Articles & News


Big Right, The First Time – Sewall "Spike" C. Cutler, Jr
Every construction project starts with a bid (unless it’s a negotiated job, but how many of those are there?), so how a subcontractor bids a job is important.

Changes and Extras – Get Paid – Sewall "Spike" C. Cutler, Jr
Change order work is inevitable on just about every construction project, but for subcontractors, getting paid for that work can be a challenge! Following these few simple suggestions will be dramatically increase the chances of subcontractors actually getting paid for change order work.

How is that project financed – or, is it at all? – Sewall "Spike" C. Cutler, Jr

So you want to be an Insurer: Insurance; everyone hates it, and why now? – Sewall "Spike" C. Cutler, Jr
Insurance is one of those expenses subcontractors just hate to incur, because unless there is an actual claim, its pure expense with no immediate benefit.

Contractors Must Comply With State Law If Performing Disaster Remediation Work – Tami LaGrone

Arbitration Beware! – Sewall "Spike" C. Cutler, Jr
Arbitration is not always the better choice over litigation. Read on to find out why.


Think an ICE Audit or Raid Cannot Happen to You? Think Again

June 15, 2018

Think an ICE audit or raid cannot happen to you? Think again. In 2017, unauthorized worker arrests increased 30% over those made by ICE in 2016, hitting an all-time high. The biggest arrest numbers came from Florida, North Texas and Oklahoma. While business and legal professionals hoped the Trump administration would take a kinder, gentler approach to immigration enforcement, that has not been the case. During the Obama administration, ICE prioritized arrests to unauthorized workers with serious crime convictions; however, President Trump signed an executive order in 2017expanding ICE enforcement focus to unauthorized immigrants without criminal records. Arrests originating from the regional ICE office in Dallas were up 71% between 2016 and 2017, and it looks like 2018 will be a banner year. In early 2018, ICE Acting Direction Tom Horman advised that ICE raids were "likely to quintuple in 2018, targeting undocumented, noncriminal workers and their employers." ICE recently issued a worksite statement that outlined the three-prong approach it is taking with enforcements: 1)compliance through I-9 inspections, civil fines and referrals for debarment; 2) enforcement through the arrest of employers knowingly employing undocumented workers and through the arrest of unauthorized workers; and 3) outreach through the ICE Mutual Agreement between Government and Employers (IMAGE) program, to instill a culture of compliance and accountability.

On its website, ICE showcases examples of employers gone wild. During a 2017 investigation of Asplundh Tree Experts Co. in Philadelphia, ICE found that the company engaged in a scheme to unlawfully employ aliens in which the highest levels of management remained "willfully and blind" while lower level management hired and rehired employees they knew were ineligible to work in the U.S. The company paid an $80 million fine – the largest judgment ever issued by ICE. In just the first six months of 2018 alone, ICE has made significant arrests in California, New Jersey, Texas, Florida, Tennessee, and Minnesota. In March of this year, ICE arrested 89 criminal aliens and immigration violators in North Texas and Oklahoma, most of whom had criminal records. While ICE continues to target criminal aliens, noncriminal workers are getting caught in the sweeps like the 114 unauthorized workers arrested at an Ohio garden center on June 6th.

As the saying goes, the best defense is a good offense. Employers must be proactive when it comes to ICE. Without using E-Verify, employers cannot be certain whether their employees are unauthorized to work in the U.S. However, participating in E-Verify comes with its own set of issues and risks, and is only required if a company is a federal or state contractor. By conducting its due diligence by visually inspecting documents presented at the time of hire, employers meet federal verification requirements. Employers can minimize the impact of a surprise I-9 inspection by conducting their own in-house audit of I-9 forms and making corrections. Additionally, employers must refrain from rehiring workers terminated for unauthorized status unless the worker has become authorized. If an employer has been audited once, it will be audited by ICE again; and employers found to "knowingly" hire unauthorized workers will be assessed criminal penalties as well as civil fines. It does not look like ICE is slowing down any time soon so employers must meet potential verification issues head on.

Contact our firm for more information on how to survive an I-9 inspection or conducting an in-house audit.

DOL Appeals Bar to Obama-Era Overtime Rule

November 6, 2017

On October 30, 2017, the U.S. Department of Labor filed an appeal of the recent decision by a Texas judge to ban implementation of the Obama-era rule that would have extended overtime pay by nearly doubling the current FLSA salary threshold for exempt employees.

The DOL filed its appeal in the 5th Circuit on Monday but will ask the court to hold the appeal in abeyance while the DOL reviews more than 140,000 public comments and determines what the salary level should be.

The proposed overtime rule would have required employers to pay overtime to most salaried workers earning less than $47,476.00 annually; the current cut off for overtime pay is now at $23,660.00 per year.

During his confirmation hearing, DOL Secretary Alexander Acosta indicated that the DOL will potentially revise the rule since overtime rules have not been updated since 2004. The DOL is defending its authority to create the overtime rule but not the salary limit set by the Obama administration.

For now, employers should keep business as usual but be aware that rule changes may come in 2018.

The Top 10 OSHA Violations of 2017

October 6, 2017

The federal government’s fiscal year ended on September 30th and OSHA announced its top 10 violations of the fiscal year 2017:

  1. Fall Protection (Construction 29 CFR 1926.501) – OSHA reports that a total of 6,072 violations, including the most frequently reported failure to provide fall protection for unprotected edges and open sides in residential construction, and failure to provide fall protection on low-sloped roofs.
  2. Hazard Communication (29 CFR 1910.1200) – OSHA reports that a total of 4,176 violations with the most frequently reported as failure to have a written hazard communications program and failure to provide employee access to safety data sheets.
  3. Scaffolding (29 CFR 1926.451) – A total of $3,288 violations were reported to OSHA with the most reported as improper access to surfaces and lack of guardrails.
  4. Respiratory Protection (29 CFR 1910.134) – A total of 3,097 violations were reported with the most frequent violation of failure to establish a written respiratory protection program and failure to provide medical evaluations.
  5. Lockout/Tagout (29 CFR 1910.147) – Of the 2,877 violations reported, the most frequent was for employee training and failure to conduct periodic inspections.
  6. Ladders (Construction 29 CFR 1926.1053) – Of 2,241 total violations in the category, the most frequently reported as improper use of ladders, damaged ladders and using the top step.
  7. Powered Industrial Trucks (29 CFR 1910.178) — The most frequently reported violation out of 2,162 violations was employee training and refresher training.
  8. Machine Guarding (29 CFR 1910.212) –A total of 1,933 violations were reported with the most frequently reported as failure to guard point of operations.
  9. Fall Protection Training (Construction 19 CFR 1926.503) – A total of 1,523 violations were reported with the most frequent being failure to train employees in identifying fall hazards and proper use of fall protection equipment.
  10. Electrical (29 CFR 1910.305) – Of the 1,405 reported violations in this category, the most frequent was temporary wiring in lieu of permanent wiring."

OSHA Proposes to Extend Crane Operator Certification Requirement

September 11, 2017

In 2010 OSHA promulgated a final rule regulating cranes and derricks in the construction industry, "Cranes and Derricks in Construction, Subpart CC (29 C.F.R. 1926. 1440, et al.)". Shortly after the final rule was issued, OSHA published the "Small Entity Compliance Guide" on the new standard, which created conflict between OSHA and the stakeholders involved in the use of cranes, including employers, unions, and firm offering crane operator training and certification. In particular, OSHA took the position that an operator is qualified to operate a crane if certified for the "type and capacity" of equipment or for higher-capacity equipment of that type.

In November 2012, the International Union of Operating Engineers (IUOE) petitioned OSHA to reverse its interpretation and to amend the "capacity and type" language in Sections 1926.1427(b)(1)(ii)(B) and 1926.1427(b)(1), believing that crane capacity should not be used as a factor for operator certification. OSHA’s response was to hold a stakeholder meeting in April 2013 and gather additional information; and in May 2013, it proposed to extend the compliance date to November 10, 2017. In September 2014, after a public comment period, OSHA announced that it was allowing a three year extension for the crane operator certification requirements to November 10, 2017. During this extension period, OSHA intended to develop a new standard that addressed qualification requirements, including the role of operator certification. OSHA is now considering further extending the deadline to November 10, 2018 in order to address stakeholder concerns and allow further public comment. The current public comment period is through September 29, 2017.

Employer Responsibilities In Disasters

Many employers wonder what their responsibility is during a disaster. In particular, how does employer liability change in a "disaster" such as Hurricane Harvey versus inclement weather?

The top area for confusion and concern is the payment of wages in the context of a natural disaster. Under federal wage laws, Non-Exempt Employee are paid only for time worked, regardless of whether their absence is due to the employer closing the office/jobsite or the employee’s decision to stay home or evacuate. If the worksite is open and the employee leaves or fails to come in, the employee does not have to be paid for those work hours missed. An exception exists for employees on-call or waiting at the employer’s premises and unable to use their time for their own purposes. In such waiting/on-call situations, the employee must be paid for all time on premises. Exempt employees must be paid their full salary if the employer shuts down work because of adverse weather conditions for less than a full work week, or if the employee only works a partial day as a result of the employer’s decision to close. However, unless there is a company policy to the contrary, the employer can require the employee use his/her accrued paid-time-off ("PTO") for the absence. If the employee does not have available PTO, the employee is entitled to his/her full salary if the employer decides to close due to weather. Nevertheless, the employee does not have to be paid if the employer is open for business but the employee is absent for personal reasons. In such event, the employee can be required to use their accrued PTO. If the employer has a leave policy but the employee does not have any PTO available, the employee can be placed on unpaid leave, however the employer cannot deduct salaries for a partial-day absence, even though PTO balance deductions are allowed for partial-day absences. As a result, if an exempt employee without a leave balance misses half of a workday, the employer must pay that employee his/her salary for the entire day, with no partial deduction for the absence. Meanwhile, an employee with a leave balance in the same scenario could be required to use half a day of PTO to cover the absence.

Further, disasters may negatively impact payroll processing. Texas law requires that employees be paid twice a month for non-exempt employees and at least once per month for FLSA-exempt employees. The Texas Workforce Commission advises that in the event of a change to the employer’s designated payday as a result of disaster related processing issues, the employer should provide written notice to employees explaining the last old payday, the first new payday, and the next-following new payday. Employers must also provide written notice about any delays to wage payments or changes in the form of wage payments, such as issuing paper checks instead of making direct deposits. Employers might want to assist employees with pay-day advances or consider paying full or partial wages for a set duration, even when not required, to assist employees until government assistance is available, but such payments would be treated as wages for tax purposes for both the employer and employee.

Disasters may present an opportunity for employees to work from home or otherwise work remotely. Non-exempt employees must be paid for all time spent working remotely, even if the employee was not authorized. Exempt employees must also be paid their regular salary when working remotely, even if the exempt employee spends only a few minutes working remotely. The exempt employee can be required to use appropriate PTO for the balance of the time when he/she only works a partial workday.

Not all disasters are disasters. A disaster is not a "qualified disaster" unless the President of the United States declares it as such. Further, only governmental entities can issue a declaration of a "state of emergency." Employer duties do not change upon the declaration of a state of emergency. In fact, the Texas Labor Code protects employees from discharge or discrimination because of an evacuation pursuant to such a governmental order. The Texas Labor Code creates employer liability for an employee’s lost wages or benefits resulting from a violation. The statute is broadly interpreted to cover voluntary and well as mandatory evacuations, and does not actually define which government officials may issue such orders. Therefore, employers may not know about an evacuation order impacting its employees. In such event, employers should tread lightly and not take adverse action against its employees because of an evacuation work absence without specific information to the contrary that the absence was not disaster related.

Employers may want to assist their employees with disaster relief payments. Qualified disaster relief payments can be made to employees without incurring income or payroll tax consequences under IRS Section 139. However, to qualify as a "disaster relief payment," the amount or benefit must reimburse or pay reasonable and necessary personal, family, living or funeral expenses arising from a "qualified disaster," or reimburse or pay reasonable and necessary expenses resulting from the repair or rehabilitation of a personal residence or its contents, to the extent attributable to a qualified disaster. Employer disaster relief payments are applicable only to the extent not covered by insurance or otherwise.

If you have questions or need additional information, contact Cutler-Smith, P.C. for assistance.

Trump Administration Rescinds 2012 DACA Program


On September 5, 2017, Attorney General Jeff Sessions announced that the Deferred Action for Childhood Arrivals ("DACA"), created by executive order under the Obama administration, is unconstitutional and "rescinded." The DACA program was implemented in 2012 and provided deferred removal action for nearly 800,000 illegal immigrants for a renewable two-year term, work authorization and other benefits, including participation in the social security program. The recipients of the program were dubbed "Dreamers." Under the DACA program, individuals were able to request DACA status if they were under the age of 31 on June 15 2012, came to the U.S. before turning 16, have continuously lived in the country since June 15, 2007, have a high school diploma or GED certification, been honorably discharged from the military or still be in school, and do not have a criminal record. DACA did not confer legal status.

The Attorney General said in his statement that the Acting Department of Homeland Security Secretary Elaine Duke would initiate a wind down process. No current beneficiaries of the program would be affected before March 5, 2018; no applications filed after September 5th will be acted on; and all existing work permits will be honored until their date of expiration up to two full years from September 5, 2017.

The solution for protecting undocumented youth will now reside with Congress.

United States District Court of Eastern District of Texas Invalidates Department of Labor’s 2016 Overtime Rule

September 1, 2017

On August 31, 2017, Judge Amos Mazzant of the United States District Court in the Eastern District of Texas, ruled that the Department of Labor’s 2016 Overtime Rule is unlawful. The announcement came just one day after the United States 5th Circuit Court of Appeals granted to 60-day extension to the Department of Labor (the "DOL") to decide whether to appeal the November 2016 nationwide temporary injunction issued by Judge Mazzant in response to the DOL’s final overtime rule that would have been effective on December 1, 2016. Since that November ruling, the DOL has been unable to implement any of the proposed overtime changes.

In May 2016, the DOL issued its final overtime rule announcing, among other things, a historical change to the minimum annual salary requirement from $23,660 annually to $47,476. The change would effectively require all salaried workers earning less than $47,476 be automatically eligible for overtime, regardless of their duties and job function. Immediately after the DOL’s ruling, a 21-state coalition, including Texas, filed two lawsuits seeking an injunction to block the rule from taking effect. The final rule was to go into effect on December 1, 2016. Just days before the final rule went into effect, Judge Mazzant issued the injunction.

Overtime rules were established in 1938 when Congress enacted the Fair Labor Standards Act, creating the now-familiar structure (for most employees), broadly described as the existence of a minimum wage, subject to overtime pay at 150% thereof, for all hours above 40, worked in a given week, by a given employee. However, since 1938, employees engaged in a "bona fide Executive, Administrative, or Professional capacity" have been exempt from the overtime rules (The "EAP Exception").

Congress did not define "bona fide, executive, administrative, or professional," but it did delegate authority to establish such definitions to the Secretary of Labor (the "Secretary"), who, in turn, delegated to the DOL. Beginning in 2004, the DOL has used a three-part test to identify individuals subject to the EAP Exception: (i) payment on a salary basis; (ii) such salary being at least at the minimum salary level established by regulations (currently $23,660 annually); and (iii) performance of bona fide executive, administrative, or professional duties, as established by regulations.

In 2004, the overtime rules changed to increase the minimum annual salary level to $23,660. Under the 2016 Overtime Rule, minimum salary levels would increase from $23,660 annually to $47,476 annually. The clear result would have been a shift away from the traditional, duties-based analysis set forth in the statute, because all salaried employees paid less than $47,476 annually would be eligible for overtime, regardless of their job function. Additionally, the proposed Overtime Rule created an automatic updating mechanism, adjusting the minimum salary upward every three years, commencing January 1, 2020.

In making his latest ruling, Judge Mazzant found that the FLSA clearly expresses Congress’s unambiguous intent to define the EAP Exception with regard to job duties. The Court also found that the minimum salary requirement of the 2004 regulations is permissible, because it serves only to assist the DOL in identifying those employees whom Congress intended to exempt; but that shifting to a salary-only analysis was clearly beyond the DOL’s authority, since such a radical shift would be in opposition to Congress’s intent in applying the EAP Exception based on a job-duties analysis.

The DOL’s 2016 proposed Overtime Rule never went into effect, and the salary element of the traditional, three-point test remains at $455 per week/$23,660 per year, as well as the threshold for highly-compensated employees remains at $100,000 per year. However, depending on whether the DOL appeals Judge Mazzant’s first and second rulings, these, and other matters may change as a result of new court decisions and DOL rulings. The new Secretary of Labor nominee Alexander Acosta has expressed opinions that suggest he would support updating the overtime rules to some degree but has not gone into detail.

For now, employers are to continue under current overtime rules and encouraged to perform an internal audit of their current employee job title, functions, and salaries to be ready in the event of any changes.

Contact Cutler-Smith, P.C. with any questions or for any assistance in navigating these issues.

Have You Prepared Your Distracted Driving Policy?

August 30, 2017

Starting September 1 2017, Texas will institute a state-wide ban on texting and driving. It will be illegal to read or send text messages or post on social media while operating a moving vehicle. Drivers caught texting while the vehicle is in motion are subject to fines up to $100.00. The bill, dubbed the Alex Brown Memorial Act, was signed into law on June 6, 2107. Alex Brown was a 17 year old high school student who died in a car crash while texting. The new law will ban drivers from reading, writing or sending electronic message via electronic device while operating a moving vehicle. Drivers will still be allows to make and receive calls, unless otherwise prohibited. Use of Bluetooth and other hands-free devices is allowed and even encouraged. Use of a phone’s navigation system and music apps are allowed as well. The law does not preempt stricter hands-free ordinances currently enacted in several Texas cities.

We encourage employers to develop and implement an anti-distracted driving policy for their fleet drivers.

Labor and Employment Alert: Texas Supreme Court Rejects a Cause of Action for Compelled Self-Defamation

June 26, 2017

A defamation claim generally requires "publication" of a false and defamatory statement of fact to a third party. Publication occurs when the defamatory statement is communicated to a third person who can understand its defamatory import and who actually does so understand. Under the self-defamation theory, a former employee’s disclosure of a defamatory statement to a prospective employer can show "publication" because he or she is effectively compelled to publish the statement when asked why he or she left former employment.

In May 2017, and in a case of first impression, the Texas Supreme Court recently held that compelled self-defamation is not recognized under Texas law as either an element of a defamation claim or as an independent cause of action.

In Exxon Mobil Corp. v. Gilberto Rincones, Rincones was a technician working for an Exxon contractor and was terminated after testing positive for marijuana following a random drug test performed by a third-party administrator approved by Exxon. He claimed that he did not use illegal drugs, that the sample was not actually his, and that there had been "questionable testing procedures." He then offered another sample that had been tested by a private doctor, which was negative for marijuana (though the screening threshold was substantially higher than the one his employer had used). His employer refused to accept these results and Rincones did not complete a rehabilitation program as required to be reinstated. Rincones sued alleging, among other things, that the defendants had tortiously compelled self-defamation a result of having to report to future employers that he had been terminated for failing a drug test. The Texas Supreme Court rejected the self-defamation claim and "expressly decline[d] to recognize a theory of compelled self-defamation in Texas."

First, the Court reiterated that a plaintiff cannot recover for injuries as a result a publication if the plaintiff consented to, authorized, invited or procured that publication. The Court next explained that recognizing compelled self-defamation "would risk discouraging plaintiffs from mitigating damages to their own reputations." Otherwise, any employee who disagrees with his or her employer’s termination reason could unilaterally create an actionable tort against the employer, and the availability of increased damages might encourage an employee to publish a defamatory statement when that could have been avoided.

The Court also "fear[ed] that accepting the compelled self-defamation doctrine would unacceptably impinge on the at-will employment doctrine" and found that the claim is "incompatible with Texas’s at-will employment system." This is because a claim of compelled self-defamation would require employers to conduct investigations and make accurate findings before taking any action against an employee or risk being sued – and employers have no duty to conduct such an investigation under Texas law.

Finally, "recognizing compelled self-defamation could also stifle workplace communication by chilling honest evaluation and communication about employee performance, as employers strive to protect themselves from defamation claims by adopting policies of providing only ‘name, rank and serial number’ references."

Texas now joins with an emerging majority of state courts that have considered the issue and rejected compelled self-defamation, including those in Connecticut, Massachusetts, Hawaii, Tennessee, Iowa, Pennsylvania, and New York. Moreover, Colorado and Minnesota have limited the claim by statute.


Department Of Labor Withdraws Administrator’s Interpretations for Joint Employer and Independent Contractors

June 15, 2017

On June 7, 2017, Alexander Acosta, U.S. Secretary of Labor, announced an immediate withdrawal of two Wage and Hour Division Administrator’s Interpretations ("AIs") on join employment and independent contractor status issued by the Obama Administration. In January 2016, AI No. 2016-01 addressed joint employment under the Fair Labor Standards Act ("FLSA") and Migrant and Seasonal Agricultural Worker Protection Act ("MSPA"), and viewed as an attempt to expand the definition of joint employment. In July 2016, AI No. 2015-1 was issued to address the definition of independent contractors under the FLSA which many opponents viewed as an attempt to narrow those classifications.

The DOL made clear that removing these AIs does not change an employer’s legal responsibility under the FLSA or MSPA, as reflected in the long-standing DOL regulations and case law. However, withdrawing these AIs is likely to signal a policy shift in how the DOL interprets and enforces matters relating to joint employment and independent contractors.