Is it okay to lie and trick an employee into staying on the job? Texas State Supreme Court to Decide

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by Jay Pate

If you are like the vast majority of folks in Texas and elsewhere, you are an “at will” employee. “At-will” refers to an employment relationship in which either party can break the relationship. Under this legal doctrine: the employer is free to discharge individuals, even without cause, and the employee is “equally” free to quit.

But what about when you take a job or stay on a job only because the employer promised you something. Do you have any rights if it turns out the promise was an outright lie, i.e. a fraudulent trick to dupe you into doing whatever it was the employer wanted you to do?

Sixty-three former employers of DuPont claim they were the victims of such a trick. They all who worked in the Terathane Products Unit at the company’s manufacturing facility in La Porte, Texas. In February 2002, DuPont announced plans to spin off a portion of its operations to form a wholly owned subsidiary to be known as DuPont Textiles and Interiors (“DTI”).

DuPont represented that the Terathane Unit employees would be allowed to choose whether to stay with DuPont or join DTI. The employees who stayed with DuPont would leave the Terathane Unit and transfer to another unit at the La Porte facility. According to DuPont, those who joined DTI would remain with the Terathane Unit and would be covered by a new collective bargaining agreement identical to their existing agreement with DuPont, providing the same pay and benefits they received at DuPont.

The Terathane Unit employees expressed concerns at these meetings that DuPont might sell DTI to a third party. Many of the employees had worked for DuPont for a long time and wanted to protect their compensation and retirement packages by remaining a part of the DuPont family. According to the employees, Dupont assured them that DTI would remain a part of DuPont. The parties agree that the employees were told that a sale of DTI was “highly unlikely.” Employees also testified that Anderson told them individually that DuPont would still own or control DTI when they retired in fifteen years.

However, the truth was that DuPont had already began talks with Koch Industries, Inc. about selling DTI to Koch Industries. Virtually all of the Terathane Unit employees signed agreements voluntarily transferring to DTI. The new CBA between DTI and the Union became effective on February 1, 2003. On April 14, 2003, DuPont announced that it was in the early stages of negotiations for the sale of DTI with a third party. The third party turned out to be Koch Industries (“Koch”) and the sale was finalized roughly a year later on May 1, 2004. As a result, the longtime DuPont employees found themselves working for Koch Industries and receiving less in pension, pay and other benefits.

The workers sought to vindicate their rights under Texas law, asserting state law claims for fraud, fraudulent inducement, and fraud by omission. They alleged that DuPont misrepresented that it would retain ownership of DTI and in doing so fraudulently induced them to terminate their employment with DuPont and accept employment with DTI.

In Sawyer v. E.I. DuPont de Nemours & Co., 678 F.3d 379 (5th Cir. 2012), the Fifth Circuit issued an opinion which affirmed summary judgment in favor of DuPont and dismissed all of the plaintiffs’ claims. Basically, the court held that since DuPont had the right to fire the employees for any reason at all, the employees had no right to complain about losing their jobs due to the sale to Koch Industries.

However, in July, the Fifth Circuit panel reconsidered and ruled that “[b]ecause this case involves important and determinative questions of Texas law as to which there is no controlling Texas Supreme Court precedent, the panel unanimously withdraws the previous opinion and substitutes the following certified questions to the Supreme Court of Texas.”

The questions are:

  1. Under Texas law, may at-will employees bring fraud claims against their employers for loss of their employment?
  2. If the above question is answered in the negative, may employees covered under a 60-day cancellation-upon-notice collective bargaining agreement that limits the employer’s ability to discharge its employees only for just cause, bring Texas fraud claims against their employer based on allegations that the employer fraudulently induced them to terminate their employment?

This month, the Texas Supreme Court has decided it will answer the questions and has directed the parties to submit legal briefs. There seems to be no social utility in allowing employers to fraudulently induce an employee into making an employment-related decision. Hopefully, the Texas Supreme Court will allow these claims to proceed on the merits.

If you were the victim of deceptive employment practices, contact the lawyers at Heygood, Orr & Pearson for a free case evaluation. You can reach us by calling toll-free at 1-877-446-9001, or by filling out the free case evaluation form located on our website.