On Friday, March 9, 2012, in In re Frank Kent Motor Co. (No. 10-0687), the Texas Supreme Court unanimously upheld a jury waiver agreement between an employer and an at-will employee, despite the employee having been told that he would be terminated from his employment if he refused to sign the agreement. The court reasoned that because an employer has the legal right to terminate an at-will employee, a threat to exercise that right cannot amount to coercion that would invalidate a jury waiver agreement.

Steven Valdez, the employee in question, had worked for Frank Kent Cadillac for over twenty-eight years. After being told by his supervisor that he would lose his job if he failed to do so, Valdez signed the following "Acknowledgement & Mutual Waiver of Jury Trial":

I agree that with respect to any dispute between [Frank Kent] and me to resolve any disputes between us arising out of or in any way related to the employment relationship (including, but not limited to, employment and discontinuation of employment) before a judge without a jury. [FRANK KENT] AND EACH EMPLOYEE THAT SIGNS THIS ACKNOWLEDGEMENT, RECEIVES A COPY OF THIS HANDBOOK, HAS KNOWLEDGE OF THIS POLICY, AND CONTINUES TO WORK FOR [FRANK KENT] THEREAFTER, HEREBY WAIVES THEIR RIGHT TO TRIAL BY JURY AND AGREE TO HAVE ANY DISPUTES ARISING BETWEEN THEM RESOLVED BY A JUDGE OF A COMPETENT COURT SITTING WITHOUT A JURY.

Almost a year later, Valdez was discharged from employment and sued claiming age discrimination. He demanded a jury, and Frank Kent moved to strike the demand, relying on the waiver. Valdez asserted that the waiver was not signed under "knowing, voluntary, and intelligent" circumstances, and therefore could not be enforced. He asserted that he lacked education or experience in negotiating employment agreements, did not like the language of the waiver but signed because his supervisor told him he would be fired if he did not sign, and did not hire a lawyer because he believed that Frank Kent was unwilling to make changes and would fire him if he asked for more time to hire a lawyer to analyze the agreement. The trial court found the agreement unenforceable, and the court of appeals agreed in the ensuing mandamus proceedings.

For a unanimous Texas Supreme Court, Justice Debra H. Lehrmann wrote that "[a]n employer's threat to exercise its legal right cannot amount to coercion that invalidates a contract," and that none of Valdez's assertions rendered the alleged threat coercive. The at-will employment relationship is governed by the rule that either party may terminate the relationship for any or no reason, and that when the employer notifies an employee of changes in employment terms, the employee must accept the terms or quit.

The Texas Supreme Court has previously upheld the right of an employer to impose new dispute resolution procedures in the at-will employment context. In In re Halliburton Co., 80S.W. 3d 506 (Tex. 2002), the court held that it was not procedurally unconscionable to condition continued employment on acceptance of a plan under which all disputes were subject to arbitration. It enforced the arbitration provision against an employee who continued employment after receiving notice of the change in employment conditions and was subsequently demoted. In the present case, the court stated that there is no reason to treat the jury waiver any differently from an arbitration provision, especially since arbitration "is every bit as much of a surrender of the right to a jury trial as a contractual jury waiver."

Should your organization adopt a jury waiver?

In light of the court's ruling, Texas employers will wish to weigh whether adopting a jury trial waiver as a condition of employment makes sense for their organization. The general desirability of bench versus jury trial, like the desirability of arbitration, is a matter on which minds can differ, and other factors, such as the current and predicted future leanings of the jury pool and the judiciary in the area where the organization operates, must also be considered.

This article was prepared by Jeff Wray (tjwray@fulbright.com or 713 651 5585) of the firm's Labor and Employment Law Practice Group. If you have any questions, please contact any of our labor and employment attorneys.