Peter Smythe, P.C.

In Vane­gas v. Ame­ri­can Energy Ser­vi­ces, the Texas Supreme Court grap­pled with the issue of whether a com­pany could renege on a pro­mise to pay five per­cent of a com­pany sale to seven of its ori­gi­nal emplo­yees. The court ruled that it couldn’t.

A com­pany named AES was for­med in the sum­mer of 1996 and it hired seve­ral emplo­yees that year. In an ope­ra­tio­nal mee­ting the next year, the emplo­yees voi­ced con­cerns about the company’s via­bi­lity, its anti­qua­ted equip­ment, and the long hours that they had to put in to keep everything afloat. To assuage their con­cerns, an AES vice-​president alle­gedly made a pro­mise to give 5% of the pro­ceeds of a com­pany sale to all emplo­yees who sta­yed with the company.

About four years later AES was acqui­red and seven of the ori­gi­nal eight emplo­yees still on the job deman­ded their five per­cent. AES rene­ged, arguing that it didn’t owe the money because all the emplo­yees were at-​will and it could have fired any one at any time. The trial court gran­ted AES’s motion for sum­mary judgment.

The Texas Supreme Court rever­sed, saying that the emplo­yees had fully per­for­med and, having done so, AES’s alle­ged pro­mise became enfor­cea­ble. The court rea­so­ned that whether the ini­tial pro­mise was illu­sory is irre­le­vant; what mat­ters is whether the pro­mise became enfor­cea­ble by the time of the breach. The court held that the alle­ged pro­mise did become enfor­cea­ble once AES was acqui­red and the emplo­yees emplo­yed with the com­pany.

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