AT-WILL EMPLOYEES CANNOT SUE FOR FRAUD PREMISED ON CONTINUED EMPLOYMENT

Sawyer v. E.I. du Pont de Nemours & Co.,
Texas Supreme Court, No.12-0626 (April 25, 2014)
Chief Justice Nathan Hecht (Opinion)
The Texas Supreme Court, answering certified questions from the Fifth Circuit, held that at-will employees may not sue their employer for fraudulently inducing them to resign and move to a subsidiary company, and that where employees are covered by a collective bargaining agreement (“CBA”) requiring “just cause” for termination and providing detailed procedures for resolving grievances, the sole remedies are those provided by the agreement.

In February 2002, DuPont announced its intention to restructure part of its operations into a wholly owned subsidiary, DuPont Textiles and Interiors (“DTI”). Almost all the employees in the unit to be restructured were covered by a CBA. The CBA gave employees the right to transfer to another DuPont job instead of being moved to DTI and protected them against termination except for “just cause.” Many employees feared that moving to DTI would allow DuPont to sell DTI, affecting the employees’ compensation and retirement packages. DuPont allegedly assured the employees that DuPont would keep DTI, although it was already discussing a potential sale to another company. Almost all the employees chose to move to DTI.

In April 2003, the employees’ fears were realized. DuPont sold DTI to Koch, which reduced the employees’ retirement and compensation packages. Sixty-three employees sued DuPont for fraudulently inducing them to terminate their employment and transfer to DTI, claiming $23 million in damages.

The Fifth Circuit certified two questions: (1) whether at-will employees could bring fraud claims against their employers for loss of their employment; and (2) if not, whether employees covered under a CBA that required good cause for termination could sue the employer for fraudulently inducing them to terminate their employment.

The Texas Supreme Court held that at-will employees cannot bring an action for fraud that is dependent on continued employment. An at-will employee cannot justifiably rely on a representation of continued employment when that employment could be terminated at any time.

DuPont argued that even under the CBA, the employees were at-will because the CBA could be terminated for any reason with 60 days’ notice. The Court disagreed; it found that while the CBA allowed either party to terminate the agreement, neither party exercised that right. Both parties were therefore bound by the terms of the CBA. And although the CBA modified the at-will presumption and allowed termination only upon a showing of “just cause,” the Court held the CBA’s detailed procedures for resolving grievances were exclusive, barring the employees’ fraud claim.

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