Among the provisions employed increasingly by employers is the “claw back” provision. Under the typical claw back provision, the employee agrees to a certain salary or wage. The employer then requires the employee to agree that if the employee fails to provide a notice of resignation within a certain amount of time, or if the employee leaves the job before a certain amount of time, then the employee must return some portion of his pay. In Rieves v. Buc-ee’s, Ltd., No. 14-15-01061 (Tex.App. Hou. 10/12/2017), the employer offered an agreement of a certain salary if the assistant manager would agree to work at least 48 months. The pay was based in part on 1.2% of the store’s net revenue. The employee, an assistant manager named Kelly Rieves, agreed to return 1.2% of the store’s net proceeds if she did not provide a six month notice of resignation. Ms. Rieves left, and did not provide six months notice. Buc-ees responded with a letter demanding payment of $66,000, plus attorney’s fees.
Ms. Rieves sued seeking a declaratory judgment that these provisions function as unlawful restraints on trade. Buc-ees moved for summary judgment, which was granted.
The Houston court of appeals disagreed. It found the provisions did indeed act as restraints on an employee’s ability to move to a different job. The provisions set unreasonable limits and imposed a substantial penalty on Ms. Rieves for exercising her right as an at-will employee to quit a job. The court pointed to the Free Enterprise and Antitrust Act, Tex.Bus.&Com.C. Sec. 15.05, which declares that contracts may not restrain trade. The court said that unless a contract fits within the exception found within the Texas Covenants Not to Compete Act, covenants limiting an employee’s mobility are unlawful restraints on trade. Under the Texas Covenants Not to Compete Act, Tex. Bus.& Com.C. Sec. 15.50(a), covenants must be reasonable as to time and geography.
The court found the payment retention provisions in the Buc-ees employment agreement to be unreasonable. The provisions did not include any limit in geography or time. It did not even limit Ms. Rieves to employment with a competitor. The assistant manager did not move to a competitor. Her new job was not with a competitor of Buc-ees. Too, the provisions required her to re-pay the money even if she left the job through no fault of hers, or even if she did not take a new job. This agreement, said the court, goes far beyond any legitimate need of Buc-ees in regard to competition in the market place. See the decision here.
The court reversed the decision to grant summary judgment. It also ordered that Buc-ees take nothing from its suit. And, it found that the provision did indeed act as an unlawful restraint on trade.
Thank goodness. One might think that Texas courts never saw an employer friendly agreement they did not like. Let’s hope the employer does not appeal to the Texas Supreme Court.