Executive Summary: The Texas Supreme Court recently held that a jury waiver agreement between an employer and an at-will employee is enforceable. See In re Frank Kent Motor Company d/b/a Frank Kent Cadillac, No. 10-0687 (March 9, 2012).
In Frank Kent, the Texas Supreme Court examined a dispute between a car dealership and its at-will employee. The employee had signed a conspicuous jury waiver clause after being told that he would lose his job if he refused. Despite signing the jury waiver agreement, when the employee was later terminated, he demanded a jury trial.
The trial court denied the employer's motion to strike the jury demand and did not enforce the contractual jury waiver because the employee claimed that he only signed it to avoid being discharged from his job of 28 years. The employee claimed this threat constituted coercion and invalidated the contract.
Although the Texas Court of Appeals affirmed the trial court's decision, the Texas Supreme Court decided otherwise. The Court pointed out that in an at-will employment situation, the employer has the legal right to fire an employee for almost any reason, including the employee's failure to accept new employment terms. As a result, such a threat would not constitute coercion that would invalidate a contract.
In upholding the jury trial waiver, the Court noted that it has previously upheld an employer's right to require employees to sign arbitration agreements in return for continued employment. The Court held that "there is no reason to treat the effect of the at-will employment relationship on a waiver of jury trial differently from its effect on an arbitration agreement."
Employers' Bottom Line:
This decision sends a strong message for employers in Texas, and other states, that jury waivers are being tested and most are upheld. Jury trial waivers can be beneficial for employers because they can decrease litigation costs, increase the odds of a defense verdict at the trial stage without affecting the opportunity to get the case dismissed at the summary judgment stage, and, similarly, increase the odds for early resolution of a matter. This is an option that all employers should consider.
If you have any questions regarding this Alert or issues relating to the enforceability of a jury trial waiver or other alternative dispute resolution methods, please contact the authors, Chad Shultz, cshultz@fordharrison.com, or Carolyn Lam, cnlam@fordharrison.com, or the Ford & Harrison attorney with whom you usually work.