This summary judgment appeal presents the question whether provisions in an employment agreement that require an employee to repay substantial parts of her compensation upon termination of employment are unlawful restraints of trade. Because the provisions lack reasonable limits and impose a substantial penalty on the exercise of an at-will employee’s right to quit her job, we hold that they are unenforceable. We therefore reverse the trial court’s judgment and (1) render judgment that appellee Buc-ee’s Ltd. take nothing on its claims against appellant Kelley Rieves; (2) render judgment declaring the “Additional Compensation” and “Retention Pay” provisions in Rieves’s employment contracts to be unenforceable restraints of trade; and (3) remand the question of Rieves’s entitlement to attorneys’ fees to the trial court for further proceedings.
Buc-ee’s operates a well-known chain of convenience stores in Texas. Rieves, a graduate of Texas Tech University with a degree in restaurant and hotel management, was working for TGI Fridays restaurants when she began to explore a potential new job as a Buc-ee’s assistant manager. During this process, Rieves met with Don Wasek, Buc-ee’s president. Wa-sek asked Rieves what payment she would need to take a job with Buc-ee’s. Rieves responded that she would need to be paid at least the salary she was earning at TGI Fridays, which was approximately $55,000 per year. Wasek agreed.to that amount and told Rieves it would be split between an hourly pay rate and a flat monthly amount. Wasek then told Rieves that she could pick, within specified limitations, the percentage split between the two. The split requirement was not negotiable. Rieves picked a 70-30 split. Rieves accepted an assistant manager position at one of Buc-ee’s convenience stores.
Rieves signed an employment agreement with an effective date of August 25, 2009 (the 2009 Agreement). The 2009 Agreement provided that Rieves would be an at-will employee and that she would be paid an hourly wage of $14 plus a “fixed monthly bonus of $1,528.67.” The monthly bonus provision is found in Article 3, entitled ‘Additional Compensation.” This article states, in pertinent part:
3.02 For the additional compensation to be paid Employee under Paragraph 3.01, Employee shall be required to work for Employer a minimum of 60 months from the Effective date of this Agreement and shall also provide Employer with a minimum of 6 months written separation notice. In the event Employee does not meet the above requirements, regardless of the reason for termination or regardless of the reason Employee did not provide the required notification, Employee shall be required to repay all of the Additional Compensation to Employer.... In other words, in the event Employee’s employment with Employer ... terminates for any reason, - with or without cause, and the above requirements are not meet [sic] by Employee, Employee will be required to repay all of the additional compensation received.
About a year later, Wasek met with Rieves again. This meeting produced a new employment agreement (the 2010 Agreement). Under the terms of the 2010 Agreement, Rieves remained an at-will employee and would receive a weekly salary of $862.75. Buc-ee’s reserved the right to modify this salary. Article 3 of the 2010 Agreement is entitled “Retention Pay.” Under that article, Rieves would be “advanced a monthly retention payment of 1.2652% of Buc-ee’s # 32 net profit paid monthly and a one time payment of $1000.00.” Buc-ee’s reserved the right to modify this pay as well. To earn the Retention Pay, Rieves was “required to work for [Buc-ee’s] a minimum of 48 months from the Effective date of this Agreement and shall also provide [Buc-ee’s] with a minimum 6 months written Separation Notice to be given only after [Rieves] fulfills [the] required minimum number of months worked.” Like the 2009 Agreement, the 2010 Agreement required Rieves to repay all Retention Pay if she did not work a minimum of 48 months and give the minimum six months’ written notice of separation, regardless of the reason both requirements were not met. If not repaid within 30 days of termination, the retention pay and additional compensation would accrue interest at 10 percent per year, compounded annually. Article 3 also provided that Rieves “completely understands that there
Among other terms, the 2010 Agreement contains the following pertinent sections:
6,06- In the event [Rieves] has- prior Employment Contract(s) with [Buc-ee’s] which.required [Rieves] to repay Additional Compensation, the obligation to repay the Additional Compensation shall continue to exist unless [Rieves] complies with all the terms of this Agreement. Except as provided in the previous sentence, this Agreement supersedes all other agreements, either oral or in writing, between the parties to this Agreement with the exception of any non-solicitation, non-competition, non-compete, non-disclosure agreements that may be in place.
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6.08 In the event it becomes necessary for [Buc-ee’s] to sue to enforce the provisions of this Agreement, -and/or in the event-that [Buc-ee’s] is involved in litigation wherein [Buc-eye’s] defends itself in whole or in part, based, upon this Agreement, [Buc-ee’s] shall be entitled to collect from [Rieves] all attorney’s fees and other costs and expenses of litigation incurred by [Buc-ee’s].
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6.09 The following definitions shall apply to this Agreement. In the event it is determined that a definition is ambiguous, the meaning given to it by [Buc-ee’s] shall control.
1. Net, Food Service Net, Car Wash Net, Store Net, Company Net, Net Income; Net Profit, Bottom Line; Net Profit (Loss) . (collectively referred to, as “Net”) ■ are collectively defined as the amount of sales less costs of sales less expenses, at store(s) or the entire, Company. [Buc-ee’s], at its sole discretion, shall determine, at any time (including, without limitation, monthly, quarterly and annually), sales, costs of goods and all expenses. [Buc-ee’s] determination of Net shall be conclusive, final .and binding upon Employee. Employee willingly agrees to accept [Buc-ee’s] determination' of Net. [Buc-ee’s] reserves the right to modify Net, prospectively and retrospectively. In the event, [Buc-ee’s] modifies Net retrospectively; [Buc-ee’s] shall have the right to adjust any compensation, bonuses, or pay based upon said modification.
Rieves received Additional Compensation under the 2009 Agreement and later Retention Pay under the 2010 Agreement, and she paid federal income taxes on these amounts. Rieves resigned from her employment with Buc-ee’s effective July 12, 2012—-about three years after she began work. A year later, Buc-ee’s sent Rieves a demand for payment of $66,720.29, plus interest and attorneys’ fees. Buc-ee’s asserted this was the amount of Additional Compensation and Retention Pay Rieves had been paid during her employment with Buc-ee’s.
Rieves responded by filing this lawsuit seeking a declaration that these provisions of the Agreements function as unreasonable restraints of trade and are therefore unenforceable. Buc-ee’s filed an answer and counterclaim seeking to recover the $66,720.29, plus interest and attorneys’ fees. In. response to Bue-ee’s counterclaim, Rieves asserted, among other defenses, that the Additional Compensation and Retention Pay provisions were unenforceable restraints of trade. .Rieves later added causes of action for fraud, fraudulent inducement, negligent misrepresentation, breach of contract, quantum meruit, and unjust enrichment.
Buc-ee’s then filed a second motion for summary judgment on (1) its counterclaim for breach of contract; (2) Rieves’s remaining affirmative defenses; and (3) all of Rieves’s claims seeking monetary damages. Rieves filed a motion for summary judgment on Buc-ee’s counterclaim for breach of contract and on her request for a declaratory judgment. The trial court granted Buc-ee’s second motion for summary judgment, denied Rieves’s motion, and then signed a final judgment awarding Buc-ee’s $48,687,46 in damages plus, prejudgment and post-judgment interest and attorneys’ fees.
Analysis
Rieves raises numerous issues challenging the trial court’s orders granting Buc-ee’s motions for summary judgment and denying her own. We consolidate these challenges into three: (1) the 2010 Agreement is unenforceable due to a lack of consideration; (2) the 2010 Agreement is unconscionable; and (3) the repayment provisions.found .in both, agreements are unenforceable restraints of trade.
I. The Additional Compensation and Retention Pay provisions are unenforceable restraints of trade.
A. Standard of review
We review a trial court’s order granting a traditional summary judgment de novo. Mid-Century Ins. Co. v. Ademaj,
Rieves contends the repayment provisions should be considered covenants not to compete. The enforceability of a covenant not to compete is a question of law. DeSantis v. Wackenhut Corp.,
B. The provisions are unenforceable because they lack reasonable limits and impose a substantial penalty on Rieves for exercising her right as an at-will employee to quit her job.
It is undisputed that Rieves was an at-will employee of Buc-ee’s. At-will employment is an important and longstanding doctrine in Texas. Sawyer v. E.I. Du Pont de Nemours & Co.,
In the Free Enterprise and Antitrust Act, the Legislature declared that ‘“[e]very contract, combination, or conspiracy in restraint of trade or commerce is unlawful.’ ” Marsh USA Inc.,
Under supreme court precedent, these standards of reasonableness apply not only to provisions that expressly limit a former employee’s professional mobility, but also to damages provisions that impose a severe economic penalty on a departing employee. Peat Marwick Main & Co. v. Haass,
As noted above, an enforceable covenant must contain limitations ás to time, geographic area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than necessary to protect the employer’s business interest. Tex. Bus. & Com. Code Ann. § 15.50(a) (West 2011); Marsh USA, Inc.,
For these reasons, we hold that the Additional Compensation and- Retention Pay provisions are unreasonable and therefore unenforceable. See Tex. Bus. & Com. Code Ann. § 15.50(a); Haass,
Buc-ee’s makes several arguments against this result, but none are persuasive. Buc-ee’s initially .argues that the Additional Compensation and Retention Pay provisions are enforceable forfeiture provisions, not restraints of trade, Buc-ee’s cites ExxonMobil Corp. v. Drennen, a choice-of-law case, in support of this argument.
We conclude Drennen does not affect the outcome here for two reasons. First, Drennen involved a different type of compensation plan than the one at issue here. The dispute in Drennen grew out of Exx-onMobil’s cancellation - of future payments of unvested stock options that had been awarded but not delivered to-Drennen, an ExxonMobil vice president, under a noncontributory profit-sharing plan. Exxon-Mobil -cancelled the future payments after Drennen' retired and then accepted employment at an ExxonMobil competitor. Id. Drennen did' not involve ExxonMobil seeking, the return of Drennen’s salary or any stock options that had already vested. In contrast, Buc-ee’s seeks the return of money that had already been paid to Rieves “for all hours worked” as a convenience store assistant manager and'on which she had already paid federal income taxes.
Second, the supreme court in Drennen examined the differences between non-competes and forfeiture provisions. As the. court explained,
[njon-competes protect the investments an employer has made in an employee, ensuring that the costs incurred to develop human capital- are protected against competitors who, having not made such expenditures, might appropriate the employer’s investment. Forfeiture provisions conditioned on loyalty, however, do not restrict or prohibit the employees’ future employment opportunities.Instead, they reward employees for continued employment. and loyalty. As we recognized in Marsh, employee stock-ownership plans have a purpose that is unrelated to restraining competition—linking the interest of key employees with the employer’s long-term success. Under a non-compete, the former employer can bring a breach of contract suit to enforce the clause. But under a forfeiture provision, the former employer does not need to take legal action because the profit-sharing plan belongs to the employer.
Id. at 327-28 (internal citations omitted). Here, the Additional Compensation and Retention Pay provisions do not have the hallmarks of forfeiture provisions as described by the supreme court. These provisions do not reward Rieves for her loyalty because (1) they require Rieves to disgorge a substantial part of the compensation she was paid even if it is Buc-ee’s (not Rieves) who terminates the employment relationship; and (2) the longer Rieves works for Buc-ee’s, the larger the penalty becomes if she exercises her right as an at-will employee to quit her job. Furthermore, the additional compensation and retention pay had not been retained by Buc-ee’s; the funds had been paid to Rieves, and Buc-ee’s had to file this suit for breach of contract to try to get them back.
Buc-ee’s reliance on Dollgener v. Robertson Fleet Services, Inc.,
Finally, Buc-ee’s gains no support from its citations to Dresser-Rand Co. v. Bolick, No. 14-12-00192-CV,
Having determined that the Additional Compensation and Retention Pay provisions are unenforceable restraints of trade, we sustain Rieves’s third consolidated issue. We hold' that the trial court erred when it: (1) granted Buc-ee’s partial motion for summary judgment; (2) granted Buc-ee’s second motion for summary judgment; and (3) denied Rieves’s motion for summary judgment on her request for a declaration that the Additional Compensation and Retention Pay provisions are unenforceable restraints of trade and on Buc-ee’s counterclaim for breach of contract.
Finally, Rieves challenges the trial court’s award of attorneys’ fees to Buc-ee’s. Section 6.08 of the 2010 Agreement entitles Buc-ee’s to collect attorneys’ fees from Rieves if Buc-ee’s sues to enforce the Agreement or defends itself in whole or part based on the Agreement; it does not entitle Rieves to fees or require that Buc-ee’s prevail in order to recover its fees.
Section 15.52 of the Covenants Not to Compete Act provides that the criteria for enforceability of a covenant in section 15.50 and the procedures and remedies for enforcement in section 15.51 “are exclusive and preempt” any other enforceability criteria or “procedures and remedies in an action to enforce a covenant not to compete under common law or otherwise.” Id. § 15.52; see Glattly v. Air Starter Components, Inc.,
Conclusion
Having sustained Rieves’s issues challenging the Additional Compensation and Retention Pay provisions as unenforceable restraints of trade and challenging the award of attorneys’ fees to Buc-ee’s, we reverse the trial court’s final judgment and render judgment (1) that Buc-ee’s take nothing on its claims against Rieves; (2) that Buc-ee’s take nothing on its request for attorneys’ fees; and (3) declaring that the Additional Compensation and Retention Pay provisions in Rieves’s employment agreements are unenforceable restraints of trade. We remand the question of Rieves’s entitlement to attorneys’ fees to the trial court for further proceedings.
Notes
. The difference between the amount Buc-ee’s initially sued Rieves to collect ($66,720,29) and the amount the trial court awarded Buc-ee's in the final judgment is explained by Buc-ee’s waiving its claim to the amount of federal income taxes that were withheld, from Rieves’s Additional Compensation and Retention Pay payments.
. Buc-ee’s argues that Rieves waived any appellate challenge to the enforceability of the 2009 Agreement’s Additional Compensation provision because she mentioned only the 2010 Agreement by name in her opening brief. We conclude that no waiver occurred because section 6.06 of the 2010 Agreement incorporated the Additional Compensation provision of the 2009 Agreement, and Rieves’s arguments apply equally to both agreements’ repayment provisions. See Perry v. Cohen,
. Rieves does not, however, complain on appeal about the trial court’s denial of her motion for summary judgment on her own request for attorneys’ fees.
. The Covenants Not to Compete Act returned Texas law regarding the enforceability of such covenants to the common-law requirements that existed before the supreme court adopted a narrow “common calling” test. See Marsh USA, Inc.,
. Even if we were to take the formalist view that these provisions are not subject to the Covenants Not to Compete Act because they do not expressly prohibit competition, our holding that the provisions are unlawful would not change. As explained above, the Act provides an exception to the general rule that employee mobility limits are unlawful restraints of trade, so the Act’s inapplicability would simply result in the provisions being held unlawful under the general rule. In addition, as discussed below, the provisions likewise fail the common-law reasonableness standards (similar to those in the Act) that the supreme court applied to the damages provisions in Haass and Frankiewicz.
.It is undisputed that Rieves left hfer job at Buc-ee’s for a job in an unrelated business that did not compete with Buc-ee’s convenience stores in any manner.
. Additionally, Drennen is not on point because the supreme court expressly declined to address whether provisions in non-contributory employee incentive programs like Exxon-Mobil's, much less compensation plans like Buc-ee's method of paying Rieves's salary, are unreasonable restraints of trade under Texas law. Id. at 329.
. The parties dispute whether the attorneys' fee provision of the 2009 Agreement survived the 2010 Agreement. We need not decide this issue because even if the 2009 provision survived, it would likewise be preempted,
. See Glattly,
