Restraints Against Commerce—Contractual Penalty for Resignation

Restraints Against Commerce—Contractual Penalty for Resignation—Rieves v. Buc-ee’s Ltd., ___ S.W.3d ___, 2017 WL 4557796 (Tex. App—Houston [14th Dist.] 2017)—The employer hired the plaintiff as an hourly-rated, “at will” employee but subject to a contract requiring her to repay all her “fixed monthly bonus,” which was a substantial part of her total compensation, if her employment terminated for “any reason” before the end of five years or if she failed to give at least six-months’ notice of termination. If the employee failed to repay within 30 days of termination, the unpaid amount was to accrue 10 percent interest, and the employee was required to pay attorney’s fees involved in collection of the debt. The employee resigned after three years and the employer brought this action to enforce the contractual obligation to reclaim $66,000 in previously paid compensation plus interest at 10 percent and attorney’s fees. The trial court awarded summary judgment for the employer but the court of appeals reversed, holding: (1) the contract was an unenforceable restraint on commerce under Tex. Bus. & Com. Code Ann. § 15.05(a) because it imposed a substantial penalty on the employee’s exercise of the right to resign at will; (2) the contract did not qualify for the exception for a reasonable and legitimate covenant not to compete because the penalty clause was triggered by any termination of employment and not just by service for a competitor within a limited geographic range or within a limited time. The court distinguished other cases that seemed to authorize contracts providing for the forfeiture of deferred compensation. See ExxonMobil Corp. v. Drennen, 452 S.W.3d 319, 321 (Tex. 2014). Drennan involved the forfeiture of future payments of unvested stock options that were incentives for loyalty rather than a return of salary already paid for time worked. Moreover, the contract in this case provided for forfeiture of compensation even if it was the employer, and not the employee, who elected to terminate the employment. Finally, the court held that the contract’s provision for attorney’s fees in favor of the employer was preempted by the attorney’s fees rules of the Covenants Not to Compete Act, Tex. Bus. & Com. Code § 15.52.