Results-Oriented, Board Certified Attorneys

Who’s In Charge Here? Issues Of Concern For Poas As Employer

Attorney

I.     A 30,000 foot view

Most POA attorneys, in their daily practices, rarely have to deal with employment issues because most of their clients do not have employees. As all of you know, POAs are typically managed by management companies which do have employees. However, increasingly, especially with larger Associations, many Boards of Directors are choosing to take management of the Association in-house and hire their own employees to handle tasks historically reserved for management companies.  In that scenario, you, as the Association’s attorney, may be asked for your opinion on the relative merits and disadvantages of such an arrangement.  One of the purposes of this paper is to equip you with the tools necessary to make an intelligent evaluation of that potential transition.  There are a myriad of issues to consider when making that evaluation, and hopefully this paper will help you identify the major ones that can and will have a dramatic effect on the day to day operations of an Association which chooses to have employees.

II.   THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION:

A.    In General.
The Equal Employment Opportunity Commission (“EEOC”)[1] is responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or an employee due to a person’s race, color, religion, sex (including pregnancy, transgender status, and sexual orientation), national origin, age (40 or older), disability or genetic information. Most employers, including labor unions and employment agencies, are covered by EEOC laws if they have fifteen (15) or more employees while a higher threshold of twenty (20) employees is utilized in age discrimination cases.  Federal EEOC laws apply to all types of work situations, including hiring, firing, promotions, harassment, training, wages, and benefits.

B.    Laws Enforced by the EEOC.
The laws enforced by the EEOC are as follows:

1.    Title VII of the Civil Rights Act of 1964 (“Title VII of the CRA”) [2]

Title VII of the CRA makes it illegal to discriminate against someone on the basis of race, color, religion, national origin, or sex.  The law also makes it illegal to retaliate against a person because the person complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit. Title VII of the CRA also requires employers to reasonably accommodate applicants’ and employees’ sincerely held religious practices, unless doing so would impose an undue hardship on the operation of the employer’s business.

2.    The Pregnancy Discrimination Act (“PDA”)[3]

The PDA amended Title VII of the CRA to make it illegal to discriminate against a woman because of pregnancy, childbirth, or a medical condition related to pregnancy or childbirth. The PDA also makes it illegal to retaliate against a person because the person complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit.

3.    The Equal Pay Act of 1963 (“EPA”)[4]

The EPA makes it illegal to pay different wages to men and women if they perform equal work in the same workplace. The EPA also makes it illegal to retaliate against a person because the person complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit.

4.    The Age Discrimination in Employment Act of 1967 (“ADEA”)[5]

The ADEA protects people who are 40 or older from discrimination because of age. The law also makes it illegal to retaliate against a person because the person complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit.

5.    Americans with Disabilities Act of 1990 (“ADA”)[6]

The ADA makes it illegal to discriminate against a qualified person with a disability in the private sector as well as state and local governments. The ADA also makes it illegal to retaliate against a person because the person complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit. The ADA further requires that employers reasonably accommodate the known physical or mental limitations of an otherwise qualified individual with a disability who is an applicant or employee, unless doing so would impose an undue hardship on the operation of the employer’s business.

6.    Civil Rights Act of 1991, Sections 102 and 103 (“CRA”)[7]

Among other things, this law amends Title VII of the CRA and the ADA to permit jury trials and compensatory and punitive damage awards in intentional discrimination cases.

7.    Rehabilitation Act of 1973, Sections 501 and 505 (“Rehab Act”)[8]

This law makes it illegal to discriminate against a qualified person with a disability in the federal government and to retaliate against a person because they complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit. Under this law, employers are also required to reasonably accommodate the known physical or mental limitations of an otherwise qualified individual with a disability who is an applicant or employee, unless doing so would impose an undue hardship on the operation of the employer’s business.

8.    The Genetic Information Nondiscrimination Act of 2008 (“GINA”)[9]

GINA makes it illegal to discriminate against employees or applicants because of genetic information. Genetic information includes information about an individual’s genetic tests and the genetic tests of an individual’s family members, as well as information about any disease, disorder, or condition of an individual’s family members (i.e., an individual’s family medical history). GINA also makes it illegal to retaliate against a person because the person complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit.   

C.    Evidentiary Test for Discrimination

1.    McDonnell Douglas Burden-Shifting Analysis

The evidentiary framework used to analyze whether a plaintiff’s discrimination claim for disparate treatment should survive a defendant employer’s motion for summary judgment is provided by the McDonnell Douglas burden-shifting analysis.  This test takes its name from the 1973 U.S. Supreme Court case of McDonnell Douglas Corp. v. Green and is applied when a plaintiff lacks direct evidence of discrimination.[10]

2.    Analysis Steps.

For a plaintiff to make out a prima facie case under the traditional McDonnell Douglas burden-shifting analysis, the following facts should be demonstrated:

  1. Plaintiff is a member of a protected class;
  2. Plaintiff was qualified for and applied for an available position;
  3. Despite being qualified, plaintiff was rejected for the position; and
  4. The position remained available after plaintiff’s rejection, and the defendant employer continued to seek applicants from persons of plaintiff’s qualifications.
  5. The burden of production then shifts to the defendant employer to articulate a legitimate, nondiscriminatory reason for the employment action.
  6. The plaintiff must then demonstrate that the employer’s reason was pretext for discrimination.[11]

Although the McDonnell Douglas burden-shifting framework was originally created for claims alleging discriminatory failure to hire on the basis of race under Title VII of the Civil Rights Act of 1964, courts have applied the analysis to various other employment claims under Title VII such as failure to promote, retaliation and termination. It has also been used to analyze claims of discrimination under several other federal laws prohibiting employment discrimination such as the Americans with Disabilities Act and the Age Discrimination in Employment Act.

III.  Wages and the Fair Labor Standards Act

A.    In General.
The Fair Labor Standards Act (“FLSA”)[12] establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments. Covered nonexempt workers are entitled to a minimum wage of not less than $7.25 per hour effective July 24, 2009, and overtime pay at a rate not less than one and one-half times the regular rate of pay after 40 hours of work in a workweek.[13]

B.    Specific Requirements.

  1. FLSA Minimum Wage: The federal minimum wage is $7.25 per hour effective July 24, 2009. Many states also have minimum wage laws. In cases where an employee is subject to both State and Federal minimum wage laws, the employee is entitled to the higher minimum wage.
  2. FLSA Overtime: Covered nonexempt employees must receive overtime pay for hours worked over 40 per workweek (any fixed and regularly recurring period of 168 hours – seven consecutive 24-hour periods) at a rate not less than one and one-half times the regular rate of pay. There is no limit on the number of hours employees 16 years or older may work in any workweek. The FLSA does not require overtime pay for work on weekends, holidays, or regular days of rest, unless overtime is worked on such days.
  3. Hours Worked: Hours worked ordinarily include all the time during which an employee is required to be on the employer’s premises, on duty, or at a prescribed workplace.
  4. Recordkeeping: Employers must display an official poster outlining the requirements of the FLSA. Employers must also keep employee time and pay records.
  5. Child Labor: These provisions are designed to protect the educational opportunities of minors and prohibit their employment in jobs and under conditions detrimental to their health or well-being.

IV.  RECOMMENDED ADDITIONAL Insurance coverage

  1. Workers Compensation Insurance – A type of business insurance that reimburses employers for damages that must be paid to an employee for injuries incurred on the job in the course of their employment (also referred to as “Workers’ Comp” insurance). Specifically, this insurance helps pay for items such as medical expense, lost wages, vocation rehabilitation, death benefits, etc.  Workers’ Comp will not protect employers from employee lawsuits for gross negligence, malicious intent, discrimination, failure to promote, or wrongful termination, etc.  For cases such as these, employment practices liability insurance should be obtained.  (Please see Section IV.D. below.)
  2. Fidelity Insurance – A type of business insurance that protects employers against losses caused by the dishonesty or nonperformance of an employee. Under a fidelity insurance policy, an insurance company essentially agrees to guarantee the loyalty and honesty of an employee by promising to compensate the employer for losses incurred as a result of the employee’s disloyalty or dishonesty.
  3. Business Automobile Insurance – If a company owns a vehicle that is titled in the company’s name (for example, an HOA vehicle used for deed restriction violation inspections), then that commercial vehicle would need business car insurance for complete coverage.
  4. Employment Practices Liability Insurance (“EPL”) – a type of business insurance that covers employment-related claims for acts such as the following:
  1. discrimination
  2. harassment
  3. retaliation
  4. violation of the Family and Medical Leave Act
  5. wrongful discipline
  6. wrongful failure to promote
  7. wage and hour lawsuits
  8. wrongful termination, etc.

V.    HUMAN RESOURCES DEPARTMENT

A.    Primary Responsibilities
The primary responsibilities associated with human resource (“HR”) management include the following:

  1. job analysis and staffing
  2. organization and utilization of work force
  3. measurement and appraisal of work force performance
  4. implementation of reward systems for employees,
  5. compliance with discrimination laws
  6. professional development of workers
  7. maintenance of work force.

 

VI.  EMPLOYEE HANDBOOK (containing harassment and discrimination policies)

A.      The 10 Essentials in an effective Employee Handbook

  1. Company Overview, Vision, Mission, and Values
  2. Compensation, Benefits, and Perks
  3. Code of Conduct
  4. Anti-Discrimination and Equal Opportunity Policies
  5. Family and Medical Leave Policies
  6. Schedule, Hours of Operation, and Paid Time Off (PTO)
  7. Workplace Safety and Security

8.        Digital Conduct and Social Media Policy

9.        Nondisclosure and Conflicts of Interest

10.     Important Disclaimers

VII. HOW TO CONDUCT A PROPER HARASSMENT INVESTIGATION

A.    Hypothetical Factual Situation:

ABC Property Association Inc. has decided to hire its own employees as opposed to farming out its management duties to a management company. It now employs over fifteen (15) employees, including several staff members who work in the POA offices. “Harry Handsy”, an elected Board member, regularly comes into the office and attempts to micro-manage many of the functions of the POA traditionally handled by the POA’s employees. He particularly concentrates his attentions of the duties performed by attractive female employees. This morning, you as the POA’s attorney, receive a call from the in-house manager informing you that various female employees on staff have filed written complaints, alleging that Board member Harry Handsy has been inappropriate in his behavior toward them, including making crude comments and giving unsolicited back rubs “to help with the employees’ stress levels.” What do you do?

B.         Investigative Steps:

  1. Take all complaints seriously.
  2. Initiate a prompt investigation
  3. Protect confidentiality
  4. Create an investigation file.
  5. Take steps to prevent retaliation.
  6. Prepare to interview all appropriate parties.
  7. Interview the complainant.
  8. Interview witnesses.
  9. Interview the accused.
  10. Gather evidence.
  11. Evaluate credibility.
  12. Prepare a confidential report.
  13. Propose corrective action.
  14. Follow up with the accusers and the accused.

For your reference and convenience, we have attached hereto as Appendix A an investigation report worksheet which may be used for future employee investigations.

VIII.    ISSUES UNIQUE TO A POA HARASSMENT INVESTIGATION

A.        What if a Board member is the Accused?
In our hypothetical situation above, Harry Handsy is a Board Member, he is not an employee of the Association. What if, after your thorough investigation, you find that Harry did indeed commit all of the wrongdoings alleged by the Complainant? What then? You can’t fire him—he’s not an employee. Can you remove him from the Board?

B.         What do your governing documents say?
Obviously, you need to read all of the Association’s dedicatory instruments and your Association’s By-laws, but the CC&R’s will rarely address this type of situation.  More probable, but still rare, is the situation where the Association’s By-laws allow the Board itself to remove a Board member, without a community vote, for inappropriate behavior.  If, after reviewing all relevant Association documents, an owner vote is necessary and the Board cannot take any disciplinary action without a community-wide removal vote, what do you do then?

C.        Are there actions the Board can take, short of removal, without an Association vote?
Depending on the severity of the Board member’s actions, the remaining Board members may consider censure action, short of removal, which might be appropriate punishment. Passing a Board resolution that prohibits the accused Board member from going into the Association’s offices or being in close proximity to Association employees may be considered. However, enforcement, can be difficult at best.

D.        What if a community-wide vote becomes necessary?
Depending on the severity of the Board member’s actions, coupled with his refusal to voluntarily constrain his behavior even in the face of a Board resolution, your only option may be to hold a community wide vote to remove the Board member from office according to the voting requirements in your Association’s By-laws. Some issues to consider are as follows:

  1. How do you word the notice without potentially libeling the Board member?
  2. How aggressively do the remaining Board members campaign for removal?
  3. Do you hold a community wide informational meeting to discuss the issues?
  4. How does Texas Property Code Sec. 209.005(k) affect how you notice this matter?

Texas Property Code Sec. 209.005(k) provides that “except as provided by Subsection (l) and to the extent the information is provided in the meeting minutes, the property owners association is not required to release or allow inspection of any books or records that identify the dedicatory instrument violation history of an individual owner of an association, an owner’s personal financial information, including records of payment or nonpayment of amounts due the association, an owner’s contact information, other than the owner’s address, or information related to an employee of the association, including personnel files.  Information may be released in an aggregate or summary manner that would not identify an individual property owner.”  Board members should be careful when noticing and/or informing members of the allegations against the Board Member, that that they don’t inadvertently violate Section 209.005(k) by disclosing information that is in the complainant’s personnel file (e.g., the original complaint, any investigation notes, etc.).  It’s also important to note that Texas Property Code Sec. 209.005(k) does not apply to condominium associations.  The condominium equivalent to this statute will be codified at Texas Property Code Sec. 82.1141(j) and go into effect on September 1, 2021, as part of the new legislation passed by the 87th Texas Legislature.

  1. What if the Association’s By-Laws do not have a Board Member Removal Provision?

If there is no Board member removal provision in the By-Laws, it may be possible for them to refer to Texas Business Organizations Code Section 22.211(b) (the Texas Non-Profit Corporation Act) which provides that, “in the absence of a provision for removal in the certificate of formation or bylaws, a director may be removed from office, with or without cause, by the persons entitled to elect, designate, or appoint the director.  If the director was elected to office, removal requires an affirmative vote equal to the vote necessary to elect the director.” Thus, in the absence of a Board member removal provision in an Association’s governing documents, a Board Member may be removed from the Board by a vote of the membership with the same number of affirmative votes it took to elect him/her.

 

IX.  CONCLUSION

An Association’s decision to forego management company assistance and hire its own employees is a decision that should not be entered into lightly and should only be considered after doing extensive research and conducting an exhaustive cost/benefit analysis. The decision will significantly increase Board member involvement in the day-to-day operation of the Association and will create unique challenges for the POA attorney who is tasked with advising the Association along the way.

Good luck!

Investigation Report

[1] The Equal Employment Opportunity Commission was created by section 705 of the Civil Rights Act of 1964 (42 U.S.C. 2000e-4).

[2] Title VII of the Civil Rights Act of 1964 (Pub. L. 88-352) (Title VII), as amended, is set forth in 42 U.S.C. Section 2000e, et. seq. and prohibits discrimination on the basis of race, color, religion, national origin, or sex.  .

[3] The Pregnancy Discrimination Act of 1978 amends Section 701 of Title VII of the Civil Rights Act of 1964 and prohibits sex discrimination on the basis of pregnancy.

[4] Equal Pay Act of 1963 (Pub. L. 88-38) (“EPA), as amended, is set forth in 29 U.S.C. Section 206(d). The EPA is a part of the Fair Labor Standards Act of 1938 and prohibits sex-based wage discrimination between men and women in the same establishment who perform jobs that require substantially equal skill, effort, and responsibility under similar working conditions.

[5] Age Discrimination in Employment Act of 1967 (Pub. L. 90-202) as amended, is set forth in 29 U.S.C. Section 621, et. seq. and prohibits discrimination against individuals 40 and older. The Older Workers Benefit Protection Act (Pub. L. 101-433) amended several sections of the ADEA.  Section 115 of the Civil Rights Act of 1991 (P.L. 102-166) also amended section 7(e) of the ADEA as well (29 U. S.C. 626(e).

[6] Americans with Disabilities Act of 1990 (Pub. L. 101-336) Titles I and V as amended, is set forth in 42 U.S.C. Section 12101, et. seq. and prohibits discrimination on the basis of disability.

[7] The Civil Rights Act of 1991 (Pub. L. 102-166)  amends Title VII of the CRA by inserting Sections 102 and 103 to provide for the recovery of compensatory and punitive damages in cases of intentional violations of Title VII of the CRA, the Americans with Disabilities Act of 1990, and the Rehabilitation Act of 1973.

[8] Sections 501 and 505 of the Rehabilitation Act of 1973 (Pub. L. 93-112), as amended, is set forth in 29 U.S.C. 791, et. seq.  Section 501 prohibits employment discrimination against individuals with disabilities in the federal sector. Section 505 contains provisions governing remedies and attorney’s fees under Section 501.

[9] The Genetic Information Nondiscrimination Act of 2008 (Pub. L. 110-233) became effective on November 21, 2009 (i.e., 18 months after enactment on May 21, 2008) and prohibits discrimination on the basis of genetic information with respect to health insurance and employment.

[10] McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973).

[11] Id.

[12] Fair Labor Standards Act of 1938, 29 U.S.C. Section 201, et. seq., (Pub. L. 75–718).

[13] Id.