Most large employers have employee handbooks, those set of policies that explain things like vacation and sick leave, discipline, etc. Employers will often describe how they are “binding” and must be followed. But, legally, they are not binding, at all. They look thorough and professional and provide some comfort to employees in an uncertain world.

They are generally not binding on the employer. They are nothing more than a guideline.  If the employer included a phrase providing they are not contractual, then they will not be binding. And, most, perhaps all employers do include non-binding type language in the handbook.

The battle over whether individual arbitration agreements can prevent class actions was settled with the decision in Epic Systems v. Lewis, 138 S.Ct. 1612 (2018). That decision found that workers who signed individual arbitration agreements with his/her employer could not later file suit as a class or collective action. Employers viewed this decision favorably. But, now, maybe not so much.

See what has happened with what was intended to be a collective action against Chipotle. In 2014, Chipotle started requiring workers to sign arbitration agreements. Some 2800 Chipotle workers signed mandatory arbitration agreements. They tried to file a collective action in Denver based U.S. district court. Chipotle invoked the individual arbitration agreements. The judge agreed the claims should be heard in arbitration. But, then Chipotle tried to bar the plaintiff law firm from representing the individual plaintiffs in arbitration. The employer’s rationale was that since the workers received notices of a collective action from the law firm, that law firm should not represent them. In some way, argued the Chioptle lawyers, the plaintiff law firm had compromised the interests of the potential plaintiffs. The court quickly dispensed with that specious argument. See Reuters news report.

The defense lawyers warned the judge that there may be thousands of follow-on arbitrations. The lawyers suggested the plaintiff law firm had tried to leverage thousands of arbitrations to protect its lawsuit. But, replied, the judge, “Absent more concrete evidence of legal incompetence or evidence demonstrating a clear pattern of abuse of the judicial process, I will not interfere with the arbitration plaintiffs’ right to choice of counsel.” In other words, the judge said the employees can pick the counsel they desire.

Chipotle incurs a fee of $1100 per employee, just to file the arbitration. JAMS is providing the arbitration services and their rules require the employer to pay the fees. That ruling in Denver federal court occurred in April, 2018.

Now, in December, 2018 some 150 of those workers dropped their attempted collective action and re-filed individual arbitration claims. So far, Chipotle has refused to pay much of those fees. The plaintiff law firm notes the individual claims amount to no more than about $1,000 per worker. Ordinarily, the plaintiff lawyers would not be interested in pursuing those claims. But, since they worked up much of the evidence for what they thought would be a collective action, they have pursued these 150 claims. See Huffington post here.

And look what happened to a Florida paving contractor in 2018. There were three claimants in that arbitration. The contractor was eventually hit with a bill for $100,000 in arbitral fees. Those three former employees also tried to sue in federal court first. The employer refused to pay the fees and tried to go back to federal court. Be careful what you ask for, because you just might get it.


A non-compete clause for physicians requires adherence to certain criteria to be effective in Texas. Texas has a state law applicable to physician noncompete agreements.

  •  A physician noncompete must not impinge on a doctor’s access to a list of his/her patients upon his/her departure
  • The departing doctor must have access to the patients’ records when authorized by the patient
  • The physician must not be prevented from providing treatment to an acutely ill patient
  • The agreement must provide for a “reasonable” amount for a buy-out clause, or allow an arbitrator to make a decision on a reasonable amount

See Texas Business & Commerce Code Sec. 15.50 for additional information.

In a recent decision, the Fifth Circuit addressed the turbulent area of non-solicitation agreements. Michelle Moffitt-Johnston used to work for GE Betz, Inc. GE Betz applied chemicals to fuel prior to export. Ms. Moffitt-Johnston signed a non-solicitation agreement with GE Betz during her employment, in which she agreed to not solicit Betz’ customers for up to 18 months after any resignation or termination. After some ten years with GE Betz, Ms. Moffitt-Johnston resigned in 2012. Soon after, she started working for AmSpec Services, a competitor of GE Betz.

GE Betz had installed monitoring software on its worker’s computers. Monitoring logs on Ms. Moffitt-Johnston’s computer showed suspicious activity in the weeks leading up to her resignation. Days after she had announced her departure, someone using her computer downloaded some 27,000 files to an external hard drive. The evidence regarding this download was disputed. Plaintiff Moffitt-Johnston said this was the GE Betz IT department doing back-up, while the employer claimed Ms. Moffitt-Johnston had use of the computer at the time.

GE Betz admitted it had no smoking gun evidence that Ms. Moffitt-Johnston had solicited customers. Instead, it relied on a “mosaic” of evidence. The “mosaic” essentially consisted of AmSpec’s success with the customers who were included in an email from Moffitt-Jounston to AmSpec on her last day at work. But, as the court noted, it is just as likely that those customers worked with AmSpec because their cost was lower. “Many” but not all of Moffitt-Johnston’s former clients went with AmSpec. The Fifth Circuit affirmed the grant of summary judgment on the mis-appropriation of trade secrets claim. For similar reasons, the court also affirmed summary judgment regarding GE Betz’ claim for tortious interference with prospective business relationships.

To recover her attorney fees, Ms. Moffitt-Johnston relied on the Texas Covenants not to Compete Act (Tex.Bus.&Com.C. Sec. 15.50). The act requires several factors before a court could award attorney’s fees to the employee. One of those factors involved whether the employer knew the non-solicitation agreement included no geographic limitation. The GE Betz non-solicitation agreement was silent regarding any geographic limits. And, Texas jurisprudence provides, said the Fifth Circuit, that a limit regarding one’s customer base is reasonable – even if no geographic limit is specified. So, found the appellate court, it was not clear that the employer knew its non-solicitation agreement had no geographic limit. The Fifth Circuit then agreed the employee was not entitled to recover her attorney fees. See the decision in GE Betz, Inc. v. Moffitt-Johnston; AmSpec Services, LLC, No. 15-20008 (5th Cir. 3/13/2-18)  here.

What control does an employer have over a worker after work hours and away from the job? In Texas, as in most states, the employer can have a great deal of control, if it wishes. We are an “at will” state in Texas, as are most states. In an at-will state, an employer can fire a worker for any reason, so long as the reason does not violate any discrimination statute. Unless some law exists to limit what the employer can do, the employer can do as it pleases. There is no law that prevents an employer from requiring a worker to do or not do something on his/her own time. So, when Capt. Shawn Ury says the City of San Antonio was wrong to tell him he cannot work a second job after hours, that does not make a lot of sense.

As a union member, he may have different rights. The Collective Bargaining Agreement may have some limitation on what the City can do or not do regarding union member after hours. But, absent some provision in the CBA, the City can indeed tell him he cannot work a second job. The only enforcement mechanism is to discipline him and perhaps, terminate him. But, sure, they an ask him to do anything that does not conflict with discrimination statutes or various penal statutes. According to the San Antonio Express-News, Capt. Ury has had a hearing in front of an arbitrator regarding this issue. The ultimate decision is up to the arbitrator. But, in Texas, yes indeed, an employer can tell an employee not to work a second job – or not to wear a green shirt or whatever-  on his/her off-time. The employee, after all, can always choose to quit. See San Antonio Express News report.

More and more, Texas employers rely on non-compete agreements. More and more, those agreements are permeating down below to blue collar jobs. In Elite Auto Body v. Autocraft, No. 03-15-00064 (Tex.App. Austin 5/5/2017), Autocraft sued Elite Auto Body and three former employees of Autocraft. Autocraft claimed the three employees took trade secrets with them when they left Autocraft, including financial and personnel information. Autocraft operated a body repair shop. The three employees included a production manager, and two other employees. A fourth former employee was an Office manager for Autocraft. The former employer accused three of the former employees of using confidential information gained from Autocraft to solicit business and to persuade other Autocraft employees to join the new business.

The Defendants then counter-sued for violation of the Texas Citizens Participation Act (TCPA), also known as a SLAPP suit. Relying on the TCPA, the three defendants sought to dismiss the lawsuit saying it infringed on their right to free association or the exercise of free speech. Relying on affidavits from two of the former employees, the three defendants said the lawsuit lacked basis and was intended to chill their rights to free association. The court of appeals agreed that the Autocraft suit was based on actions which include the exercise of the right to free association. The exercise of free association is defined under the TCPA, said the court, as the right to communication between individuals to collectively promote or pursue common interests.

Autocraft claimed one defendant, David Damian, did not engage in communication under the TCPA because he breached a fiduciary duty by misappropriating confidential and proprietary information from Autocraft. But, the court noted that the communication between the three former employees includes that alleged confidential information. Since the TCPA protects communication between the three employees, they can in fact discuss confidential information. Autocraft then argued that the state legislature envisioned the TCPA would apply to public participation in government, not in the private sector. No, said the Austin court of appeals, the Texas Supreme Court has already made it clear the TCPA applies to the private sector.

Autocraft then argued that certain types of speech are not implicated by the First Amendment, such as speech regarding illegal activity. The court was more troubled by this argument. It found that the burden shifting analysis of the TCPA requires the TCPA movant to show how free speech is involved in the lawsuit by the former employer. After reviewing recent state Supreme Court decision, the Third Court of Appeals found that private speech which is restricted among the three new employees can rise to the level of free speech. Therefore, their speech relates to a matter of public concern, because the language of the TCPA itself is broad enough to include First Amendment protections.The higher court specifically noted that the TCPA does not necessarily protect only First Amendment communications. The provisions of the TCPA apply to more than free speech communications. The act applies to all communications that fit the TCPA definition, whether the communication pertains to free speech, trade secrets or not. The court found the initial question for a TCPA-based motion is whether the employees engaged in communication that fits the TCPA definition of communication and whether those individuals joined together collectively to promote or pursue common interests.

So, the court found the district court improperly failed to grant the three defendants’ motion to dismiss based on the three defendants’ “communications.” Bottom line: as long as the employees discuss so-called confidential information among themselves, it should be protected by the TCPA.  See the decision here.

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.

Former Texas Tech coach Mike Leach is still after the pay he believes he was owed. I wrote about his lawsuit against Texas Tech here and here. He seeks $2.4 million, including $1.6 million for a buyout clause. Under the terms of the buyout clause, he would be entitled to $1.6 million if he was fired without cause. Coach Leach recently hired a former news reporter to create a publicity campaign to help pressure the university. See Ft. Worth Star Telegram report. But, the thing is the school had pretty good cause to fire him., He had abused the son of an ESPN analyst, Craig James. Mr. James was also a former star running back at SMU and in the NFL. The coach might disagree whether the treatment of the young Adam James was abuse. But, the employer gets to make that call, not the employee.

He tried to sue his former employer for breach of contract. But, like most states, Texas has a law that a state cannot be sued unless it has given permission. And, it has never passed any sort of law that would allow a former coach to sue for breach of contract. He apparently feels like he was cheated in some way. But, everyone who deals with the state incurs that risk. Coach Leach is also a law school graduate. He may feel he has some inside knowledge. If so, it has not worked for him, yet.

Too, Coach Leach, while still employed at Texas Tech reportedly told his boss, the school President, to go f— himself. That sort of remark does tend to cause issues with management.

Arbitration is becoming more and more a significant feature of the legal landscape. Arbitration is a creature of contract. Whatever the parties agree to becomes the arbitration. What if the parties agree to arbitration, but then allow some form of appeal? In a recent decision, the Fourth Court of Appeals wrestled with that question. In Methodist Healthcare System v. Friesenhahn, No. 04-16-00825 (Tex.App. San Antonio 10/11/2017), the employer invoked arbitration. But, the arbitration did not go as the employer had hoped. The arbitrator awarded the employee almost $214,00 in damages and $170,000 in attorney’s fees. So, the employer got creative and filed a motion to vacate the arbitration award. Methodist Hospital argued that the arbitration agreement provided for expanded judicial appeal. It pointed to a small number of cases that recognized arbitration agreements that provided for appeals of decisions which contain reversible error. That is, they sought to appeal the arbitration decision based on traditional litigation type appeals. For example, in one section, the agreement states that the arbitrator will apply the same law as would a judge in court. The employer argued this meant reversible error would be grounds for appeal.

But, no, the Fourth Court was not going there. The court of appeals discussed the provisions cited by the employer. It said those provisions do not provide for an expanded appeal. They simply explain that the arbitral forum is simply another forum. The same legal theories apply in arbitration and apply in court. To provide expanded judicial review, the agreement would have to apply limitations on the arbitrator’s authority. For example, noted the appellate court, the agreement could have incorporated a reference to reversible error. It did not include any such reference. See the decision here.

The employer wanted arbitration. It drafted the arbitration agreement and then invoked the agreement when the plaintiff field suit. But, in the end, the employer found arbitration was not what it wanted, after all. Be careful what you ask for. You just might get it.

Every employee owes his employer a duty of loyalty. An employee generally may not carry on a business that competes with his employer’s business. To do so is grounds for termination. But, what about an employee who is contemplating leaving his employer? Can he discuss his possible departure with co-workers? The court in In Re Athans, 478 S.W.3d 128, 2015 WL 5770854 (Tex.App. Hou. 2015) answers yes. In Athans, three surgical assistants worked for American Surgical Professionals. One of them considered leaving ASA to work for a competitor. The three worked closely together. Another surgical assistant planned to leave to start a competing firm, Prestige Surgical Assistants. Martinez planned to leave and asked Athans if he was interested in leaving. Martinez testified he simply shared his project with Athans. He shared the project with other surgical assistants. Martinez and an investor started Prestige Surgical Assistants after Martinez ;eft ASA. ASA sued Martinez and Athans  for “soliciting” Athans and others to leave. ASA accused Martinez of interfering with the employment agreement between Athans and ASA. Four surgical assistants turned in letters of resignation at the same time. One surgical assistant changed his mind and stayed with ASA. The others joined Prestige.

The jury found in favor of Prestige. ASA sought a new trial, which was granted. Prestige sought a writ of mandamus to stop the new trial, which the court of appeals granted. The Court of Appeals agreed with Prestige. Assuming, said the court, that “solicit” means to ask seriously, Athans did not ask any of the surgical assistants “seriously.” He simply told them about his project. Athans was not certain he would work for Prestige when he resigned from ASA. He did not know what he would do when he left ASA. The other surgical assistants also indicated that Athans simply told them about a possible opportunity. The jury was entitled to use the ordinary meaning of “solicit.” See decision here.

The decision illustrates the difficulty in suing based on intent. ASA apparently lacked evidence regarding when Athans made up his mind to work for Prestige. If Athans had decided before he turned in his resignation and if ASA had some evidence of the timing of that decision, the outcome might have been different.