In re Halliburton Co.

• Decision Date: 30 May 2002
• Docket Number: No. 00-1206.,00-1206.
• Citation: 80 S.W.3d 566
• Parties: In re HALLIBURTON COMPANY and Brown & Root Energy Services, Relators.
• Court: Texas Supreme Court

80 S.W.3d 566

In re HALLIBURTON COMPANY and Brown & Root Energy Services, Relators.

No. 00-1206.

Supreme Court of Texas.

Argued November 7, 2001.

Decided May 30, 2002.

Rehearing Denied August 22, 2002.

Russell J. Weintraub, Austin, W. Carl Jordan, Vanessa M. Clem, Vinson & Elkins, Houston, for Relators.

Barbara J. Gardner, Barbara Gardner & Associates, David W. Holman, Holman & Keeling, PC, Houston, for Respondent.

Chief Justice PHILLIPS delivered the opinion of the Court in which Justice HECHT, Justice ENOCH, Justice OWEN, Justice HANKINSON, Justice O'NEILL, Justice JEFFERSON, and Justice RODRIGUEZ joined.

We are once again asked to decide whether mandamus should issue to enforce an arbitration provision, in this instance between an employer and an at-will employee. The employer sent notice of a new dispute resolution program (the Program) to the employee informing him that continuing employment would constitute acceptance of the new plan. When the employee was later demoted, he filed suit rather than following the Program. The district court denied the employer's motion to compel arbitration under the Federal Arbitration Act and stay or dismiss the trial court proceedings. The court of appeals also denied relief. ___ S.W.3d ___. We conclude that the Program meets the requirements for altering an at-will employment contract, is not unconscionable, and is otherwise enforceable under general contract principles. Because the employer has no adequate remedy on appeal, we conditionally grant the writ.

I

James D. Myers has been an at-will employee of Brown & Root Energy Services, now a subsidiary of Halliburton Company, for approximately thirty years. In November 1997, Halliburton sent notice to all employees of Halliburton companies that it was adopting a Dispute Resolution Program.¹ As part of that program, binding arbitration was designated as the exclusive method for resolving all disputes between the company and its employees. The notice informed employees that by continuing to work after January 1, 1998, they would be accepting the new program.²

Myers does not dispute that he received this notice, but he claims that he did not fully understand it. Nevertheless, he continued working for Halliburton after January 1, 1998. Sometime in 1998, Halliburton demoted him from his position as a General Welding Foreman. Although he was told this demotion was due to "a lack of interpersonal skills," Myers alleges that the real reason was discrimination based on his race and age. In October 1999, Myers brought this suit in district court alleging wrongful demotion in violation of the Texas Commission on Human Rights Act, TEX. LAB.CODE § 21.001. Halliburton asked the trial court to compel arbitration under the Program and to either stay or dismiss the lawsuit. The trial court denied the motion, and the court of appeals denied Halliburton's petition for writ of mandamus.

II

Under the Federal Arbitration Act (FAA), an agreement to arbitrate that is valid under general principles of state contract law and involves interstate commerce is "valid, irrevocable, and enforceable." 9 U.S.C. § 2. The parties here do not dispute that the contract involves interstate commerce. We must determine whether, under state law, the Program's arbitration clause is valid. 9 U.S.C. § 2.

In Hathaway v. General Mills, Inc., 711 S.W.2d 227 (Tex.1986), we outlined the manner in which an employer may change the terms of an at-will employment contract. We held that the party asserting a change to an at-will employment contract must prove two things: (1) notice of the change, and (2) acceptance of the change. Id. at 229. We stated that "to prove notice, an employer asserting a modification must prove that he unequivocally notified the employee of definite changes in employment terms." Id. Yet we made clear that when an employer notifies an employee of changes to the at-will employment contract and the employee "continues working with knowledge of the changes, he has accepted the changes as a matter of law." Id. (citation omitted).

Here, it is undisputed that Halliburton notified Myers of the proposed changes. The notice explained the Program, stated its effective date, and explained that by working after that date an employee would indicate that he or she accepted the provision. Myers argues that he only briefly looked at the documents and that he did not understand them. The materials, however, unequivocally notified him that his employment terms would be changing. A one-page summary included in the materials stated:

While both you and Halliburton retain all substantive legal rights and remedies under this Program, you and Halliburton are both waiving all rights which either may have with regard to trial by jury for employment related matters in state or federal court.

The accompanying materials set forth that adopting the new Program meant that

if you accept or continue your employment after January 1, 1998, you will agree to resolve all legal claims against Halliburton through this process instead of through the court system.

After receiving this notice, Myers continued to work for Halliburton after January 1, 1998, thus accepting the changes as a matter of law.

This is not a case in which the written notice was contradicted by other written or oral communications between the employer and the employee. See Hathaway, 711 S.W.2d at 229. On this record we conclude that Halliburton's offer was unequivocal and that Myers' conduct was an acceptance of that offer.

The court of appeals held that Halliburton's promises were illusory, and therefore could not constitute consideration for Myers' promise to arbitrate. ___ S.W.3d ___. The court relied on Light v. Centel Cellular Co., 883 S.W.2d 642 (Tex.1994), for the proposition that

because an at-will employer and employee may not contract to limit the ability of either to terminate the employment at-will, a promise by either which is dependent on a period of continued employment is illusory and thus insufficient to support a bilateral contract because it would fail to bind the promisor who always retains the option of discontinuing employment in lieu of performance.

Id. at 645.

This is a correct statement of the law, but it does not apply to the situation here. In Light, we considered the validity of a covenant not to compete between an at-will employee and her employer. Light, 883 S.W.2d at 643. We held that certain promises made by the employer in the covenant were illusory because they were dependent on the at-will employee's continued employment. Id. at 645-46. The employer could avoid performance simply by terminating the employment relationship, while the employee was bound whether she stayed or left. Id. at 645.

By contrast, the Program is not dependent on continuing employment. Instead, it was accepted by the employee's continuing employment. When Myers reported for work after January 1, 1998, he accepted Halliburton's offer; both Myers and Halliburton became bound to arbitrate any disputes between them. Even if Myers' employment had ended shortly thereafter, the promise to arbitrate would have been binding and enforceable on both parties. In Light, the employer was bound only while the employee continued to work. Thus, following Myers' acceptance, the Program was not dependent on continuing employment and was not illusory. See also In, re Jebbia, 26 S.W.3d 753, 758 (Tex.App.-Houston [14th Dist.] 2000, orig. proceeding) (rejecting the argument that an arbitration provision lacked consideration because the employment relationship was at-will).

Myers also asserts that Halliburton's promises were illusory because the company retained the right to modify or discontinue the Program. But the Program also provided that "no amendment shall apply to a Dispute of which the Sponsor [Halliburton] had actual notice on the date of amendment." As to termination, the plan stated that "termination shall not be effective until 10 days after reasonable notice of termination is given to Employees or as to Disputes which arose prior to the date of termination." Therefore, Halliburton cannot avoid its promise to arbitrate by amending the provision or terminating it altogether. Accordingly, the provision is not illusory.

Myers further asserts that because his statutory rights under the Texas Commission on Human Rights Act are implicated, a higher standard applies in determining if he agreed to binding arbitration. For this proposition, he cites Prudential Insurance Co. v. Lai, 42 F.3d 1299 (9th Cir.1994). Lai held that the employer must establish at least a "knowing agreement to arbitrate employment disputes" before an employee may be deemed to have waived a judicial determination of his or her rights under Title VII and related state statutes. Lai, 42 F.3d at 1304. The court held that because the arbitration agreement did not specifically mention the type of claim the plaintiffs alleged, the plaintiffs could not have "knowingly" agreed to arbitrate those claims. Id. at 1305. However, nearly every subsequent decision has rejected Lai's "knowing waiver" standard. See, e.g., Penn v. Ryan's Family Steak Houses, Inc., 269 F.3d 753, 761 (7th Cir.2001); Haskins v. Prudential Ins. Co. of Am., 230 F.3d 231, 239-40 (6th Cir.2000); Seus v. John Nuveen & Co., 146 F.3d 175, 183 n. 2 (3rd Cir.1998); Battle v. Prudential Ins. Co. of Am., 973 F.Supp. 861, 866 (D.Minn. 1997); Cremin v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 957 F.Supp. 1460, 1474-75 (N.D.Ill.1997); Maye v. Smith Barney, Inc., 897 F.Supp. 100, 107 (S.D.N.Y.1995); Bryant v. American Exp. Fin. Advisors, Inc., 595 N.W.2d 482, 486 (Iowa 1999); DeCaminada v. Coopers & Lybrand, L.L.P., 232 Mich.App. 492, 591 N.W.2d 364, 368 (App.1998); but see Hooters of Am., Inc. v. Phillips, 39 F.Supp.2d 582, 612 (D.S.C.1998); Hoffman v. Aaron Kamhi, Inc., 927 F.Supp. 640, 645 (S.D.N.Y.1996). Moreover, Lai's "knowing waiver" standard is inconsistent with the ...