Vanegas v. American Energy Services
30 I.E.R. Cas. (BNA) 148, 53 Tex. Sup. Ct. J. 204, 302 S.W.3d 299 (2009)
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Rule of Law:
An employer's promise to pay a bonus or other compensation to an at-will employee, contingent upon the employee's continued service until a future event, constitutes an offer for a unilateral contract which becomes binding and enforceable once the employee renders performance by completing the required service.
Facts:
- In 1996, American Energy Services (AES) hired the petitioners (the employees).
- In a June 1997 meeting, employees expressed concerns to AES Vice President John Carnett about their working conditions.
- To provide an incentive for them to stay, Carnett promised the original eight employees that they would receive 5% of the value of any sale or merger of AES if they were still employed at that time.
- The employees were at-will, meaning they were free to leave at any time and could be terminated at any time.
- In 2001, AES Acquisition, Inc. acquired AES.
- At the time of the acquisition, seven of the eight original employees were still employed by AES.
- When the seven employees demanded their share of the proceeds from the sale, AES refused to pay.
Procedural Posture:
- The employees sued AES in trial court for breach of an oral agreement.
- AES filed a motion for summary judgment, arguing the promise was illusory and unenforceable.
- The trial court granted summary judgment in favor of AES.
- The employees (appellants) appealed to the court of appeals.
- The court of appeals affirmed the trial court's judgment in favor of AES (appellee).
- The employees (petitioners) petitioned the Supreme Court of Texas for review.
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Issue:
Is an employer's promise to pay a bonus to at-will employees upon the sale of the company, contingent on their continued employment until that event, unenforceable as an illusory promise?
Opinions:
Majority - Justice Green
No. An employer's promise to pay a bonus to at-will employees becomes an enforceable unilateral contract once the employees accept the offer by performing as requested. AES's promise was an offer for a unilateral contract, which sought acceptance through the employees' performance of remaining with the company until it was sold. Even if the promise was illusory at the time it was made—because AES could have terminated the employees at any time—it became a binding contract once the employees fully performed by staying until the sale occurred. The court distinguished this case from prior precedent involving bilateral contracts, such as covenants not to compete, where mutual, non-illusory promises are required. Here, the employees' performance served as consideration, making AES's promise to pay the bonus enforceable.
Analysis:
This decision clarifies the distinction between bilateral and unilateral contracts in the context of at-will employment, particularly concerning bonus promises. It establishes that an employer cannot induce continued service with a promise of future compensation and then, after the employee has performed, claim the promise was illusory and unenforceable. The ruling solidifies the principle that performance transforms an otherwise revocable offer into a binding unilateral contract, thereby protecting employees' reasonable expectations for performance-based compensation like bonuses, pensions, and vacation pay.
