TADC Employment Law Newsletter — Fall 2005

tadc employment law newsletter — fall 2005

R. Edward Perkins, Editor
Benjamin C. Connally, Assistant Editor
Adam Robison, Assistant Editor
Chris M. Knudsen, Assistant Editor
Sheehy Serpe & Ware, P.C. – Houston, Texas

I. TEXAS SUPREME COURT DECISIONS

A. Retaliatory Discharge – Sufficiency Of The Evidence

In Haggar Clothing Co. v. Hernandez, 164 S.W.3d 386 (Tex. 2005), Altagracia Hernandez was injured on the job while working for Haggar Clothing Company in February of 1991. Shortly thereafter, Hernandez took workers’ compensation leave and remained on leave until she received a letter from Haggar in February of 1992 terminating her employment pursuant to Haggar’s one year leave-of-absence policy. In response, Hernandez filed suit alleging that her termination constituted retaliation in violation of Section 451.001 of the Texas Labor Code.

At trial, the jury awarded Hernandez both punitive and compensatory damages. The Court of Appeals affirmed the judgment, holding that the evidence was both factually and legally sufficient. The court of appeals focused on evidence of Haggar’s policy of pressuring its employees and supervisors to not miss work, to not report workplace injuries, and to minimize workers’ compensation claims.

The Texas Supreme Court, however, held that the foregoing evidence constituted no evidence. The Court reiterated its holding in Continental Coffee Products Co. v. Cazarez, 937 S.W.2d 444, 450 (Tex. 1996), that “an employer who terminates an employee pursuant to the uniform enforcement of a reasonable absence-control provision will not be liable for retaliatory discharge.” Thus, the Texas Supreme Court found the evidence that Haggar pressured its employees to not miss work, to not report workplace injuries, and to minimize workers’ compensation claims was irrelevant to the case.

Instead, the Court stated that the only important question was whether Haggar’s enforcement of its one-year leave-of-absence policy was uniform and reasonable. Because Hernandez only contended that the policy was not uniformly applied and did not argue that the policy was unreasonable, the Court focused exclusively on the issue of uniformity. Hernandez argued to the Court that the fact that Gonzalez, another similarly situated Haggar employee, was not terminated pursuant to the leave-of-absence policy constituted sufficient circumstantial evidence to warrant affirming the judgment. The Supreme Court disagreed. Specifically, it noted that the Gonzalez event occurred two years after Hernandez was terminated. In addition, Gonzalez, unlike Hernandez, was not paid during his absence from employment. For these reasons, the Court held:

[W]hile an employer’s discriminatory application of an absence-control policy may provide circumstantial evidence of retaliatory conduct, see Cazarez, 937 S.W.2d at 451, the Gonzalez example does not amount to such circumstantial evidence in this case.

Accordingly, the Court reversed the judgment, and rendered that Hernandez take-nothing.

B. Commission Contracts – Repayment

In SAS Institute, Inc. v. Breitenfeld, 167 S.W.3d 840 (Tex. 2005), John Breitenfeld sold SAS software to Methodist Healthcare System for $1 million in December 2001. In February and March 2002, pursuant to his commission contract, SAS paid him a substantial bonus. However, in April 2002, Methodist canceled its order. Breitenfeld resigned from SAS in June 2002 without refunding the bonus, and SAS sued Breitenfeld to recover the bonus.

SAS argued that the commission contract, read as a whole, unambiguously requires repayment of the bonus. The Court agreed and found that the intent of a contract is not changed simply because the circumstances do not precisely match those anticipated by the contract. In this case, the Court found that the contract directly addressed scenarios in which the employee would pay back the bonus if the purchaser cancelled the sale after the employee ceased working for SAS, or SAS would deduct the bonus from future pay if the employee still worked for SAS when the purchaser cancelled. The parties clearly agreed SAS only owed a bonus on a completed and uncancelled sale. The Court concluded that, because this was the parties’ intent, Breitenfeld owed SAS repayment of the bonus.

II. Texas Appellate Court Decisions

A. At-Will Employment – Modification

In El Expreso v. Zendejas, No. 01-03-00795-CV, 2005 WL 729449 (Tex. App.—Houston [1st Dist.] March 31, 2005, no pet. h.), Robert Zendejas sued his employer for wrongful termination and breach of contract. During his employment, Zendejas attempted to ensure that El Expreso complied with certain transportation safety laws; however, he was concerned that he would be terminated for doing so. His supervisor, on more than one occasion, verbally assured Zendejas that he would not be terminated for upholding safety laws. Despite these assurances, El Expreso terminated Zendejas. At trial, the jury found: (1) the parties had agreed Zendejas would not be terminated for trying to maintain El Expreso’s compliance with safety regulations; and (2) Zendejas had been terminated for precisely that reason.

On appeal, El Expreso argued that the supervisor’s vague statements towards Zendejas did not constitute a modification/exception to his at-will status. The Houston Court of Appeals reiterated the holdings in Miksch v. Exxon Corp., 979 S.W.2d 700 (Tex. App.—Houston [14th Dist.] 1998, pet. denied), and Montgomery County Hospital Dist. v. Brown, 965 S.W.2d 501 (Tex. 1998) by finding that the at-will status of an employee may be modified if the employer unequivocally indicates a definite intent to be bound not to terminate the employee under certain circumstances. However, “[g]eneral, indefinite statements will not limit an employer’s right to discharge an employee.” Thus, an agreement to modify the at-will employment relationship must be (1) expressed, rather than implied, and (2) clear and specific. “An employer’s oral statements may not modify an employee’s at-will status unless there is a definite, stated intention to do so.”

The court agreed that the statements made by Zendejas’ supervisor to Zendejas were sufficiently clear to modify his at-will status. Moreover, the fact that Zendejas sought out these assurances provided further evidence of clarity.

B. At-Will Employment – Sabine Pilot exception

In Bryant v. Lucent Technologies, No. 10-03-00330-CV, 2005 WL 2155196 (Tex. App.—Waco September 7, 2005, no pet. h.), Jane Bryant filed suit against Lucent Technologies alleging several causes of action, including wrongful termination. Bryant was an at-will employee; however, she alleged a cause of action under the Sabine Pilot exception.

Under Sabine Pilot Service, Inc. v. Hauck, 687 S.W.2d 733 (Tex.1985), an at-will employee may sue for wrongful termination if the sole reason for the termination was that the employee refused to perform an illegal act which would subject the employee to criminal liability. In this case, Bryant alleged that the Sabine Pilot exception applied because she refused to violate the price discrimination prohibitions set forth by the Robinson-Patman Act, 15 U.S.C. §§ 13, 13a. Bryant alleged that Lucent required her to provide sales leads, at no cost, to certain dealers but charge other dealers for this information. The Waco Court of Appeals held that “sales leads” do not constitute goods or commodities, and therefore, the Robinson-Patman Act does not apply. Thus, the trial court’s directed verdict on Bryant’s wrongful termination claim was upheld.

C. Whistleblower Act – Authorized Official

In Potter Co. v. Parton, No. 07-03-0338-CV, 2005 WL 1355111 (Tex. App.—Amarillo June 8, 2005, no pet. h.), Parton filed suit against Potter County for violating the Texas Whistleblower Act, Tex. Gov’t Code Ann. §§ 554.001-010 (Vernon 2004). Parton contended that he was terminated for reporting certain criminal violations committed by his supervisor and inmates. Parton worked for Potter County Road and Bridge Department. Both Parton and his supervisor obtained Texas Jailer Licenses for the limited purpose of allowing them to oversee inmates assigned to work for the department. Parton believed that the inmates and his supervisor were committing various criminal acts. Accordingly, he reported the matter to his supervisor who was the same supervisor that Parton believed had been engaging in the foregoing criminal acts. Parton contended that his supervisor had a duty to investigate the violations due to his status as a licensed jailer. He also believed that his supervisor had a duty to report the matter to the sheriff’s department.

In response to Parton’s suit, Potter County filed a plea to the jurisdiction, alleging that Parton’s claims were barred by its sovereign immunity. Specifically, the County contended, inter alia, that Parton failed to report the violations to an appropriate law enforcement authority as required by Section 554.002 of the Texas Government Code. Tex. Gov’t Code Ann. § 554.002 (Vernon 2004). The trial court denied the plea, and the County filed this interlocutory appeal to the Amarillo court of appeals.

The Amarillo court noted that a party suing a governmental entity has the burden of establishing that the governmental entity waived its sovereign immunity. To do so, the plaintiff must allege facts stating a claim is within the scope of the statutory waiver. Specifically, this requires that the plaintiff allege that he made a report to an appropriate law enforcement authority. Parton argued that his supervisor, who was licensed as a jailer, constituted an appropriate law enforcement authority. Alternatively, he argued that, even if his supervisor lacked the appropriate authority under the Act, he had a good faith belief that his supervisor possessed appropriate authority.

The Whistleblower Act permits a plaintiff to satisfy the reporting requirement by showing that he, in good faith, believed that the person to whom the report was made was an appropriate authority. However, the court pointed out that the good faith belief includes both a subjective and objective component. Here, the court held Parton’s belief that his supervisor constituted an appropriate law enforcement authority was not objectively reasonable. Specifically, the court reasoned that Parton’s supervisor “was not a peace officer, was not an employee of the sheriff’s department, and was not acting in the capacity of a representative of the sheriff’s department.” Accordingly, the court held that a person with Parton’s knowledge, training, and experience could not reasonably and objectively believe, under the circumstances, that: (1) his supervisor’s being a licensed jailer vested him with more authority to investigate the alleged crimes than his supervisor’s position with the county, or (2) his report to the very supervisor, who he had accused of committing the alleged crimes, was an appropriate authority. Accordingly, the court held that “[b]ecause Parton’s allegations did not show an objectively reasonable belief that he reported a violation to an appropriate law enforcement authority as required by § 554.002(a), the Act’s waiver of sovereign immunity was not applicable to Parton’s claim.”

tadc employment law newsletter — fall 2005

R. Edward Perkins, Editor
Benjamin C. Connally, Assistant Editor
Adam Robison, Assistant Editor
Chris M. Knudsen, Assistant Editor
Sheehy Serpe & Ware, P.C. – Houston, Texas

I. TEXAS SUPREME COURT DECISIONS

A. Retaliatory Discharge – Sufficiency Of The Evidence

In Haggar Clothing Co. v. Hernandez, 164 S.W.3d 386 (Tex. 2005), Altagracia Hernandez was injured on the job while working for Haggar Clothing Company in February of 1991. Shortly thereafter, Hernandez took workers’ compensation leave and remained on leave until she received a letter from Haggar in February of 1992 terminating her employment pursuant to Haggar’s one year leave-of-absence policy. In response, Hernandez filed suit alleging that her termination constituted retaliation in violation of Section 451.001 of the Texas Labor Code.

At trial, the jury awarded Hernandez both punitive and compensatory damages. The Court of Appeals affirmed the judgment, holding that the evidence was both factually and legally sufficient. The court of appeals focused on evidence of Haggar’s policy of pressuring its employees and supervisors to not miss work, to not report workplace injuries, and to minimize workers’ compensation claims.

The Texas Supreme Court, however, held that the foregoing evidence constituted no evidence. The Court reiterated its holding in Continental Coffee Products Co. v. Cazarez, 937 S.W.2d 444, 450 (Tex. 1996), that “an employer who terminates an employee pursuant to the uniform enforcement of a reasonable absence-control provision will not be liable for retaliatory discharge.” Thus, the Texas Supreme Court found the evidence that Haggar pressured its employees to not miss work, to not report workplace injuries, and to minimize workers’ compensation claims was irrelevant to the case.

Instead, the Court stated that the only important question was whether Haggar’s enforcement of its one-year leave-of-absence policy was uniform and reasonable. Because Hernandez only contended that the policy was not uniformly applied and did not argue that the policy was unreasonable, the Court focused exclusively on the issue of uniformity. Hernandez argued to the Court that the fact that Gonzalez, another similarly situated Haggar employee, was not terminated pursuant to the leave-of-absence policy constituted sufficient circumstantial evidence to warrant affirming the judgment. The Supreme Court disagreed. Specifically, it noted that the Gonzalez event occurred two years after Hernandez was terminated. In addition, Gonzalez, unlike Hernandez, was not paid during his absence from employment. For these reasons, the Court held:

[W]hile an employer’s discriminatory application of an absence-control policy may provide circumstantial evidence of retaliatory conduct, see Cazarez, 937 S.W.2d at 451, the Gonzalez example does not amount to such circumstantial evidence in this case.

Accordingly, the Court reversed the judgment, and rendered that Hernandez take-nothing.

B. Commission Contracts – Repayment

In SAS Institute, Inc. v. Breitenfeld, 167 S.W.3d 840 (Tex. 2005), John Breitenfeld sold SAS software to Methodist Healthcare System for $1 million in December 2001. In February and March 2002, pursuant to his commission contract, SAS paid him a substantial bonus. However, in April 2002, Methodist canceled its order. Breitenfeld resigned from SAS in June 2002 without refunding the bonus, and SAS sued Breitenfeld to recover the bonus.

SAS argued that the commission contract, read as a whole, unambiguously requires repayment of the bonus. The Court agreed and found that the intent of a contract is not changed simply because the circumstances do not precisely match those anticipated by the contract. In this case, the Court found that the contract directly addressed scenarios in which the employee would pay back the bonus if the purchaser cancelled the sale after the employee ceased working for SAS, or SAS would deduct the bonus from future pay if the employee still worked for SAS when the purchaser cancelled. The parties clearly agreed SAS only owed a bonus on a completed and uncancelled sale. The Court concluded that, because this was the parties’ intent, Breitenfeld owed SAS repayment of the bonus.

II. Texas Appellate Court Decisions

A. At-Will Employment – Modification

In El Expreso v. Zendejas, No. 01-03-00795-CV, 2005 WL 729449 (Tex. App.—Houston [1st Dist.] March 31, 2005, no pet. h.), Robert Zendejas sued his employer for wrongful termination and breach of contract. During his employment, Zendejas attempted to ensure that El Expreso complied with certain transportation safety laws; however, he was concerned that he would be terminated for doing so. His supervisor, on more than one occasion, verbally assured Zendejas that he would not be terminated for upholding safety laws. Despite these assurances, El Expreso terminated Zendejas. At trial, the jury found: (1) the parties had agreed Zendejas would not be terminated for trying to maintain El Expreso’s compliance with safety regulations; and (2) Zendejas had been terminated for precisely that reason.

On appeal, El Expreso argued that the supervisor’s vague statements towards Zendejas did not constitute a modification/exception to his at-will status. The Houston Court of Appeals reiterated the holdings in Miksch v. Exxon Corp., 979 S.W.2d 700 (Tex. App.—Houston [14th Dist.] 1998, pet. denied), and Montgomery County Hospital Dist. v. Brown, 965 S.W.2d 501 (Tex. 1998) by finding that the at-will status of an employee may be modified if the employer unequivocally indicates a definite intent to be bound not to terminate the employee under certain circumstances. However, “[g]eneral, indefinite statements will not limit an employer’s right to discharge an employee.” Thus, an agreement to modify the at-will employment relationship must be (1) expressed, rather than implied, and (2) clear and specific. “An employer’s oral statements may not modify an employee’s at-will status unless there is a definite, stated intention to do so.”

The court agreed that the statements made by Zendejas’ supervisor to Zendejas were sufficiently clear to modify his at-will status. Moreover, the fact that Zendejas sought out these assurances provided further evidence of clarity.

B. At-Will Employment – Sabine Pilot exception

In Bryant v. Lucent Technologies, No. 10-03-00330-CV, 2005 WL 2155196 (Tex. App.—Waco September 7, 2005, no pet. h.), Jane Bryant filed suit against Lucent Technologies alleging several causes of action, including wrongful termination. Bryant was an at-will employee; however, she alleged a cause of action under the Sabine Pilot exception.

Under Sabine Pilot Service, Inc. v. Hauck, 687 S.W.2d 733 (Tex.1985), an at-will employee may sue for wrongful termination if the sole reason for the termination was that the employee refused to perform an illegal act which would subject the employee to criminal liability. In this case, Bryant alleged that the Sabine Pilot exception applied because she refused to violate the price discrimination prohibitions set forth by the Robinson-Patman Act, 15 U.S.C. §§ 13, 13a. Bryant alleged that Lucent required her to provide sales leads, at no cost, to certain dealers but charge other dealers for this information. The Waco Court of Appeals held that “sales leads” do not constitute goods or commodities, and therefore, the Robinson-Patman Act does not apply. Thus, the trial court’s directed verdict on Bryant’s wrongful termination claim was upheld.

C. Whistleblower Act – Authorized Official

In Potter Co. v. Parton, No. 07-03-0338-CV, 2005 WL 1355111 (Tex. App.—Amarillo June 8, 2005, no pet. h.), Parton filed suit against Potter County for violating the Texas Whistleblower Act, Tex. Gov’t Code Ann. §§ 554.001-010 (Vernon 2004). Parton contended that he was terminated for reporting certain criminal violations committed by his supervisor and inmates. Parton worked for Potter County Road and Bridge Department. Both Parton and his supervisor obtained Texas Jailer Licenses for the limited purpose of allowing them to oversee inmates assigned to work for the department. Parton believed that the inmates and his supervisor were committing various criminal acts. Accordingly, he reported the matter to his supervisor who was the same supervisor that Parton believed had been engaging in the foregoing criminal acts. Parton contended that his supervisor had a duty to investigate the violations due to his status as a licensed jailer. He also believed that his supervisor had a duty to report the matter to the sheriff’s department.

In response to Parton’s suit, Potter County filed a plea to the jurisdiction, alleging that Parton’s claims were barred by its sovereign immunity. Specifically, the County contended, inter alia, that Parton failed to report the violations to an appropriate law enforcement authority as required by Section 554.002 of the Texas Government Code. Tex. Gov’t Code Ann. § 554.002 (Vernon 2004). The trial court denied the plea, and the County filed this interlocutory appeal to the Amarillo court of appeals.

The Amarillo court noted that a party suing a governmental entity has the burden of establishing that the governmental entity waived its sovereign immunity. To do so, the plaintiff must allege facts stating a claim is within the scope of the statutory waiver. Specifically, this requires that the plaintiff allege that he made a report to an appropriate law enforcement authority. Parton argued that his supervisor, who was licensed as a jailer, constituted an appropriate law enforcement authority. Alternatively, he argued that, even if his supervisor lacked the appropriate authority under the Act, he had a good faith belief that his supervisor possessed appropriate authority.

The Whistleblower Act permits a plaintiff to satisfy the reporting requirement by showing that he, in good faith, believed that the person to whom the report was made was an appropriate authority. However, the court pointed out that the good faith belief includes both a subjective and objective component. Here, the court held Parton’s belief that his supervisor constituted an appropriate law enforcement authority was not objectively reasonable. Specifically, the court reasoned that Parton’s supervisor “was not a peace officer, was not an employee of the sheriff’s department, and was not acting in the capacity of a representative of the sheriff’s department.” Accordingly, the court held that a person with Parton’s knowledge, training, and experience could not reasonably and objectively believe, under the circumstances, that: (1) his supervisor’s being a licensed jailer vested him with more authority to investigate the alleged crimes than his supervisor’s position with the county, or (2) his report to the very supervisor, who he had accused of committing the alleged crimes, was an appropriate authority. Accordingly, the court held that “[b]ecause Parton’s allegations did not show an objectively reasonable belief that he reported a violation to an appropriate law enforcement authority as required by § 554.002(a), the Act’s waiver of sovereign immunity was not applicable to Parton’s claim.”