In Texas, one of the fundamental rules of employment law is the doctrine of employment at-will. Stated simply, employment at-will means that either the employer or the employee can end the employment relationship at any time for any reason.
In 20 years of representing Texas employers, I have generally considered at-will doctrine reasonable and fair. The at-will doctrine is not an absolute rule: various anti-discrimination laws limit it, and provisions in an employment contract can supersede it.
Most Texas employers and employees are familiar with the at-will doctrine, and very few ask me to explain it in detail. Recently, however, I had to explain the doctrine to a foreign executive, and he found it an unpleasant surprise.
It turns out that the Texas brand of employment at-will does not sound reasonable or fair at all to someone who comes from Canada or Europe. Multinational employers should recognize how unsettling an offer letter with at-will language can sound to international employees.
Jean-Luc, the foreign executive who consulted with me, was initially excited about his new opportunity. In his early 50s, he had spent his entire professional career with the same energy company, first in Canada and then in France. Now a significant promotion would bring him to Houston.
He trusted the company but wanted to ensure he understood the offer letter, which had a section about employment at-will. He had seen colleagues lose jobs in corporate restructurings, knew a similar fate could befall him, and had relied on the safety nets provided by Canadian and French law.
Jean-Luc estimated that, in light of his seniority, if his current position in France were eliminated, he would receive approximately two years of severance pay. As he understood the offer letter, if he took the job in Texas and the company later laid him off, he would receive nothing. He had already spoken to the HR director who signed the offer letter and had pointed out the discrepancy.
The HR director told Jean-Luc that all of the Texas offer letters (which both parties sign and which are de facto employment contracts) had at-will language. She said that the Texas division had chosen not to adopt a severance pay policy, but assured him that if there were ever a layoff in Texas, the company would certainly offer “something” by way of severance.
The HR director’s response did not put Jean-Luc at ease. He consulted with me to learn what legal protections he would have as an at-will employee in Texas. The short answer: almost none.
In Texas, there is only one common-law exception to the at-will doctrine. In 1985 in Sabine Pilot v. Hauck, the Texas Supreme Court found that it is unlawful for an employer to terminate an at-will employee for refusing to perform an unlawful act. This exception has been narrowly construed and applies only to situations where an at-will employee is instructed to perform an illegal act that has criminal consequences, refuses the instruction and is terminated as a result.
The Texas Supreme Court has refused to recognize any further exceptions. On several occasions, most recently in 2006 in Ed Rachal Foundation v. D’Unger, the court declined to recognize a common-law “whistleblower” cause of action.
In 2002, in Texas Farm Bureau v. Sears, the court held that an employer has no duty to use ordinary care when investigating an at-will employee’s alleged misconduct. In other words, if an employer believes that an at-will employee did something wrong, the terminated employee has no recourse even if the employer’s belief was entirely mistaken.
Likewise, there is no implied duty of good faith and fair dealing in the at-will employment relationship. This was confirmed by the Texas Supreme Court in 2000, in City of Midland v. O’Bryant.
Earlier this year, in Sawyer v. DuPont, the Texas Supreme Court reiterated the above principles and found that an at-will employee cannot bring an action for fraud that is dependent on continued employment.
As I explained all of this to an incredulous Jean-Luc, I realized just how shocking the at-will doctrine must sound to someone from Europe or Canada.
I am not arguing against employment at-will: the doctrine is well established and works for us here in Texas.
My point is this: Corporations and their counsel should keep an open mind when negotiating with foreign executives. C-level executives like to talk about employee engagement. It makes no sense to offer a promotion as a reward for valuable service, and then insist upon “at-will” language that leaves the executive feeling disengaged and worried about the future.
It’s unfortunate that when Jean-Luc accepted the promotion, he did so with trepidation, not excitement. A wiser company would have foreseen this situation and adopted a formal severance pay policy, or allowed substantial amendments to Jean-Luc’s offer letter. The Texas Supreme Court has carefully guarded the doctrine of employment at-will, but Texas corporations need not, and in some cases should not, do the same.