PIP. In November 2009, he reported alleged anti-Arab discrimination to HR. In April 2010, he filed an EEOC Charge. In July 2010, he was transferred to a new supervisor. On October 30, 2010, he was fired for alleged poor performance, insubordination, and general incompetence. He sued for retaliation under Title VII. He relied in part on the fact that the EEOC had issued a Letter of Determination (“LOD”) that Dow had retaliated against him.

The district court granted summary judgment for Dow, and the Fifth Circuit affirmed. It found that, unlike an EEOC investigative report, which a district court must consider, an EEOC LOD could be “freely ignored.”

It also concluded that the pre-November 2009 poor rating and PIP substantially undercut Alkhawaldeh’s retaliation claim. In addition, the court found it compelling that Alkhawaldeh’s performance was viewed as poor by two separate supervisors and a committee Dow convened to evaluate his performance. Finally, the Court emphasized the “high burden” of the “but for” causation standard in Title VII retaliation cases, and found that Alkhawaldeh had not met it.

This case demonstrates that just because the EEOC issues a favorable LOD to the employee, does not mean the employee’s claims will hold up in court.

Posted in At Will Employment, EEOC, Houston Retaliation Law, Whistleblower | Leave a comment

Court Holds That Once An Employer Acts With An Illegal, Retaliatory Motive Against An Employee, The Employee’s Mildly Inappropriate Response Is Not Sufficient To Remove The Taint Of Illegal Retaliation

In Fisher v. Lufkin Industries, __ F.3d __, No. 15-40428, 2017 WL 562444 (5th Cir., Feb. 10, 2017), the African-American plaintiff, Fisher, complained to Lufkin’s VP of HR that his supervisor referred to him as “boy,” which he regarded as racist. HR investigated, and determined that the supervisor used the word “boy,” but not in a racist way. About a month later, a white coworker of Fisher’s went to management and told them that he did not like the fact that Fisher had reported his supervisor for using the word “boy.” The coworker claimed Fisher sold pornographic DVDs from his lunch box at work, and offered to orchestrate a sting operation to prove it. The company agreed, and Fisher was indeed caught selling pornographic DVDs at work. After he was caught, Fisher did not allow the company to search his car, claiming that he had to leave immediately because his wife called him and told him she was ill and needed him. A week later he was fired for an alleged “serious violation of company policies.”

Fisher sued for retaliation under Title VII. The district court held a bench trial. The trial judge found that Lufkin had retaliated against Fisher for his complaint about his supervisor using the word “boy,” but that Fisher’s own misconduct in refusing to cooperate with the company in its investigation, and lying about his wife being ill, broke the causal chain, and, therefore, his termination was lawful. Fisher appealed.

On February 10, 2017, the U.S. Court of Appeals for the Fifth Circuit reversed the district court. The Fifth Circuit agreed with the district court that the evidence demonstrated that the company sought to entrap Fisher in retaliation for his protected activity (complaining about his supervisor’s use of the word boy). The Fifth Circuit also agreed with the district court that selling pornography at work to other employees who wanted to buy it was not a terminable offense at Lufkin, and actually did not appear to even be a violation of any company policy. As such, the court agreed with the district court that Lufkin had targeted Fisher for termination because of his protected activity — which is classic illegal retaliation.

The court disagreed with the district court’s finding that Fisher’s own misconduct in refusing to cooperate with the company in its investigation, and lying, broke the causal chain, and, therefore, his termination was lawful. The court found that finding simply “implausible” given the record evidence. Furthermore, the court observed that, “to shield employers from liability for adverse actions taken in response to such resistance would be to incentivize supervisors motivated by retaliatory animus to initiate groundless investigations with the purpose of causing the targeted employees to resist them, thereby leading to the employer’s adverse actions. We decline to provide such an incentive.” Id. at *5 n.8.

Over the years, retaliation claims have generally fared better with the U.S. Supreme Court and the Fifth Circuit than other types of employment claims. This case is yet another example. While it is a very fact-specific case, it does indicate that once an employer is shown to have acted with retaliatory animus, the plaintiff has significant leeway before a court will conclude that something he or she did removes the retaliatory taint and exonerates the employer from liability.

Posted in Discrimination, Houston Employment Law, Houston Retaliation Law, Retaliation | Leave a comment

Fifth Circuit Holds That Employee’s Failure to Provide Doctor’s Note Confirming Reason for Absence Dooms His Claims Under The Americans with Disabilities Act

Mark Oberti writes:

Sometimes, employees ask for time off from work because of medical issues. In those situations, the Americans with Disabilities Act (“ADA”) may protect them from being terminated because of the time they take off from work. However, if an employer asks for medical proof to substantiate the need for time off, and the employee does not provide it, then there is a very good chance the ADA will not protect the employee if they are terminated for taking the time off from work. This was the situation in the recent case of Delaval v. PTech Drilling Tubulars, LLC, __ F.3d __, No. 15-20471, 2016 WL 3031069 (5th Cir. May 26, 2016).

Danny Delaval was given permission to take time off work from his job at PTech to get some medical testing. After he completed the testing, he sent his employer and e-mail to know he was “cancer free,” but had been diagnosed with kidney stones and an enlarged spleen. Delaval said he would be back to work soon. The owner of his employer told him to follow his doctor’s orders and keep them informed. A week later, Delaval returned to work. His employer asked him for medical documentation to demonstrate that he had been undergoing medical testing or treatment while he was out. Delaval did not provide any. At that point, he was fired for allegedly “failing to show up at work for more than three consecutive days without notifying a supervisor.” Delaval sued for failure to accommodate and disability discrimination under the ADA. The district court dismissed his claims on summary judgment, and Delaval appealed to the U.S. Court of Appeals for the Fifth Circuit. The Fifth Circuit affirmed the district court’s decision.

As to Delaval’s failure to accommodate claim under the ADA, the Court found that Delaval’s request for time off for medical testing, and then treatment, was a request for a reasonable accommodation under the ADA. However, the Court observed that the law permits employers to demand medical proof of the medical need for time off as a condition of granting a reasonable accommodation. That is what PTech did in this case. Yet, Delaval never provided any such proof, so he was terminated. The Court held that his termination was legal, because it was Delaval’s own fault that he failed to provide the medical documentation that PTech was within its rights to ask for. As to Delaval’s disability discrimination claim under the ADA, the Court found that there was not sufficient evidence that PTech’s given reason for his termination was a pretext for disability discrimination. Delaval argued that PTech’s given reason for his termination — “failing to show up at work for more than three consecutive days without notifying a supervisor” — was false because he had e-mailed the owner while he was out, and thus had notified a supervisor. The Court agreed that was some evidence that PTech’s given reason for termination was false, but that was still not sufficient evidence of disability discrimination. Accordingly, the Court affirmed the district court’s decision to dismiss Delaval’s entire case.

Posted in ADA, At Will Employment, Disability, EEOC, Houston Employment Law, Human Resources | Leave a comment

Fifth Circuit Holds That Employees Interviewed As Part Of A Sexual Harassment Investigation Have Greater Protection From Retaliation

Mark Oberti writes:

Recently, the U.S. Court of Appeals for the Fifth Circuit, which covers Texas, Mississippi, and Louisiana, affirmed that an employee interviewed as part of a company’s internal investigation into sex harassment complaints is protected from retaliation under Title VII. In EEOC v. Rite Way Service, Inc., No. 15-60380 (5th Cir. Apr. 8, 2016), an employee named Ms. Tennort reportedly “observed two interactions between [supervisor] Harris and another general cleaner, [Ms.] Quarles, that troubled her. The first involved Harris pretending to smack Quarles’s bottom and saying, ‘ooh wee.'” The second was when Harris said he “could tell what was in Quarles’s pants pocket and stated that ‘somebody must be looking real hard at [Quarles’s] behind,'” supposedly adding for emphasis that “I’m a man, I’m gonna look.”

In response to her employer’s request, Tennort submitted a written report about the second incident. That week, Harris was transferred away, but the school replaced Harris with his brother-in-law. After that, “[o]ver the next five weeks, she [Tennort] received two written warnings and up to two oral warnings for poor job performance Her alleged infractions included not properly cleaning areas assigned to her, tardiness, and insubordination. These warnings were the first that Tennort had received since beginning her employment with Rite Way in 2009.”

Ms. Tennort was fired for alleged “neglect of duty,” about a month after filing her witness statement. The EEOC sued Rite Way on her behalf, claiming that her termination was in retaliation for her report, and violated Title VII’s prohibition against retaliation.

The district court concluded as a matter of law that “that Tennort did not engage in protected conduct under Title VII’s anti-retaliation provision,” and granted summary judgment for the employer. On appeal, however, the Fifth Circuit reversed, and sent the case back to the district court for a jury trial.
Title VII’s opposition clause in section 704(a), 42 U.S.C. § 2000e-3(a), requires opposition of a practice made unlawful by Title VII (“he has opposed any practice made an unlawful employment practice by this subchapter”). Thus, courts have generally required that the employee had an objectively reasonable belief that the practice “opposed” was illegal. Courts have not generally considered, though, the situation where the party “opposing” the practice was a third-party witness to an event, responding passively to an employer’s request for information. That was the case here.

The Fifth Circuit concluded that the “reasonable belief” standard applies equally to persons cooperating in an investigation. The EEOC argued based on Crawford v. Metropolitan Government of Nashville and Davidson County, Tennessee, 555 U.S. 271 (2009), that it was enough that the employee “opposed” conduct “by responding to someone else’s question.” The Court rejected that argument, stating that “creating a lower threshold for reactive plaintiffs bringing retaliation claims would be at odds with Crawford’s reasoning that the language of the opposition clause does not permit courts to treat reactive opposition any differently than proactive opposition.”

Notwithstanding its refusal to budge from the “reasonable belief” standard, the Court still reversed summary judgment. Even if the one incident the claimant witnessed would not by itself constitute harassment as a legal matter, the circumstances might tilt into gray-zone “reasonable belief” – at least enough to allow a jury to decide it. “She heard Harris tell Quarles that he was looking at and admiring her rear end … [T]his was conduct directed at a specific fellow employee. That it came from a person in a supervisory position is another important consideration.” The earlier near-slap is also “relevant to how she assessed the seriousness of Harris’s later comment that he was ‘gonna look’ at Quarles’s rear end because he was a man.”

Finally, Tennort’s belief was informed by a pamphlet furnished by the employer that “sexual harassment” – including “unwelcomed sexual . . . comments” and “other verbal or physical conduct of a sexual nature” – should be reported. In sum, “If Tennort had not yet reached a view that Harris violated federal employment law when he made offensive comments and gestures about Quarles’s rear end, the circumstances surrounding her questioning may very well have caused her to do so.” Thus, the Court found that Tennort had a reasonable belief that what she reported was actually sexual harassment that violated Title VII, and so the district court’s summary judgment was reversed and the case sent back to the district court for a jury trial on the question of whether Tennort had been fired because of her report.

This decision was written by Judge Gregory Costa.

Posted in Discrimination, EEOC, Houston Employment Law, Houston Retaliation Law, Retaliation, Whistleblower | Leave a comment