Last month I wrote about how Texas employers can require employees to repay the employers’ training expenses related to those employees, even if that means repaying an equivalent of 1/3 of an employee’s salary. I culminated my article cautioning the companies to make sure that their repayment requirements in the employment agreements do not violate the Texas Free Enterprise and Antitrust Act of 1983.
Later the same week, the Houston Court of Appeals found that Buc-ee’s did just that by requiring its assistant manager to repay more than $66,000 in salary for leaving her at-will job to go work for another company, which was not even a competitor of Buc-ee’s.
Here’s a quick look at what Buc-ee’s did, what the Court of Appeals thought of it, and the lessons that Texas employers can take away from this case.
Buc-ee’s’ Employment Agreements
In 2009, Rieves came to work as an assistant manager for Buc-ee’s. The wages arrangement was such that 70% of her salary would be paid on hourly basis and 30% would be paid in flat fee, translating into $14 an hour and a fixed monthly bonus of $1,528.67 (the “Additional Compensation”).
This 2009 Employment Agreement specifically said that Rieves was an “at-will employee” but also stated that she was “required to work” for Buc-ee’s a minimum of five years and had to provide the employer with a 6-month written separation notice. If she failed to meet these two requirements, regardless of the reason, she had to repay all of the Additional Compensation.
In 2010, Rieves entered into a new employment agreement with Buc-ee’s that contained similar requirements (4 year term and 6-month separation notice) and stated that if Rieves left before 2014, she had to repay a portion of her salary under the 2010 Employment Agreement and the Additional Compensation under the 2009 Employment Agreement. Thus, under the 2010 Employment Agreement, the longer Rieves worked for Buc-ee’s, the more of her salary she would have had to pay back.
The Court of Appeal’s Analysis
In looking at the employment agreements, the Court first and foremost noted that Rieves was an “at-will employee,” which, under the long-standing doctrine in Texas, meant that her employment could be terminated by her or Buc-ee’s for good cause, bad cause, or no cause at all.
Furthermore, the repayment provisions in Rieves’s employment agreements imposed a severe economic penalty on her if she exercised her right as an at-will employee to leave Buc-ee’s. Therefore, these provisions had to comply with the Texas Covenants not to Compete Act in order to be enforceable. They did not.
The repayment provisions penalized Rieves even if Buc-ee’s fired her without a cause and they were not related to Buc-ee’s legitimate business interest because they penalized Rieves even if she went to work for a company that was not Buc-ee’s competitor. Therefore, the repayment provisions were an unfair restraint of trade in violation of the Texas Free Enterprise and Antitrust Act and were not enforceable.
The Lessons for Texas Employers
While Texas recognizes the freedom of parties to contract, employers cannot enter into contracts that are illegal. Under the Texas Free Enterprise and Antitrust Act, “every contract, combination, or conspiracy in restraint of trade or commerce is unlawful.” Non-competition agreements that are reasonable and are designed to protect a legitimate business interest are an exception to the rule. Any other restraint in an employment agreement that prohibits an at-will employee from leaving his or her current employer or restricts such employee’s ability to sell his or her skills in the marketplace is likely to violate the Texas Free Enterprise and Antitrust Act.
Leiza litigates non-compete and trade secrets lawsuits in a variety of industries. If you are a party to a dispute involving a noncompete agreement in Texas, contact Leiza at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108 or fill out the form below.