Common Misconceptions in Employment Law: Not an April Fools Joke

Posted on April 1, 2013 in Consulting

I thought this April Fools Day would be a good time to clarify some common misconceptions in employment law. These are the situations when I most often hear from a client, “You must be joking.” In fact, I am not.

Myth 1: Non-competition agreements are unenforceable.

I cannot begin to tell you how many people have told me that non-competes are unenforceable in Texas. Usually, the question reflects wishful thinking of someone wanting to hire an applicant who signed a well written non-compete with his former employer. Texas courts will, however, enforce non-competes when appropriate. A number of factors determine when a non-compete will be enforced, including the reasonableness of the restrictions. Over the past few years, Texas courts have expanded on circumstances where a non-competition agreement will be enforced.

Here are a few of the more common misconceptions I hear about non-competition provisions:

• I got fired so the non-compete is void.

Wrong: The reason for separation of employment rarely determines the enforceability of a non-compete.

• Texas is a right to work state, so non-competes are void.

Wrong: “Right to work” has nothing to do with non-competes. In over simplified terms, “right to work” is a statute that prohibits collection of union dues as a condition of employment.

Myth 2: An offer letter is never a contract.

Companies often use offer letters in the hiring process. Sometimes, the offer letter is the only writing reflecting the terms of employment. Most often, at least in my experience, an offer letter will have a statement confirming the employment relationship is at-will. But sometimes a manager will modify the company’s form offer letter and add terms that alter the at-will relationship. For example, the manager and applicant might negotiate a severance in the offer letter or include a notice provision. In these circumstances, the offer letter might create contractual obligations that change the at-will relationship.

 Myth 3: Salaried employees do not get overtime.

 The Fair Labor Standards Act mandates payment of overtime to all “non-exempt” employees. DOL regulations enforcing the FLSA define “exempt” employees to include: (i) persons performing work in professional, executive and administrative positions and (ii) who are paid on a salary-basis of at least $455/week. The first part of the test requires that these persons perform certain duties. Some in the business world forget the first part of the test and spread the myth that being paid a salary alone is enough to exempt a person from overtime. This is false. Employers must make sure a person paid on a salary basis also meets the duties test.

Myth 4: Employee work-product belongs to the employee.

An employee’s work product created in the course of employment belongs to the employer and remains the company’s property after the employee leaves no matter the reason for separation of employment. I have, however, had many situations when employees fail to understand this basic premise. Similarly, employees believe – nearly universally – that the contact information they compile during employment belongs to them. This is also false.

 Myth 5: A company can bar employees from sharing wage and salary information.

Business owners hate employees discussing wages. Some companies adopt rules (written and unwritten) prohibiting employees from sharing information about wages and salary. Yet, few businesses understand, and even less want to acknowledge, that Section 7 of the National Labor Relations Act bars universal prohibitions against discussing wages, salaries, or other terms of employment. This provision protects employees’ rights to collectively bargain (i.e., form unions). The NLRA applies to a union workforce and in an open shop. (This is another common misconception in employment law.)

I hope you enjoyed this newsletter. I encourage you to send me thoughts on what you would like me to discuss in future newsletters.