DOJ Seeking Evidence of Wage-Fixing and No-Poaching Collusion Among Chicken Producers

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The Justice Department has begun an investigation of chicken producers to see if they have shared information about employment practices to hold down the wages of plant workers throughout the highly concentrated poultry processing industry. The issue at the heart of the civil investigation is whether these practices amount to anticompetitive behavior in violation of federal law, including the Federal Trade Commission Act, the Sherman Act, and the Clayton Act.

Line workers in chicken producer plants are among the lowest paid and most disadvantaged industrial workers. The work is dirty and dangerous, with a higher rate of injury than coal mining or logging. It is often the first job for recent immigrants to the U.S., whose English is limited or non-existent. The potential for abuse is huge.

The injustice of potential industry-wide collusion to hold down their wages shocks the conscience. But the possibility that illegal anticompetitive employment agreements exist also poses a risk for executive-level managers and human resource professionals who know the facts but may be unaware of the legal guidelines.

Our Texas Employment Law Practice Knows the Red Flags of Unfair Employment Agreements

If you have questions about your company’s employment practices, click this link, and fill out and submit the form Contact Kilgore & Kilgore. Or you can call us at (214) 949-9099. For information about our employment law practice click this link Employment Law. We look forward to speaking with you.

Chicken Producers in a Concentrated Industry Already on the Antitrust Radar

Americans have a huge appetite for chicken. In 2022, the average American is expected to eat more than 98 pounds of chicken, and chicken producers are on track to slaughter eight billion birds. Nonetheless, the huge industry is dominated by four producers: Tyson Foods, Pilgrim’s Pride, Sanderson Farms, and Perdue Farms. These are the producers reportedly under DOJ scrutiny.

In September 2021, the Biden administration announced plans to crack down on alleged meat price fixing among large meat processors. Meat and poultry makers claimed that pandemic-related labor shortages limited how much they could process and caused meat shortages and higher prices. The 2021 proposed acquisition of Sanderson Farms by Cargill and Continental Grain was delayed by a DOJ antitrust investigation and criticized by lawmakers who cited significant antitrust concerns. This is the backdrop for the latest probe concerning wage and hiring collusion.

Anticompetition Law in a Nutshell

The Federal Trade Commission Act permits the FTC to prevent unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce. The Clayton Antitrust Act, intended to strengthen earlier antitrust legislation, prohibits anticompetitive mergers, predatory and discriminatory pricing, and other forms of unethical corporate behavior. Finally, and perhaps most importantly, the Sherman Act, prohibits “every contract, combination, or conspiracy in restraint of trade.”

Wage fixing and no-poaching agreements are likely the areas on which the DOJ is focused. Under the combined authority of all three statutes, the FTC and the DOJ have focused on two types of ant-competitive agreements that, without any pro-competitive justification, give rise to a violation of the antitrust laws. These are:

  • Wage-Fixing Agreements, which are agreements pertaining to employee salary or other terms of compensation; and
  • No-Poaching Agreements, which are agreements to refuse to solicit or hire another company’s employees.

Red Flags Among Chicken Producers

Workers in chicken processing plants are unlikely to have access to information about industry-wide agreements concerning hiring or wages. But they may have evidence that such arrangements exist if wage rates are identical among employers or if competing companies simply refuse to hire based on a current or prior employer. It is often impossible for them to raise these concerns.

Others are in a better position to raise questions, however. For executive-level managers and human resource professionals who want guidance about what is legal and what to avoid, federal antitrust agencies have identified nine red flags:

  • An agreement with another company about employee salary or other terms of compensation, either at a specific level or within a range;
  • An agreement with another company to refuse to solicit or hire that other company’s employees;
  • An agreement with another company about employee benefits;
  • An agreement with another company on other terms of employment;
  • A suggestion to competitors that they should not compete too aggressively for employees;
  • Exchange of company-specific information about employee compensation or terms of employment with another company;
  • Participation in a meeting, such as a trade association meeting, where the above topics are discussed;
  • Discussion of the above topics with colleagues at other companies, including during social events or in other non-professional settings; or
  • Receiving documents that contain another company’s internal data about employee compensation.

Even if an individual does not agree orally or in writing to limit employee compensation or recruiting, other circumstances – such as evidence of discussions and parallel behavior – may lead to an inference that the individual has agreed to do so. In addition, merely inviting a competitor to enter into an illegal agreement may be an antitrust violation, even if the invitation does not result in an agreement to fix wages or otherwise limit competition.

Competition is Good in Every Market, Not Just Chicken Producers, According to the U. S. Federal Government

Encouraging a competitive labor market is clearly a priority for the FTC and DOJ under the Biden Administration. Accordingly, employers may want to review their hiring-related agreements with competitors in the same labor market for compliance with the antitrust laws. Their goal should be to ensure that they have established antitrust policies and procedures to educate hiring managers about antirust considerations in the employment law context.

Although the current DOJ investigation of poultry processors is civil, it is important to realize that the DOJ may proceed criminally against wage-fixing or no-poaching agreements. Individuals who become aware of suspect arrangements are encouraged to report them to the DOJ or the FTC. Consulting with legal counsel would be a very sound first step at this point.

Our Employment Law Attorneys Can Help You Understand the Law Concerning Anticompetitive and Antitrust Employment Law Practices

Our experienced employment law attorneys understand the nuances of DOJ and FTC enforcement actions concerning wage-fixing and no-poaching agreements. Contact us for guidance about how to avoid prohibited information-sharing or if you believe that your company’s practices do not comport with the law. Reach out to Kilgore & Kilgore for a free review of the facts of your case. Click here to get the conversation started contact Kilgore & Kilgore.

New Federal Law Ends Forced Arbitration of Workplace Sexual Harassment and Sexual Assault Claims Despite Employment Agreements that Require It

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In March 2022, President Biden signed a new bill that ends forced arbitration of sexual assault and harassment claims. Now, employers throughout the country may no longer require employees to arbitrate claims of sexual harassment or sexual assault. The new law is effective for claims that arise or accrue on or after the date the bill was enacted, or March 3, 2022. Employees may not, however, re-open claims that have already been arbitrated.

Many employees have signed employment agreements containing the usual language requiring all employees to waive their rights to join in a class action lawsuit and to arbitrate any disputes they may have with the employer. Such agreements take away employees’ right to trial by a jury of their peers: in arbitration, an attorney typically is the finder of fact. Under this new law, employees with sexual harassment and sexual assault claims are not required to use arbitration as a method to prove a claim but will have the ability to try their cases in open court.

This is seen as a win for workers, but how the law will work is unclear. Texas law strongly favors enforcement of employment agreements. The new law is extremely limited in scope, and sexual harassment and sexual assault claims are often coupled with complaints of retaliation, salary discrimination, racial or ethnic discrimination, breach of contract, and unjust termination. A Black woman may be harassed both because she is a woman and because she is Black. Claims that are not strictly sexually based might still have to be arbitrated, which could make things complicated.

Our Texas Employment Lawyers Have Answers About Sexual Harassment and Sexual Assault

If you have experienced sexual harassment, sexual assault, discrimination, or termination at work or any other form of workplace dispute, reach out to our experienced employment lawyers. Do not suffer in silence. Find relief. Get justice. Click here, fill out and submit the form Contact Kilgore & Kilgore. We will call you. Or you can call us at (214) 949-9099. For information about our legal work in combatting sexual harassment in the workplace, visit this link Protect Your Dignity. For a wider view of our employment law practice click this link Employment Law. We look forward to collaborating with you.

Sexual Activity at Work is Common

According to the EEOC, 25 to 85 percent of women report experiences of sexual harassment at work. Definitions of sexual harassment range widely and include unwanted attention, coercion, sexist and crude comments, offensive behavior, and using pornography at work. This is based just on the reported behavior. Many employees deal with sexual harassment by avoiding the harasser, denying, or downplaying the situation, ignoring, or enduring the abuse. Men who are victims of sexual harassment or assault may be reluctant to report it or seek help. Our employment lawyers put their clients first without judgement or prejudice.

Perils of Arbitration in Employee Claims

Arbitration favors employers. Instead of a hearing before a judge, arbitration takes place in private, in front of a retired judge or lawyer who is often hired by the employer. It would be reasonable to assume that an arbitrator who develops a history of employee-friendly rulings may not be hired again.

The practice of arbitration has proliferated rapidly. It is estimated that over half of non-union private sector employees have signed contracts requiring them to file all complaints through arbitration instead of the courts. Low-wage workers are especially likely to be forced to arbitrate.

Employees win in arbitration only about 20 percent of the time, compared with 60 percent who win for claims filed in court. When employees do win in arbitration, the awards are often much smaller than in court. The average award for an employee in arbitration is $23,548, compared with $143,497 in federal court and $328,008 in state court.

It is also important to recognize that while arbitration is private, it may not allow others who work for the same employer to discover that an endemic and potentially dangerous situation exists. Much of the energy behind the #MeToo movement comes from the fact that making some noise can protect other people, too.

Texas Law – One Hand Gives, but the Other Takes Away

Both Texas Labor Code Chapter 21 and Title VII of the federal Civil Rights Act protect Texas workers from employment discrimination based on sex or sexual harassment. Effective September 2021, an amendment to the existing law expanded the definition of sexual harassment, heightened the standard for an employer’s response to complaints, and placed responsibility on individuals as well as employers for failing to address sexual harassment.

On the other hand, though, in a 2016 overtime pay case, the Fifth Circuit Court of Appeals confirmed that Texas contract law favors the enforcement of arbitration agreements. This was so, even though the plaintiff oil worker had expressly refused to sign the agreement. The court reasoned that he had accepted the arbitration requirement because he continued to show up for work.

Were this a sexual harassment case from after March 2022, federal law would govern, and the plaintiff would have had a right to his day in court. But what about any other claims arising from the same employment situation? It is still too early to see Texas or state court decisions under the new law, but things could get messy.

Our Employment Lawyers Have Answers to Your Questions About Workplace Sexual Harassment

Our experienced lawyers understand how difficult it can be to deal with harassment, discrimination, violence, or any number of other unpleasant situations at work. Contact us when workplace difficulties arise. Reach out to Kilgore & Kilgore for a free review of the facts of your case. Click here to get the conversation started contact Kilgore & Kilgore.

Dinosaurs, Grey Hair, and the Workplace — Age Discrimination in Employment

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A recent New York Times reported that tech companies are scrambling to hire. This would seem to be great news for applicants and employees. Right? But, if you are over 40, a hiring boom or job security may not be in your future. In fact, things can get unexpectedly nasty for the working “dinosaurs”. Today, approximately one-third of the workforce in the U.S. is 50 years old or older according to the AARP.

Between 2013 and 2018, IBM reportedly fired about 20,000 American employees over the age of 40, which amounted to about 60 percent of its total U.S. job cuts during those years. Internal documents compared older employees to dinosaurs and called for their extinction. Older female employees were disparaged as a “dated maternal workforce.” In recent years, similar claims have been made about hiring and retention policies at Google and Apple.

Although tech companies may discriminate on the basis of age or gender, the practice of singling out “grey hairs” for termination or demotion is not limited to them. Age discrimination rises hand in hand with the unemployment rate and older employees tend to be the last hired back and the first fired. Pandemic-related business dislocations have made a bad trend worse. Federal and Texas laws protect employees from age, gender, and other forms of discrimination. For older employees, it may just be a matter of getting the right legal help to overcome such setbacks as getting fired.

Our Employment Lawyers Can Help with Your Age Discrimination Problem

If you believe you have experienced employment discrimination because of your age, you should talk to an employment lawyer at Kilgore & Kilgore. Employment discrimination can occur in different ways and for many different reasons including age, gender, race, pregnancy, sexual orientation, national origin, disability, and any combination of these reasons. Our discrimination lawyers understand the range of remedies you may have under Texas and federal law. If you have experienced age discrimination in the workplace, reach out to us by clicking this link Contact Kilgore & Kilgore. To learn more about our employment discrimination law practice, click this link Dallas Discrimination Lawyers Hold Employers Liable for Employee Rights Violations.

Not All Unfair Treatment is Illegal Age Discrimination

Whether in the tech industry or other sectors of the economy, the requirements of age and other forms of law governing employment discrimination are the same. Not all bad employer conduct is illegal, and laws contain considerable protections for employers. Texas employers have wide discretion when it comes to hiring, promotions, and firing decisions.

An employee who brings a claim for discriminatory treatment must, first, fall within a class of employees explicitly protected by the statute. The federal law known as the Age Discrimination in Employment Act (ADEA) protects applicants and employees who are over the age of 40. The same is true of Texas Labor Code Chapter 21. Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination on the basis race, color, religion, gender, pregnancy, or national origin, is not age limited. None of these laws, however, apply to very small employers – those with fewer than 15 employees, or 20, in the case of the ADEA.

Even an employee who falls within the group of individuals expressly protected by the law has a considerable burden to bear to show that the treatment was discriminatory, not simply callous, unfair, or mean-spirited. In an age discrimination lawsuit, several issues can become important. These include:

  • direct – whether the conduct complained of was direct – as in an employer’s statement
    that “We are firing you because you are old,” which is quite rare these days; or
  • indirect – something that an employee believes is discriminatory based on the totality
    of circumstances.

If the evidence is circumstantial, it is then up to the employee to show that he or she:

  • was qualified for the position;
  • suffered some adverse employment action (like firing or demotion); and
  • was replaced by someone outside the protected group or was treated less favorably than other similarly situated employees outside the protected group.

The last requirement can prove to be a stumbling block for employees as it was for the plaintiff in a 2021 Fifth Circuit District Court case (Wright v. United Parcel Service) of a female employee who was fired for working too slowly. She claimed she was an employee over 40, which is recognized as a protected class of worker. She failed to prove that she was classified as such by her employer. She lost her claim and the Fifth Circuit agreed with the summary judgment of the lower court.

Employers Keep Employee Records Confidential for a Reason

Employers control access to information about employee firings, hirings, and job performance. This makes it more difficult for employees who claim discrimination or other illegal treatment to argue crucial elements of their cases against employers when they go to court.

Even when an employee can make what is termed a “prima facie” case for illegal discrimination, an employer may prevail by showing that a non-discriminatory reason also existed for the adverse employment action. In federal court, it is not enough that age discrimination was a contributing factor in the employer’s decision. It must be the determining cause – the “but for” cause – as reiterated in 2019 by the Fifth Circuit District Court (McMichael v. Transocean Offshore Deepwater Drilling) in a case involving a 51-year-old drilling employee and his claim of age discrimination against his employer who fired him. In fact, the employer fired 7,320 employees at once and more later. The employer’s HR department devised a plan to rank the employees to identify the top talent to decide who to keep and who to fire. The scoring system used to rank the employees considered several different factors. In addition, the supervisors of the employees ranked each employee’s on-the-job performance. The claimant who pressed this lawsuit was poorly ranked, so he was fired. A different, younger, higher ranked employee took over the job. So, the fired employee sued his former employer for age discrimination but lost because he was unable to prove the age discrimination that he claimed.

On the other hand, the U.S. Supreme Court has held that an individual protected by the ADEA can sue an employer for age discrimination if the employer’s policy, practice, or other employment action has had a disparate impact — even if unintended — on older employees. This may be useful in situations where, for instance, an employer requires a group of employees, including those under 40, to transfer to another location, with full knowledge that the older employees may chose to leave rather than relocate. This may be especially true where a telling paper trail details plans and strategies for shedding a particular group of protected employees, like older employees or older women. It is important to have an experienced employment lawyer at your side.

Contact Us If You Have Questions About Age Discrimination

If you believe that you are the victim of discrimination at work, you may be right. Let us explore how we can help you. Reach out to Kilgore & Kilgore for a free review of the facts of your case. Click here to get the conversation started contact Kilgore & Kilgore.

CEO Sues Former Employer for Cheating Him Out of His Employment Contract Benefits

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A former CEO with an employment contract promising valuable company stock claims he was the victim of a bait-and-switch scheme when he was fired just before he would have become entitled to it. The sole reason he was fired, he claims, was to save the company from having to keep its end of the bargain. In the summer of 2021, the District Court for the Eastern District of Texas, Sherman Division, held that Scott Crane, the former CEO of Rave Restaurant Group, could pursue his breach of contract and fraud lawsuit against his former employer.

Most top executives are offered complicated compensation structures in their employment contracts as incentives to join a company and improve its profitability. Although salary and bonuses are sometimes generous, the real inducement for an executive to take a top position is the promise of equity ownership in the company. This is especially true if the company is a start-up or poised for expansion. Those promises are often protected by the terms of an employment contract. But contract interpretation when the executive leaves the company can be anything but straightforward.

Employment Contract Questions? Our Texas Employment Lawyers Can Help

If you are in the process of creating a compensation package for an employment contract, negotiating an employment contract, anticipating a hard-earned stock benefit or if you are anticipating the need for a severance negotiation, reach out to our experienced Texas employment lawyers. Just click on this link to get the conversation started Contact Kilgore & Kilgore. As a word to the wise, it is always preferable to get legal advice at the contract negotiation, rather than waiting until earned benefits are anticipated, when problems arise. Wherever you find yourself, we offer a free review of the facts of your case. To learn more about executive compensation practice, click this link Executive Compensation.

Crane’s Employment Contract

Crane was recruited for the position of CEO for two of Rave Restaurants brands in 2016 and interviewed with several members of the board of directors. He was ultimately offered a salary with potential bonuses and shares based on his achievement of certain performance metrics. His executive compensation package was memorialized in an employment contract and spelled out in multiple restricted stock award agreements. Perhaps ominously, his right to collect on this deferred compensation depended on whether he was employed by Rave on a date after his achievement of the required performance. His arrival at the company was widely heralded in the Texas business press.

Rave’s stock price increased during Crane’s employment, from $2.22 per share two days before the announcement of his hire to $3.08 per share on the day before his termination was announced – an increase of 72 percent in 30 months.

Crane claims he was instrumental in fixing Rave’s balance sheets and that he met the benchmarks set by Rave’s board of directors, thus entitling him to approximately 328,000 shares for the 2016 fiscal year; 300,000 shares for the 2017 fiscal year; and 300,000 shares for the 2018 fiscal year.

Fired in Violation of his Employment Contract

In July 2019, one month after Crane claims he reached the benchmarks for fiscal year 2018, but before the date on which entitlement to the company shares vested, the board fired him. It gave no reason. Crane claims Rave failed to transfer the shares he earned, refused to pay his bonus, refused to compensate him for his earned but unpaid vacation, did not pay him $300,000 in severance pursuant to the employment contract, and did not pay his COBRA premium payments.

Rave argued that although Crane arguably met the benchmarks, he did not meet the requirement that he be employed on the required date. Crane countered that the only reason he failed to meet the second requirement was because Rave made it impossible. He argued that the Court should interpret the contract in a manner that would prevent an unjust forfeiture of the benefit of the bargain he arguably earned through his performance.

Crane filed his lawsuit in January 2020. Rave moved for summary judgment. The dispute raises a variety of contract issues, but the thorniest of these may about the enforceability of a condition precedent in a contract. Crane asked the Court to find there was a condition precedent and that Rave made it impossible for Crane to fulfill the condition precedent. Crane relied heavily on Sellers v. Minerals Techs., Inc. when making his argument.

The Employment Contract in the Sellers v. Minerals Techs Case

A condition precedent is an event that must happen or be performed before an individual has a right to enforce an obligation. In Sellers, the Fifth Circuit noted that “[b]ecause of their ‘harshness in operation,’ condition precedent are generally not favored under Texas law and should not be recognized if ‘another reasonable reading of the contract is possible’ or the condition ‘would impose an absurd or impossible result.’” The District Court’s decision in Crane further cites Sellers for the proposition that “[u]nder Texas jurisprudence, if one party prevents another from performing a condition precedent or renders its fulfillment impossible, then the condition may be considered fulfilled.”

What does this mean for Scott Crane? So far, all we know is that, at least on the portion of his breach of contract claim that relates to more than 900,000 shares of company stock, he will have the opportunity to go to trial. The same is true for a portion of his fraud claim. The District Court determined that these claims could not be decided simply as a matter of law, and that both sides should have the opportunity to introduce evidence at trial that supports their positions.

What does this mean for top executives whose compensation agreements include stock award agreements, commissions, bonuses, and other forms of incentive compensation? The Sellers decision, as applied in Crane, is good news for those seeking to enforce employer promises, especially when it appears that an employer is backing out of the deal after the executive has substantially performed his or her part of the employment contract.

Contact Us If You Have Questions About Your Employment Contract, Its Content, Negotiation, and Enforcement

Remember that an ounce of prevention is worth a pound of cure. Make sure that you get your employment contract reviewed by an employment lawyer before you sign it. It is essential that you understand it thoroughly. Contact an experienced employment lawyer if, and as soon as, difficulties arise. Reach out to Kilgore & Kilgore a free review of the facts of your case. Click here to get the conversation started contact Kilgore & Kilgore.

EEOC Cites Return to Work Discrimination in Two Different Texas Disability Lawsuits

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In September, the EEOC filed lawsuits against two Texas employers – 151 Coffee in Fort Worth and Faben’s Pharmacy in El Paso County — for discrimination against employees who asked for reasonable COVID-19 accommodations at work. The employees had medical conditions that the employer had previously recognized as “qualifying disabilities” under the Americans with Disabilities Act (ADA). All were ready, willing, and able to work.

151 Coffee allegedly violated the ADA by refusing to allow two baristas to return to work until a COVID vaccine was developed. One had a heart condition and the other suffered from multiple sclerosis. They asked if they could avoid customer contact as much as possible when the stores reopened in the Spring of 2020. One had specifically asked not to work the drive-thru window. They were told they could not come back to work until there was a vaccine for COVID-19. The company ultimately terminated their employment.

Fabens Pharmacy refused to allow a pharmacy technician with asthma to wear a facemask. The employee was allegedly harassed, taunted, and humiliated for questioning the policy prohibiting masks and was sent home twice. He quit.

Do You Have a Similar Story? Call a Texas Employment Disability Discrimination Lawyer at Kilgore & Kilgore

If you suspect that you have been the victim of disability discrimination at your workplace, reach out to us. Covid-19 has been rough on employees and employers throughout Texas. Individuals with disabilities who have been harassed and/or denied reasonable accommodations face challenges. Click on this link to find out about our workplace discrimination practice. Use this link to Contact Kilgore Law to get the conversation started. We offer no-cost case evaluations.

Federal and Texas Workplace Disability Discrimination Laws

The federal Equal Employment Opportunity Commission (EEOC) has the principal responsibility for enforcing the ADA, under which both lawsuits were brought. Under the ADA, workplace discrimination may occur when an employee is terminated, suspended, denied training or a promotion, or anything else that negatively affects the terms and conditions of employment because the employee is disabled or needs a reasonable accommodation.

Texas Labor Code Chapter 21 also prohibits employers from discriminating against applicants or employees with disabilities in job applications, procedures, conditions, and privileges of employment. Chapter 21 applies to private employers with 15 or more employees and to all state government and local government entities no matter how many employees they have.

The Thorny Issue of “Reasonableness” in Disability Lawsuits

Although both the 151 Coffee and Faben’s Pharmacy lawsuits were brought under the ADA, it is noteworthy that the issue of whether a requested accommodation is “reasonable” is important under both Texas and federal employment law. That is the issue on which these cases often turn.

An employer need not grant an accommodation that would cause it “undue hardship.” “Undue hardship” is further construed to mean causing “significant difficulty or expense.” An employer may not reject any accommodation that costs money, but it may weigh the cost of an accommodation against its current budget and constraints created by the pandemic.

Even under those constraints, there may be a third way involving other no-cost or very low-cost accommodations. The question of reasonableness quickly becomes a fact-specific process of balancing equities. Negotiations are so specific that it is often hard to extract general principles from preceding lawsuits.

Employers are also required to engage with the employee in what the law describes as an “interactive process.” If it is not obvious or already known, an employer may ask questions or request medical documentation to determine whether the employee’s disability necessitates either the accommodation requested by the employee or any other. An employer may ask an employee:

  • whether another form of accommodation could effectively address the health and safety concerns raised; and
  • how a proposed accommodation will enable the employee to continue performing the fundamental job duties of the position (and whether those job duties are actually essential).

If the employer does not initiate this discussion, a court may infer that there was no real exploration of reasonableness.

It should be noted that fear of contracting COVID-19, by itself, without another condition that substantially limits one or more life activities, does not qualify as a disability. That was not, however, the situation with any of the plaintiffs in the 151 Coffee or Faben’s Pharmacy lawsuits.

The Ugly Facts of Harassment and Retaliation and Disability

In addition to requiring reasonable accommodation for disabled employees, the ADA also prohibits employers from retaliation against employees who request accommodation under the ADA. The EEOC defines retaliation as an adverse action against a covered individual because he or she seeks reasonable accommodation under the law.

Harassment, taunting and humiliation, as the Faben’s Pharmacy employee reported, falls into the catch-all category of “anything else that negatively affects the terms and conditions of employment.” It can be the most damaging aspect of employment discrimination, especially for someone already coping with a disability.

Legally speaking, disability harassment includes behavior of any kind that fosters a hostile environment that severely restricts an individual with a disability. Disability harassment covers a range of behavior. These include abusive jokes and crude name calling – think about middle school at its worst. But it also includes escalating incidents like threats and sexual and physical assault.

Retaliation is effectively the institutional embodiment of one-on-one harassment. Think about negative evaluations, demotions, hours cuts, denied promotions, terminations. It may be decorated in corporate language concerning priorities, productivity, and goals. Harassment and retaliation often go hand-in-hand.

The legal distinctions are sometimes less than useful in describing what has occurred. Nonetheless, workers are protected from both disability discrimination and the harassment and retaliation that sometimes follow from raising the issue.

Reach out to our Employment Disability Discrimination Attorneys for Legal Help

Our Texas employment lawyers have extensive experience with employment disputes, including disability discrimination, and other discrimination claims. Use this link to reach out to us Contact Us with your questions and concerns.

Texas Sexual Harassment Law Protects Employees of Small Businesses and Makes Supervisors, HR, and Third Parties Liable

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Effective September 1, 2021, Texas employees who work for businesses with fewer than 15 employees have remedies under the Section 21.141 to the Texas Labor Code for sexual harassment. And sometimes, these small businesses can be the most dangerous for workers, particularly regarding employee rights. Contrary to common understanding, there were no remedies for sexual harassment of employees in the Texas Labor Code before September 1. Imagine that you work in a two-person office, just you and the boss. The boss begins to act in inappropriate and unwelcome ways – lewd comments, unwanted touching, asking you out on a date, even suggesting that you could get a raise that way — or that you could get fired otherwise. This harassing activity can escalate. But there are no witnesses, no potential allies and certainly no HR Department. Under prior law, your only realistic choice might be to find another job.

For conduct on and after September 1, 2021, however, you may have another choice – to make a claim under the Texas Labor Code for sexual harassment or discrimination. In combination with two other recent changes to Texas law, SB 45 (as this new law is also known) considerably expands the protections that Texas employees have against sexual harassment.

If You Have Experienced Sexual Harassment, Our Texas Employment Lawyers Can Help

If you find yourself in this uncomfortable and potentially dangerous situation, reach out to our experienced Texas employment lawyers by clicking on this link and sending us your contacts information Contact Kilgore & Kilgore. We offer a free Initial consultation to help you explore your options. Click this link if you would like to know more about our employment law practice.

Legal Definition of Sexual Harassment

It has been said many times before, but it bears repeating. Sexual harassment does not happen just to women. The law protects men, women, and our LGBTQ brothers and sisters. It even applies in cases of mistaken perceptions about sexual orientation. In addition, not all sexual conduct is harassment. The key concepts for a legal sexual harassment definition include unwelcome, unwanted, or conduct that creates a hostile atmosphere in the workplace.

Under the new statute, sexual harassment means an unwelcome sexual advance, a request for a sexual favor, or any other verbal or physical conduct of a sexual nature if any one of the following four things is also true:

  • Submission to the advance, request, or conduct is made a condition of an individual’s employment, either explicitly or implicitly; or
  • Submission to or rejection of any of these behaviors is used as the basis for a decision affecting the individual’s employment; or
  • Any of these behaviors has the purpose or effect of unreasonably interfering with an individual’s work performance; or
  • The behavior has the purpose or effect of creating an intimidating, hostile, or offensive working environment.

That fourth element applies even to employees who are not the target of the harassment. Suppose that the boss harasses an employee, Bob, because she thinks Bob is gay. She leaves Mary, the other employee alone, but Mary is very upset by what is happening to her friend Bob. Mary may also have claim for sexual harassment — in addition to Bob’s claim.

The New SB 45 Holds Contractors, Supervisors, Managers, and HR Personnel Also Responsible for Sexual Harassment, Going Farther Than Federal Law

In addition to expanding the reach of the Texas Labor Code’s prohibition of sexual harassment to employers of any size, SB 45 also expands the definition of employer. In this context, the term also includes “a person who acts directly in the interests of an employer in relation to an employee.” Thus, it may cover the kind of behavior described above if it is done by an outside contractor or a fellow employee. The contractor or colleague may be individually liable for sexual harassment.

In addition, after September 1, supervisors, managers, HR professionals, other employees and third parties may be named individually as defendants in an employee’s sexual harassment complaint and held personally liable for damages. This change may also limit an out-of-state employers’ ability to remove sexual harassment claims under Texas law to federal court in cases where an in-state manager or supervisor is also sued. This is significant because the lower employee-threshold for Texas law is now stricter than that of federal law.

To avoid liability, an employer or person acting in the interest of an employer may be liable if he or she knew or reasonably should have known of the harassing behavior and did not take “immediate and appropriate corrective action.” The previous standard called for “prompt” action, which was presumably not as fast.

Two More Changes to the New Texas Sexual Harassment Law

Two additional changes to Texas law may also be important for employees. HB 21, which also went into effect on September 1, 2021, lengthens the time within which sexual harassment claims may be brought. For a sexual harassment complaint based on conduct occurring on or after September 1, employees will be allowed to file their charge with the Texas Workforce Commission within 300 days after the date the alleged sexual harassment occurred. This is almost twice the 180-day time limit previously in effect. But bear in mind that it is still extremely short. It is very important to act promptly.

Secondly, and of perhaps more limited consequence, SB 282 amends Texas law by prohibiting the Texas legislature from appropriating money and state agencies from using appropriated money to settle or otherwise pay a sexual harassment claim against an elected or appointed member of the executive, legislative, or judicial branch of state government. This includes school districts, open-enrollment charter schools, counties, municipalities, special districts, and other subdivisions of the state.

This is indirectly important to employees because it increases the incentive for these employers to police compliance with sexual harassment laws. It may also lessen any potential political sentiment against sexual harassment settlements as being paid from taxpayer money.

If You Have Experienced Sexual Harassment at Work, Our Employment Lawyers May be Able to Help

What should you do if you have been the target of workplace sexual harassment? First, make detailed notes about the conduct – time, place, date, who else was there, and who knows about it. Keep this record at home. Second, act promptly. Even under the new provisions of the law, you do not have much time. And finally, get in touch with an experienced employment lawyer. Reach out to Kilgore & Kilgore by filling out a form and sending it to us for a free initial consultation. Click here to get the conversation started contact Kilgore & Kilgore.

My Former Employer Has Enforced a Non-Compete Agreement against Me. How Can a Lawyer Help?

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Although your services were once seen as essential to the company’s success, your former employer has now terminated your employment contract. Unfortunately, the only job prospects you have are in the same industry and same geographical area. Your former company nonetheless insists that it will enforce the terms of the non-compete, non-solicitation, or forfeiture provisions in your employment agreement. After years of building a career, the prospect of starting over is less than appealing, and retirement is still a long way off.

Should things get to the lawsuit stage, the former employer’s first move might be to seek a temporary restraining order (TRO). A TRO would prevent you, the departing executive, from taking a new job pending resolution of the lawsuit. That may be more than enough to scare a new employer away. It can seem like an impossible bind.

This is a tough situation. Texas, unlike some other states, favors enforcement of these restrictive covenants. This remains true even in the face of the Biden administration’s recent Executive Order Promoting Competition in the American Economy, signed on July 9, 2021, directing the FTC to examine potential federal rule changes affecting non-competes. To date, the employer-friendly rules remain in place, but there are still strategies that may soften the blow. This is the time to explore your legal options.

Our Texas Employment Lawyers Help Executives Negotiate, Review and Defend against the Enforcement of Non-Compete Agreements

First, a word to the wise. Do not sign an employment agreement until you have had a Texas employment lawyer review it. That is the best chance you have to avoid these problems.

The Texas employment lawyers at Kilgore & Kilgore may be able help protect you against harsh or unfair enforcement of a non-compete agreement. Click this link to learn more about our Executive Compensation law practice. Use this link to read more about non-compete agreements. To get the conversation started about your situation, click here, and submit your information Contact Kilgore & Kilgore.

Employment Contract Details and the Non-Compete Agreement

Restrictions on competition come up in a variety of circumstances, and non-compete clauses are not always labeled as such. It is important, therefore, to have an employment lawyer evaluate your full employment agreement.

Start With the Letter of the Law

Paragraph 15.50(a) of the Texas Business and Commerce Code provides that:

“[A] covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made to the extent that it contains limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.”

There are a lot of terms to parse here, but the bottom line is that a non-compete agreement is enforceable in Texas if it is:
  • supported, at the time the agreement was made, by something of value (often money);
  • reasonable in time;
  • reasonable in geographic scope; and
  • reasonable in the activities to be restrained.

It would be misleading to announce a bright-line rule for any of these criteria. The court decisions on these issues are extremely fact and industry specific. This is the kind of detail about which you need to talk to an attorney. No two situations are the same.

Some other potential defensive strategies come from the basic common law of contracts. Among these (and this is not, by any means, an exclusive list) is the doctrine of “unclean hands,” which addresses issues about whether a contract may be assigned to another entity, and choice-of-law questions.

The Doctrine of Unclean Hands in Employment Agreements

The doctrine of unclean hands argues that the party claiming a breach of contract (in this case the former employer) is not entitled to a remedy (the TRO) if it was also responsible for committing the breach. The availability of this defense may depend on evidence of knowing and deliberate misdeeds.

Examples might include:

  • deception as to the terms of the contract or the consequences of the breach;
  • purposely and knowingly not responding to correspondence from the other party on time; or
  • breaking the contract with the employee on the assumption that the employee will not fulfill his or her side of the deal.

Assignability of an Employment Contract

Imagine a situation in which you went to work for ABC Corporation and signed an employment contract that included restrictive covenants. ABC Corporation is thereafter acquired by XYZ Company. As part of the purchase agreement, XYZ acquired all ABC’s contract rights, including your employment agreement. After valiant efforts, you decide that you hate working for XYZ, and so begin to look for another job.

You get an offer from LMNO Ltd., which is a direct competitor of XYZ, but was not of ABC. XYZ sues you and seeks a TRO to prevent you from working for LMNO. Can they do that? The answer is that it may depend on the nature of the services you provided to ABC and XYZ.

Some courts have found that, where an employee does not explicitly agree that his or her employment contract is assignable to a purchaser, and the services provided to the company are personal services – unique to the employee – then the employment agreement may not be assignable. As above, this is a highly fact-specific situation.

Choice of Law and the Non-Complete Agreement

Another interesting wrinkle has to do with which state’s law is to be applied in determining the enforceability of the employment contract. When it comes to non-compete agreements, Texas law is particularly employer friendly. Some other states, like California, hold that non-compete agreements are unenforceable. Many states’ laws fall somewhere in between these poles.

Most Texas non-compete agreements specify that Texas law is to be applied. In Cardoni v. Prosperity Bank, the Fifth Circuit Court of Appeals determined that Oklahoma law applied, rather than Texas law, as provided in the parties’ choice-of-law provision. The decision was the product of a two-step analysis.

First, the court determined that Oklahoma law had a more significant relationship to the employment agreements in question. Therefore, Oklahoma law would have applied had there been no Texas choice-of-law provision in the agreements.

Even with the choice-of-law provision in place, however, Oklahoma had a materially greater interest than Texas because of a fundamental public policy in Oklahoma against enforcement of non-compete agreements. The decision, although it dates from 2015, seems to suggest some possible avenues for employees hamstrung by the consequences of their employment agreements.

Our Employment Lawyers Can Help You Negotiate, Review, and Challenge Enforcement of a Non-compete Agreement or an Employment Agreement

Executives who are subject to restrictive covenants as part of their employment agreements may face unintended consequences when their employment situation changes. For an evaluation of your situation and help with responding in the best way, reach out to our employment lawyers by clicking on this link and submitting your contact information Contact Kilgore & Kilgore.

Termination for Cause Provisions in Employment Contracts

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Employment agreements for executives and other key employees typically address issues such as compensation and benefits, equity grants, length or term of employment and termination. The termination provisions, especially those dealing with termination for cause and the resulting forfeiture of severance benefits, may be the single greatest source of disputes between employers and executives whose employment is defined under the terms of a negotiated contract.

Even boilerplate termination for cause provisions, which allow the employer to terminate an executive’s employment early if he or she engages in certain acts or omissions against the employer’s interest, can erupt into hot legal controversy when dollars and reputation are on the line. It only gets worse when economic conditions or business conditions force tough decisions about downsizing.

Our Texas Employment Lawyers Help Executives and Employees with Employment Contracts, Negotiations, and Termination Disputes

If you are an executive anticipating the opportunity to work under a negotiated employment agreement, the Texas employment lawyers at Kilgore & Kilgore can help bargain for the best possible arrangement. Remember that problems, including termination issues, are best prevented. If, however, that opportunity has come and gone, our attorneys can help you and your employer resolve disputes. Click this link to learn more about our Executive Compensation law practice. Use this link to get the conversation started about your own compensation Contact Kilgore & Kilgore.

Termination for Cause Provisions in Employment Contracts

There are variations, of course, but a typical termination for cause clause in an employment contract might read something like this:

“Termination by the Company for Cause. The Company may, at any time and without notice, terminate the Executive “for cause.” Termination by the Company of the Executive “for cause” shall include but not be limited to termination based on any of the following grounds: (a) failure to perform the duties of the Employee’s position in a satisfactory manner; (b) fraud, misappropriation, embezzlement or acts of similar dishonesty; (c) conviction of a felony involving moral turpitude; (d) illegal use of drugs or excessive use of alcohol in the workplace; (e) intentional and willful misconduct that may subject the Company to criminal or civil liability; (f) breach of the Employee’s duty of loyalty, including the diversion or usurpation of corporate opportunities properly belonging to the Company; (g) willful disregard of Company policies and procedures; (h) breach of any of the material terms of this Agreement; and (i) insubordination or deliberate refusal to follow the instructions of the President of the Company.”

Undefined Terms in Employment Contracts That Can Help an Executive or Employee

Some of the triggering causes mentioned, like “conviction of a felony” are clearly identifiable. Others are far more subject to interpretation. Does “refusal to follow instructions” include refusal to commit an illegal act or refusal to commit an act that is unethical, for instance? What about retaliation against a whistleblower? What about termination that follows a pattern of conduct that is arguably discriminatory or harassing? What about the fallout from an office romance gone toxic?

The net effect is the same, however. Usually, no severance is payable to the executive when he or she is terminated for cause. The severance provisions in an employment contract are often key elements of the negotiation, particularly if the executive left a secure position to join a new organization. The damage to an executive’s professional reputation by a termination for cause can also have considerable impact as the executive finds himself or herself back on the job market.

Getting an Employment Contract into a Defensible Posture

It is best to prevent a dispute before one arises. The best opportunity is at the initial negotiation of the employment contract. The executive or employee should seek to have the termination for cause provisions drafted as narrowly as possible, to reduce the risk of undefined terms that could be interpreted expansively against the interests of the employee.

Another possible approach is to seek to include an “indemnity clause” in the employment contract. Indemnification is a legal concept in which one party is contractually obligated to compensate and defend the other party for any damage or liability incurred due to certain acts. Indemnity clauses are a way to shift financial liability. For example, an employer who agrees to indemnify an individual who is wrongly accused of breaching the terms of an employment contract might be required to pay the costs, expenses, and fees (including legal fees) incurred by the executive or employee. At best, an executive or employee should negotiate for advancement of attorney fees rather than reimbursement of expenses. Advancement is indemnification up-front for expenses incurred, with a promise to repay the amounts advanced if it is judicially determined that the executive or employee was not entitled to be indemnified.

A third defensive approach is to resist a growing trend among employers to contractually require that all disputes be submitted to arbitration. Although arbitration on its face seems to be a relatively neutral method of reducing the costs and time that employment disputes can cause, it may work against the complaining party. Arbitrators are often chosen by defendant employers. Their neutrality may be implicitly compromised by an understandable desire to be hired again in the future by that employer. Arbitration proceedings create no precedent. There is often little if any record of the proceedings and the decision of an arbitrator is difficult to appeal.

Of course, none of these approaches is foolproof and the suggestions may come too late for those already engaged in a dispute about for cause termination. Sometimes aggressive legal representation is the best, and perhaps only, remaining alternative.

Our Employment Lawyers Can Help You Craft and Negotiate a Mutually Acceptable Employment Contract or Deal with the Consequences of a For Cause Termination

Executives and employees whose compensation is determined on a negotiated contract basis may face unique challenges. For an evaluation of your situation, help in crafting the best possible employment contract, effective legal representation, and negotiation coaching, should you wish to handle you own negotiation, click this link to reach out to our employment lawyers at contact Kilgore & Kilgore.

Workplace Discrimination Based on Perceived Disability is Illegal

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For the last year, you have worked from home, as have all the employees at your job. Your employer has now required that all employees come back to the office. You are happy and eager to do so. In the meantime, however, you have been diagnosed with cancer, which is now finally controlled and in remission. Perhaps instead, you became pregnant. Rather than welcome you back to the office, your boss fires you. You are not disabled and have not asked for accommodations, but you experience discrimination as if you were. Frankly, from your employer’s point of view, you have become a bit of a burden. What now?

Call a Texas Employment Discrimination Lawyer at Kilgore & Kilgore

If you have questions about discrimination at work, even if you are not disabled, reach out to us. Click on this link to find out about our workplace discrimination and our pregnancy discrimination law practice. Use this link Contact Kilgore Law to get the conversation started. We offer no cost case evaluations.

The Law in Texas Regarding Workplace Disability Discrimination

Texas Labor Code Chapter 21 and the Americans with Disabilities Act (ADA) prohibit employers from discrimination against applicants or employees with disabilities in job application, procedures, conditions, and privileges of employment. Chapter 21 applies to private employers with 15 or more employees, and to all state government and local government entities no matter how many employees they have.

To be clear, disability discrimination may occur when an employee is terminated, suspended, denied training, denied promotion, or anything else that negatively affects the terms and conditions of employment because the employee is disabled or needs a reasonable accommodation. Disability discrimination can also occur in the job application process. For example, an employer cannot refuse to hire an applicant simply because the employee is disabled or is regarded as having a disability. Similarly, an employer may not be able to withdraw a job offer on learning that a prospective employee is pregnant.

The law places strict guidelines around an employer’s ability to ask about disabilities during the hiring process. In most cases, an employer cannot ask about an employee’s medical condition or disability as a contingency on making a job offer. An employer can only ask whether the employee can perform the job with or without reasonable accommodations. Someone may bring a lawsuit under the Texas Labor Code and the ADA if he or she has been discriminated against due to:

  • a physical or mental disability that substantially limits one or more major life activities;
  • a record of having a disability; or
  • is regarded as having a disability.

Discrimination Occurs When a Worker is Mistakenly Believed to Have a Disability

Under the Americans with Disabilities Amendments Act of 2008 (ADAAA), the rules surrounding the third of these fundamental requirements, often referred to as the regarded as or perceived as prong, are a little different than they are for other situations.

Ordinarily, to succeed in a workplace disability discrimination case, claimants must first show that they have a condition that limits their ability to perform a major life activity. Thereafter, the inquiry is about whether they are qualified and able to do the job with reasonable accommodations, whether the accommodations will cause undue hardship to the employer, and whether the employer engaged them in an interactive process to answer these questions.

In regarded as cases, an employee may allege discrimination without having to show that she is limited in a major life activity. However, regarded as claims are subject to two important limits. First, someone with an impairment that is transitory, and minor will not qualify as regarded as having a disability. That is presumably what sick leave is for. Secondly, an employer need not offer reasonable accommodations. In the imaginary scenario proposed at the outset, it is important that the employee did not claim to have a disability and was willing to return to the office.

Recent Regarded as Situations That Resulted in Discrimination Lawsuits with Favorable Court Decisions

Several cases shed light on how these claims work. In early 2021, for example, Pirtek USA LLC, a fluid power system company based in Florida agreed to pay $85,000 and furnish other relief to settle a perceived disability discrimination lawsuit filed by the EEOC. In late 2015, the employee was hospitalized for several weeks with pancreatitis, acute respiratory distress syndrome, and pneumonia. In March 2016, the employee’s physician cleared him to return to work without restrictions. Nevertheless, Pirtek fired him, claiming that he was a liability and that it was afraid he would be injured on the job.

“Too often employers rely upon unfounded assumptions about an employee’s ability to do his job, rather than the results of a medical examination,” said Robert Weisberg, regional attorney for the Miami District EEOC Office. In addition to the $85,000 in monetary relief, the three-year consent decree settling the lawsuit required Pirtek to develop and distribute a written policy against disability discrimination and to conduct anti-discrimination training for management and human resources personnel.

Another case, Cannon v. Jacob Field Servs. N. AM., Inc. serves as an example of the way perceived disability cases that do not settle may proceed through the court system. The Fifth Circuit, without resolving an underlying discrimination claim, ultimately held that a job applicant whose condition did not qualify as a disability could claim that he had been discriminated against based on a perceived disability. Jacobs Field Services (JFS), a construction company, offered Michael Cannon a job as a field engineer at a Colorado mine site. It revoked the offer shortly after learning that Cannon had a rotator cuff impairment that prevented him from lifting his right arm above the shoulder.

Cannon filed a complaint with the EEOC, which ultimately concluded that JFS engaged in disability discrimination because, among other things, it had failed to engage with Cannon in an interactive process that would have allowed further fact finding about his injury and any job limitations. The EEOC, on Cannon’s behalf, filed suit in the District Court. The District Court granted summary judgment in favor of JFS, holding that Cannon’s rotator cuff injury was not a disability under the ADA. It also found that even if he were disabled, he was not qualified for the job because of his movement limitations. The District Court never reached Cannon’s claim that JFS had failed to grant him reasonable accommodations.

The Fifth Circuit reversed the District Court, holding that internal communications at JFS supported a finding that the construction company viewed his shoulder injury as a disability, however erroneously, under the terms of the law. Cannon was therefore permitted to claim that he had experience discrimination in the job application process because he was regarded as having a disability. The Fifth Circuit remanded the case to the District Court for further proceedings.

What About COVID-19 Implications?

That is the looming question. The pandemic and work from home arrangements have scrambled the employment landscape in ways that are still to be fully understood. Some employees will be reluctant to give up the benefits of work from home arrangements; employers may re-think the need for large and expensive office space. The issue of workplace accommodations seems to have taken on a life separate from disability discrimination law. Employment lawyers with extensive experience may be better positioned to represent employees creatively in this rapidly changing situation.

Reach out to our Employment Discrimination Attorneys for Legal Help

Our Texas employment lawyers have years of far-ranging experience with employment disputes, including disability and other discrimination claims. Use this link to reach us Contact Us with your questions and concerns.

2021 Executive Compensation Considerations and Strategy Challenges for CEOs and Other Top Executives

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With the pandemic and associated business disruptions, employers are widely advised to take a hard look at executive compensation. If your executive compensation is determined on a negotiated contract basis, now is an excellent time to review it. Employers are reviewing details like salary, deferred compensation agreements, performance-based awards, non-compete agreements, severance packages, stock options, stock prices, retirement, and equity incentives.

Many businesses face extraordinary challenges in 2021. Last year was one that a lot of Texans and companies located in Texas would like to forget. This year has not been smooth sailing either. The February freeze, the personal suffering, and business disruption it caused made a rough start to the year for the energy sector and many companies in Texas. Uncertain remains the watchword, not just in the Texas economy, but also worldwide. CEOs and other top executives should prepare themselves with plans of their own. The best survival strategy may be information, planning, and negotiating based on experience and expertise.

Our Texas Employment Lawyers Help CEOs and Other Top Executives Negotiate Their Executive Compensation Packages

If your company has or may be planning to restructure your compensation arrangement, the Texas employment lawyers at Kilgore & Kilgore can help you assess your situation and craft the best possible package for the future. Click this link to learn more about our Executive Compensation law practice. Use this link to get the conversation started about your own compensation Contact Kilgore & Kilgore. Every situation is different, so there is no one strategy. Here, however are some of the challenges and opportunities we see on the horizon.

Salary Reductions and Strategies for Executive Compensation

A study by the Corporate Governance Research Initiative at the Stanford Graduate School of Business and the Rock Center for Corporate Governance at Stanford University reported that, among those surveyed, many companies have cut CEO salaries. A smaller percentage reduced either deferred salary payments or required or offered an exchange of salary for equity. Many a company receiving stimulus aid under the CARES Act were subject to significant limits on the compensation paid to officers and other highly paid employees.

Executives, appreciating that temporary reductions may not be avoidable, should still look for an end date and for plans to restore lost compensation. Employers, equally sensitive to the risk of losing key executives to competitors, may be willing to consider creative ways for top employees to earn back salary reductions through future incentive payments.

Bonus Awards and Incentive Payments – Moving the Measure in Executive Compensation

Annual bonus awards and longer-term incentive payments are generally dependent on the achievement of certain pre-set goals. The economic climate may have made some of these simply impossible; so, it may be to an executive’s benefit – at least for 2021 – to change the measuring stick used to assess performance.

To motivate and retain key executives, many companies have been willing to amend critical metrics – for instance, by changing financial performance metrics to strategic metrics, including the achievement of diversity, equality, and inclusion goals. Other companies agree to re-set goals later in the year or in on an adjustable scale that considers stock prices, revenue projections, and extraordinary events. Others may be willing to set a broader range for performance targets. When confronted with a lower maximum payout, executives may be able to argue for a decrease in the eligibility threshold for receiving a performance award. As uncertain as the economy may look, there may be work-arounds.

Stock Awards and Stock Options

Many executives have suffered significant losses because the value of their employer stocks dropped. Executives holding shares of employer stock cannot often sell their interest in company stock at will, so they are, in a sense, captive investors. Some commentators have suggested that it is unfair to expect them to bear these losses without mitigation of some sort, such as supplemental awards later. The rate at which an executive’s interest in equity vests is often performance-based, rather than time-based. Usually this works to an executive’s benefit. In extraordinary situations like a pandemic, however, negotiating for time-based vesting may be the better choice.

Change in Control and Severance Agreements

The grim truth, though, is that the financial challenges of 2020 will force some companies to face painful restructuring decisions. Others may have become acquisition targets. Unwanted as these changes may be, there is no need for them to be a surprise. Now may be the time for high-level employees to review their financial protections in the event of a change in control or termination. It may also be time to review the terms of non-compete agreements.

With respect to severance agreements, it is important to consider whether and how the benefit plans are subject to the Employee Retirement Income Security Act (ERISA) and Internal Revenue Service Code Section 409A, and, depending on how post-termination health benefits are provided, determine any continuing health benefits compliance issues under COBRA.

Our Employment Lawyers Can Help You Develop Personalized Executive Compensation Strategies

Those whose compensation is determined on a negotiated contract basis are challenged in 2021 because of the fluctuations in the 2020 economy. There is no assurance that the new normal will look much like the old one. For an evaluation of your compensation package and developing a negotiating strategy favorable to you, reach out to our employment lawyers at contact Kilgore & Kilgore.