Chapter 6-1 Wrongful Discharge—Breach of Employment Agreement

• Jurisdiction: United States

6-1 Wrongful Discharge—Breach of Employment Agreement

The long-standing rule in Texas provides for employment at will, terminable at any time by either party, with or without cause, absent an express agreement to the contrary.¹ There exists a presumption that employees in Texas are hired at will.² An employment contract is an exception to the employment-at-will doctrine.³

6-1:1 Overview

6-1:1.1 Related Causes of Action

Tortious Interference with Employment Contract, Invasion of Privacy, Intentional Infliction of Emotional Distress, Defamation, Negligent Misrepresentation, Fraud, Breach of Contract.

6-1:2 Elements

(1) Plaintiff had an enforceable employment contract⁴

• A written employment contract signed by the employer is enforceable.⁵
• An oral employment contract is enforceable if the contract can be performed within one year.⁶

(2) The employment contract must restrict the employer's right to discharge plaintiff at will.⁷

• A written employment contract may restrict the employer's right to discharge the plaintiff by requiring the employer to give the employee notice before discharge.⁸
• An oral employment contract qualifies if the employer "unequivocally indicate[s] a definite intent to be bound not to terminate the employee except under clearly specific circumstances."⁹
• Employee handbook language must directly limit the employer's right to terminate without cause in a "meaningful and special way".¹⁰
• An employment contract restricts an employer's right to discharge if the contract is for a stated term unless the agreement allows for termination for "any reason."¹¹

(3) Plaintiff "performed or tendered performance."¹²

(4) Defendant breached the contract by discharging plaintiff contrary to the contract terms.¹³

(5) Plaintiff was damaged as a result of the breach.¹⁴

• The evidence must show that the damages are the natural, probable, and foreseeable consequence of the defendant's conduct.¹⁵
• The absence of a causal connection between the alleged breach and the alleged damages will preclude recovery.¹⁶

6-1:3 Damages and Remedies

6-1:3.1 Actual Damages

The measure of actual damages is the present cash value of the contract to the employee if the contract had not been breached less any amounts that the employee should in the exercise of reasonable diligence be able to earn through other employment.¹⁷

6-1:3.2 Interest

Prejudgment interest is compensation allowed by law for the lost use of the money due as damages during the time between the accrual of the claim and the judgment date.¹⁸ If no statute requires prejudgment interest, then the trial court may award prejudgment interest.¹⁹ An award of equitable prejudgment interest is within the trial court's discretion.²⁰ For a recovery of interest to be sustained it must be based in the pleadings; interest must be asked for specifically or be²¹,²²

A money judgment that provides for interest or time price differential within its terms earns post-judgment interest at a rate equal to the lesser of the rate specified in the contract or 18%.²³ Prejudgment interest accrues at the same rate as the post-judgment interest rate.²⁴ Prejudgment interest accrues on the earlier of the 180th day after the defendant receives written notice of a claim or the date that the suit is filed.²⁵ Prejudgment interest is computed as simple interest and does not compound.²⁶ Post-judgment interest accrues on the date that judgment is rendered and ends on the date that judgment is satisfied.²⁷ Post-judgment interest compounds annually.²⁸ See Chapter 11, Section 11-13:1.

6-1:3.3 Court Costs

The award and allocation of court costs under Texas Rules of Civil Procedure 131 and 141 are matters for the trial court's discretion and may be awarded in a wrongful discharge claim.²⁹ See Chapter 11, Section 11-13:2.

6-1:3.4 Attorney's Fees

A person may recover reasonable attorney's fees if the claim is for an oral or written contract.³⁰

6-1:4 Defenses

6-1:4.1 Statute of Limitations

The limitations period is four years for a breach of contract action.³¹ The action accrues at the time of the breach.³²

6-1:4.2 Good Cause

Express Discharge Conditions—good cause from conditions expressly listed in the contract.³³

Implied Discharge Conditions—good cause implied under the law³⁴

(1) Plaintiff failed to perform duties that "a person of ordinary prudence would have done under the same or similar circumstances"; or
(2) Plaintiff committed an act "inconsistent with the continued existence of the employer-employee relationship."

6-1:4.3 Statute of Frauds

Defendant may assert statute of frauds as an affirmative defense.³⁵

Elements:

(1) Contract was oral; and
(2) Contract could not be performed within one year.

6-1:4.4 Payment

Defendant may assert as an affirmative defense that plaintiff was paid the amounts due under the contract.³⁶

6-1:4.5 Mitigation of Damages

Defendant may assert the defense that the plaintiff should have mitigated damages by seeking other employment.³⁷

6-1:4.6 Failure to Exhaust Administrative Remedies

Government employer may raise the defense of failure to exhaust administrative remedies.³⁸

^* The authors thank Miranda Chavez and Robyn Leatherwood for their assistance...