Promises... Promises... Promises

2005-09-19

Can an employer's express oral promise not to fire an employee under specific circumstances stand as an exception to the employment at-will doctrine? Absolutely, said the Houston court of appeals in El Expreso, Inc, v. Zendejas, 2005 Tex. App. LEXIS 2395 (Tex. App. \endash Houston [1st Dist.] March 31, 2005), affirming an approximately $163,000.00 jury verdict. Although this case is unique in a number of aspects, employers should be very cognizant of promises made by their managers of continued employment under any circumstances.

The plaintiff, Mr. Zendejas, began working for a bus company ultimately acquired by Coach USA, beginning in 1992. At the time that Coach purchased the company, El Expreso, Mr. Zendejas had been promoted to Lead Operations Manager. He was laid off in 2000 due to downsizing, but returned to work in May 2001 to serve as Manager of Scheduling and Charters. Mario Pedraza held Mr. Zendejas' former position as Director of Charters and Bus Operations.

Shortly after he commenced working for El Expreso, several El Expreso bus drivers complained to Zendejas that they were being coerced into violating safety regulations by driving their buses too frequently or too long. Zendejas tried to bring these issues to the attention of Mr. Pedraza, Jorge Martinez, Manager of Safety and Training, and the company president, Joe Escobedo, in one-on-one conversations or meetings between all four. His efforts were rebuffed by all.

Zendejas eventually contacted Kathy Wagner, the Regional Safety Director at Coach, regarding his concerns about safety compliance. Wagner requested Zendejas' assistance in bringing El Expreso into compliance with safety laws and regulations. When Zendejas expressed trepidation that he might be terminated if he followed her instructions, Ms. Wagner assured Zendejas that he would not be fired for complying with safety regulations. Wagner then conducted an audit of El Expreso and discovered fairly substantial deviations from safety laws, including driver log fraud. As a result, Mr. Pedraza was reassigned to the position of Director of Terminal Operations.

Wagner continued to request Zendejas' help concerning El Expreso's compliance with safety logs and regulations. He was repeatedly assured that he would not be terminated from employment if he ensured that drivers complied with safety regulations. With this in mind, Zendejas canceled bus routes when eligible drivers were unavailable and sought outside sources to fulfill the need for drivers not able to work within the safety regulations. Zendejas was ultimately promoted within about six (6) weeks of his hire to his former position as Director of Charters and Bus Operations, a position previously held by Pedraza.

During this time frame, the personal relations between Zendejas, Pedraza, and Escobedo deteriorated, especially in light of the fact that a number of bus runs had been canceled which, in Escobedo's mind, was causing the company to lose money. Two months after he had been promoted, Zendejas was notified that a bus driver had complained that another driver was committing safety violations. Zendejas was requested to keep the report confidential, but ultimately confronted the driver suspected of violating the safety rules. Soon after, Escobedo asked Zendejas about the matter, and Zendejas replied that the matter was now in the hands of the Safety Department. Later that month, the employee making the complaint to Zendejas complained to the Director of Safety that he had been exposed as the source of the complaint. The Safety Department then informed Ms. Wagner that its investigation had been compromised because Zendejas had approached the suspected driver. Although denying that he had told the suspected driver who had reported the suspected safety violations, Zendejas' employment was terminated on September 12, by Escobedo.

The parties clashed repeatedly at trial over the issue of at-will employment. Significantly, though, Ms. Wagner testified that she told Zendejas several times that he would not be fired for assuring El Expreso's compliance with safety laws. Moreover, Zendejas testified that he had relied on Wagner's promise that she would not allow him to be fired for compliance with safety laws and regulations.

In Montgomery County Hospital District v. Brown, 965 S.W. 2d 501 (Tex. 1998), the Texas supreme court held that, absent a specific agreement to the contrary, an employer or employee may end their employment at-will relationship for a good cause, a bad cause, or no cause at all. Id. at 502. Specifically, in order to modify the at-will status of the relationship, the employer must unequivocally indicate a definite intent to be bound not to terminate the employee under specific circumstances. Id. The agreement to modify the at-will employment relationship must be (1) expressed rather than implied, and (2) clear and specific. El Expreso at *10. The Texas supreme court also held in Brown, an employer's oral statement may not modify an employee's at-will status unless there is a definite, stated intention to do so. Id. at 501. Thus, according to the court in El Expreso, "[t]he critical factor in determining the validity of an agreement to modify at-will status, is whether an employer has 'unequivocally indicated a definite intent to be bound not to terminate the employee except under clearly specified circumstances.'" (citation omitted) Id. at *11.

The Houston court of appeals also recognized a similar holding made by its sister court of appeals in Houston. In that case, a supervisor made a promise to a secretary that certain events would not cause her termination in violation of the employer's conflict of interest policy. The other court of appeals found that particular statement did not contain ambiguous terminology or require one to speculate as to the parameters of the purported agreement. Miksch v. Exxon Corp., 979 S.W. 2d 700,705 (Tex. App. - - Houston [14th Dist.] 1998, pet. denied). As such, the employer there was also held to have orally modified the secretary's at-will employment status. The Houston court of appeals, Fourteenth District, like the First District court of appeals, recognized that in Brown, the Texas supreme court had left open the possibility that such verbal statements could, under certain circumstances, be sufficient to create an enforceable agreement. Id. at 704.

What then can employers do to protect themselves from situations such as these? Policies need to be put in place which recognize that the only individual who may modify the employment at-will status is a specified executive officer, typically the president of the company or business, and even then only in writing, not orally. While many employment applications contain this proviso, a number of handbooks or policy manuals that discuss employment at-will do not contain this limitation on authority. Prudent employers would reexamine their policy manuals or handbooks in order to ensure that this limitation on authority to expressly modify the employment at-will status is in place and that current employees have acknowledged having read and agreeing to abide by such policies. This policy should also be stressed in new employee orientations as well as any annual human resource training programs.