Michele Harmon
Those rascals are moving to Texas. How will that affect the way Texas does business, or will it?
I want to start where I left off last month with the prospect of mergers and acquisitions and significant businesses moving to Texas to operate in a state more friendly to business expansion. To revisit layoffs, let’s start with the latest stimulus bill, and the fact that, because of the stimulus, Texas corporations like Southwest Airlines will not have to lay off employees in 2021. However, CEO Gary Kelly says the company will be overstaffed in many areas, and Southwest is encouraging employees to use voluntary time-off programs when available. I think he wants them to burn their paid time off. In what world without the government can you be overstaffed and continue to operate? These thoughts are all fascinating as we move forward into 2021 and beyond.
Moving on, what about those outsiders moving into Texas? The 2020 Census is not final, but the Census Bureau’s preview says Texas has grown in population more than any state, citing a total of 4,215,198, and we are not sure who got counted. When schools get back to normal, the real growth in immigration from wherever will be more evident. In 2020 some big players announced relocation of their headquarters to Texas. Charles Schwab is moving from San Francisco to Dallas. Apple is building a new campus in Austin, and Oracle, Hewlett Packard, and Tesla are moving to Texas.
What is Elon Musk doing to communicate what life is like in Texas? Does he know the Texas way?
If those companies are moving to Texas, then so will some of their employees. I hope the companies communicate that they are moving to Texas because the business growth potential and taxes are more favorable to their companies and their employees indirectly. Are you a little worried about what all those employees will do when they get here? How will they vote, and will they be happy about no more state income taxes, or will they be shocked at the amount of property taxes they will be paying on a home?
What will happen to the price of real estate? Even with the cost of housing being very high in Austin, that city is still a lot less expensive than the Bay area. What about public education? That is a difficult one because we live in the Permian Basin, where public education is struggling. Kudos to Ector County ISD for all they are trying to do to turn the ship.
What about some of the fundamental ways employers operate in Texas—specifically as these relate to employees and their benefits versus other states? Texas’s and California’s employment laws are very different. Texas employees have fewer “rights,” if you want to call them that, than California. The last thing we want is for California employment laws to become Texas employment laws. New Mexico’s employment laws are looking more and more like California every day. We don’t want it to creep over the border. Here are some critical differences that you may not want to see implemented in Texas.
1. Texas is a right to work state. Texans get to choose whether or not they want to join a labor union.
2. Texas is an employment-at-will state. You can terminate your employees at any time and for any reason or no reason at all. You cannot cross federal lines when terminating an employee, but wrongful termination is more challenging to prove in Texas than most think. Check with the Texas Workforce Commission if you want to avoid lawsuits over gray areas for at-will terminations.
3. We can ask a person their current salary in Texas. However, I recommend not asking a potential employee’s salary history. What difference does it make? You are supposed to be paying the person for their experience, education, and expertise for an identified job in an established pay family.
4. Paid sick leave is not required in Texas nor are breaks nor a lunch hour. That is not the way it is in many states.
5. “Ban the box” refers to the job application section where the applicant admits whether they have a criminal history. In Texas, we still allow this, but most states do not. Just FYI, if you have employees in New Mexico, you’d better get the criminal history background questions off your old paper application. However, Texas is not heartless, and we encourage you to hire people who have made mistakes in their past. There is a time limit of seven years for criminal background checks, and there is a Texas law to alleviate the employer’s liability concerns if an employee with a poor record makes a mistake. You remember that one, negligent hiring?
6. Paid time off (PTO): Texas is not required to pay out accrued unused paid time. However, many Texas employers do offer some PTO in their company policy (employee handbook). Your employee handbook must be specific.
7. Non-compete agreements: I saved this for last. Having your employee sign one in Texas is not the end-all-be-all. A good agreement goes by Goldilocks’s Rule, not too hot and not too cold. It cannot be unreasonably restrictive or overly broad. Three-year agreements fail. The agreement should be no longer than one year, be limited to a geographical area, and identify the work that they will not be able to do.
Why did I save non-competes for last? Well, they are not legal in California. The only non-compete of sorts in California is one about trade secrets. I do not mean to sound nasty about California, but what will people do when they get to Texas and get handed a non-compete? Will they sign it? Will their employment background knowledge work to change Texas’s employment laws and end the non-compete agreement?
There was a Bloomberg article by Noah Smith in January, and he reminds us of the differences in states with and without non-competes and their ability to grow with regards to the technology industry. He states that non-competes restrain workers’ ability to move between companies in an industry or start their own venture. Letting employees move between companies might spread ideas, and ideas are synergistic.
How do you feel when you cannot hire the best employee away from a competitor? Intellectual property laws and nondisclosure agreements will still protect your company from most of your worries. Mr. Smith mentioned some promising research that points out that non-competes slow growth and reduce wages. Supply and demand come to mind.
Reduced wages are another interesting point about what will happen to our new Texans. Are the employees moving to Texas taking a pay cut? I doubt it, but we also need to take into account the Pandemic. More employees will work from home. Many may stay in their current state of residence and make the trip to Dallas or Austin once per year.
The Wall Street Journal has an article about eliminating pay differences for where you work. You know… location pay. We know about that one; if they work and live in Midland, we need to pay them more than if they work and live in Lubbock. When said like that, it does not feel very nice. There are pros and cons to location pay, and I will save it for another day. However, what difference does the location make if you are working from home?
If they remain in California and work for a Texas company, they will pay California resident taxes and Texas nonresident taxes. What a tax nightmare but a booming business for my favorite Certified Public Accountants (CPAs). Could we be moving towards a different approach to income tax and pay structures with the increase of remote work? More to come.
To conclude, have you read Greenlights yet? If not, you need to because we all need a little practical advice and laughter these days.
“Your employees are the heart of your organization.” Dr. Michele Harmon is a Human Resource professional, supporting clients in Texas and New Mexico that range in size from five to more than 3,000 employees. Email: micheleharmon1@gmail.com.