Seasoned Assistance For Employment Agreements In Texas

Filippov Law Group, PLLC, provides sophisticated legal services and business advice to individuals and businesses of all sizes, ranging from start-ups to Fortune 500 companies. The firm’s attorneys are experienced in negotiating, drafting and reviewing employment contracts and other commercial agreements with an eye towards the client’s best interest.

Electing Termination As A Business Owner

This post continues a previous discussion concerning layoffs. Many companies tend to layoff an employee when in fact, they should be electing termination. Confusing the two can lead to costly litigation and tarnish the image and reputation of the company to competitors and employees alike. Reaching the decision to terminate an employee can be difficult, but with careful planning, this decision can result in a smooth transition. Here are important items to keep in mind throughout the entire termination process.

Poor Performance Termination is directly related to an employee’s work performance; a layoff is a method companies utilize to save bottom line expenses and permanently remove positions. If an employee is not achieving the desired requirements of the job, performance evaluations should be brought to the employee’s attention and options discussed to address the lack of performance. Providing the employee an opportunity to address their job performance, allows them to prove their worth to the company or provide proof that the company made the correct decision to consider termination.

Action Plan To terminate an employee properly, create a written action plan that targets the specific problem areas and provides an opportunity for the employee to address the area. This will lessen the company’s liability and preserve the image of producing exemplary employees. Review employee performance evaluations, attendance sheets, disciplinary action reports, upward assessments, and peer reviews to assist in creating an action plan.

Company Image Improperly laying-off an employee misconstrues the former employee to future employers. The candidate is not viewed as terminated, which would raise questions and concerns, but as a capable candidate with quality performance, which is clearly not the case. The consequence is how other companies view the competency of the company and the quality of the company’s work product.

Providing Severance Packages Texas is an “at will” state, but should the company provide written contract terms that specify the employee receive a severance package, the employee is entitled to receive the severance package regardless of poor performance. Severance packages can be offered in exchange for an agreement not to sue the company or in return for the services rendered by the employee. The Fair Labor Standards Act (FLSA) has no requirements specifying company’s offer severance packages to terminated employees.

Extended Insurance Coverage For a limited period after termination, the employee has the right to continue receiving health insurance coverage from the company. The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986, allows terminated employees to receive a temporary extension of healthcare coverage for their families and themselves from their employer.

Issuing the Final Paycheck The Texas Payday Law stipulates that terminated employees receive their final paycheck within six (6) calendar days of termination or discharge. It is important to be aware of this particular law if the company distributes paychecks on a bi-weekly basis. In the event that an employee is terminated between the payday cycle than special provisions should be made to ensure the terminated employee is paid within the six (6) day period.

Wrongful Termination Avoid wrongful termination by consulting the company attorney to ensure that the employee’s Equal Employment Opportunity (EEO) and Age Discrimination in Employment Act (ADEA) rights are not in violation. These include discrimination of race, ethnicity, religion, age, color, disability, and/or veteran status and the termination of an employee over the age of 40 solely due to their age. Keep in mind the laws created to protect specific types of employees as well. These include:

• The Employee Retirement Income Security Act (ERISA) sets minimum standards in regards to pension plans
• Family and Medical Leave Act (FMLA) protects employees jobs during specified medical and family leave and allows for continued health coverage
• The National Labor Relations Act (NLRA) allows employees to participate in unions, collective bargaining, and voice concerns for the welfare of workers
• The Occupational Safety and Health Administration (OSHA) sets industry standards regarding safe work environments
• The Older Workers Benefit Protection Act (OWBPA) safeguards older employees work benefits from age discrimination
• The Sarbanes-Oxley Act (SOX) protects whistleblowers
• The Uniformed Services Employment and reemployment Rights Act (USERRA) protects members of the uniformed services from discrimination
• The Workers Adjustment and Retraining Notification Act (WARN) protects employees and their families by requiring employers to provide notice of a layoff decision

In conclusion, the business justification for terminating an employee should be well documented. Providing evidence of the measures the company took to retain the employee by offering opportunities to address the areas of low performance will serve to show the commitment the company has to its employees. However, when preventative measures fail, the ability to terminate an employee having followed written action plans to address the issues up to that point, provides the company a legal cushion knowing they did what the law required.

Crucial Provisions for a Favorable Employment Termination Agreement

If an employee has the opportunity to negotiate their termination, they can bargain for a number of provisions to protect their rights, or to protect their ability to enforce them through a settlement agreement. The first section of this entry highlights provisions that can best achieve those ends for an employee. In contrast, the second section explains a number of provisions most important to an employer, which an employee will want to guard against.

A. PROVISIONS ADVANTAGEOUS TO THE EMPLOYEE Fundamental Matters The settlement agreement should state clearly whether it will be a “structured settlement,” in which the employer makes periodic payments to the employee. The employee should ensure that the settlement agreement details which account will fund these payments, when they will be made and by whom, by what means, and to what address and recipient. The settlement should also clearly state the “venue” for any enforcement action, i.e., in which state or court these actions must be filed, as well as which state’s law will apply.

Release Language The agreement should include (a) a release of all parties from liability, and (b) a release of all possible legal claims the parties could file against each other. An employee should also negotiate for a mutual release, which has the effect that after signing the agreement, each party is finished dealing with the other.[1] Consideration To be enforceable, the terms of the settlement agreement must show that each party gives a form of consideration to the other, meaning that each will release a legal right or give something of monetary value to the other party. Consideration can take any of several forms of payment or legal right, but whichever the means, the agreement should contain as much detail on the exchange as possible. The parties should agree on the time, place, and means of payment; the specific person who will effectuate it; the right being released or the amount being paid, and from what account or other source, specifically.[2]

Cobra The terms of the agreement should specify how the employer will continue to handle COBRA payments for the employee if they apply. The agreement should pinpoint (a) the date COBRA coverage will end, (b) whether the employer will have any further obligations to the employee regarding fringe benefits, (c) which party bears the responsibility to apply for COBRA continuation coverage, (d) which party will pay for the COBRA coverage, (e) and that the employer will provide the employee with notice of his/her right to obtain continuing COBRA coverage. [3]

Dismissal and Withdrawal of Claims The agreement should also state that the underlying lawsuit will be dismissed with prejudice by a specific date, such that it cannot be filed again once the agreement is executed.

Non-Disparagement and Neutral References The employee should bargain for a mutual non-disparagement clause, which bars each party from making negative or disparaging comments about the other, to ensure that the circumstances of the settlement will not negatively affect her future career. A neutral reference clause requires an employer to give an unbiased reference to future employers, disclosing simply the position the employee held and for what duration. A better option, the provision could require the employer to refer requests for references to its director of human resources, and require that person to make no disparaging remarks about the employee. The employee might also want a provision requiring the employer to destroy all records concerning or reflecting proceedings related to the employee and the settlement, such as EEOC proceedings or disciplinary measures.

Other Agreements The settlement agreement should also explain how it will affect prior agreements between the parties, such as non-compete, or trade secret agreements. Specifically, it should state whether the settlement incorporates or renews the prior agreement, or whether it extinguishes them. Clarifying the status of former agreements will help an employee avoid suit by her employer after the settlement.

Liquidated Damages and Enforcement Procedures The agreement should state in detail how disagreements over the settlement agreement will be resolved. It should state whether the parties must use arbitration and whether they must first meet for collaborative discussions. It should also state whether the parties will additionally have a right to equitable relief, i.e., a lawsuit based on the settlement agreement.

Safe-Harbor Provision The employee should protect herself by ensuring that the agreement contains a provision that allows the parties a grace period to correct any alleged breaches of its terms, to avoid litigation over its enforcement.

“Zipper” Clause The agreement should state that it takes the place of all oral agreements between the parties and that all amendments to it must be written and signed by each party. Doing so will mean that the parties may only refer to the written agreement going forward, and cannot rely on statements it does not contain.

Attorneys’ Fees The agreement should detail how the parties will divide the legal costs of the settlement.

B. PROVISIONS EMPLOYER’S WILL WANT Waiver of Claims, Or Admissions An employer will likely seek to disclaim liability for the underlying allegations. An employee should limit this disclaimer, if possible, and limit the number of disclaimers in the agreement. Also, a number of claims can never be waived, including suits under the Fair Labor Standards Act. Thus, an employer often bargains for the agreement to include an acknowledgement by the employee of underlying facts. Yet the employee should be wary of what facts he would be admitting, and wary of making these acknowledgements at all. The employee should also negotiate for a mutual release of claims.

Confidentiality This provision contains 3 components: (a) a provision that the parties will keep the existence of the settlement, and its terms, confidential; (b) a specific statement that each party must give if questioned about the claims; and (c) a penalty if either party violates this provision. The employer will also attempt to have the employee’s spouse and attorney agree to this term.

Violation of Terms The employer will seek to prevent the employee from backing out of the settlement agreement by including a provision that if the employee files a claim against the employer or seeks to invalidate any provisions of the agreement, then she must return all payments made to her under the agreement.

Non-Assignability of Claims The employer will want the employee to acknowledge that she has not assigned to another party any of the claims she has or may have against the employer. The employee should be careful, if possible, to retain the ability to assign these claims to an executor, personal representative, spouse, or perhaps a dependent.

C. FINAL THOUGHTS In a settlement negotiation, if an employee keeps in mind the provisions important to an employer, they can better anticipate the employer’s demands. If the employee also adds to the agenda a discussion of provisions that favor their position, they can reach a better short-term bargain, prevent the employer from filing additional suits against them, and better protect their interests for future phases of their career.

[1] Only a handful of claims may never be released, including workers compensation claims, unemployment compensation, and discrimination claims. [2] Items of monetary value include (i) severance payments, (ii) accrued vacation payments, (iii) commission payments, (iv) outplacement assistance or unemployment compensation, (v) reimbursements of business expenses, (vi) perquisites, (vii) relocation costs, and (viii) return of company property. Rights to receive benefits or services include (i) health and/or disability insurance, (ii) non-retaliation, i.e., the employer’s release of the right to file a legal claim against the employee due to allegations involved in the agreement; (iii) a pension or a 401(k) plan, (iv) bonus plans, (v) stock options, and (vi) a waiver of a right to re-employment with the same employer. [3] Cobra applies to most employers with at least 20 employees, and usually also covers an employee’s spouse and dependent children. The maximum period for COBRA coverage is either 18 months, in the event of termination or reduction of hours, or 36 months, in the event of death, divorce, or separation.

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