This recent case brings to mind the old adage, “Never make promises you can’t keep.” Here are the alleged facts: DuPont spun off part of its operations to form a new subsidiary. DuPont gave affected employees an option—keep working for DuPont or go work for the new subsidiary. DuPont allegedly promised that the new subsidiary would stay part of DuPont. After employees transferred to the new subsidiary, DuPont sold the new subsidiary to Koch Industries. As a result, employees who had transferred to the new subsidiary allegedly lost pensions, pay, and benefits. They brought suit against DuPont, alleging that DuPont fraudulently induced them to stop working for DuPont and go work for the new subsidiary.

While working for DuPont, some of the plaintiffs were under a collective bargaining agreement (CBA) between DuPont and the union. The CBA provided that the employees could not be terminated except for “just cause.” The CBA also included a grievance procedure whereby fired employees could contest their discharge while continuing to work for DuPont. The CBA could be terminated by either the union or DuPont with 60 days’ notice.

The Fifth Circuit recently certified these two questions to the Texas Supreme Court:

(1)    Under Texas law, may at-will employees bring fraud claims against their employers for loss of their employment?

(2)    If not, may employees covered under a 60-day cancellation-upon-notice CBA that limits the employer’s ability to discharge its employees only for just cause bring Texas fraud claims against their employer based on allegations that the employer fraudulently induced them to terminate their employment?

To prove fraud, one has to show “detrimental reliance” on a false promise. Because at-will employees have no guarantee of future employment, they cannot “detrimentally rely” on false promises of future employment. Consequently, the Texas Supreme Court is likely to hold that at-will employees may NOT bring fraud claims against their employers for loss of employment.

Question two is a bit trickier. Is an employee who has a contract with an employer providing that he can be fired only for “just cause” at-will? Typically not. But where that contract allows the employer to fire the employee for any reason with notice, Texas courts have found an at-will relationship. The contract at issue in this case, however, is a CBA and so is governed by federal labor law. Unlike situations where an employer may terminate an employment contract for any reason with notice, employees under this CBA would NOT lose their jobs if the CBA were terminated. Rather, DuPont would have to attempt to negotiate a new CBA and, until the bargaining reached an impasse, maintain grievance protections, during which time employees could continue to work. Does this sound like an at-will relationship, where an employee may be fired for good cause, bad cause, or no cause at all? Justice Jennifer Elrod of the Fifth Circuit argues not, and I agree.

What will the Texas Supreme Court decide?