Breach of Contract

 The Facts

Employer runs a chain of retail outlets throughout the United States. Employer prefers to train its own personnel and promote from within its own ranks. Whenever a management employee is relocated, whether by request or at the company’s insistence, the Employer will cover the relocation costs, including any loss on the sale of a residence, moving expenses, house-hunting expenses, airline travel and the like.

However, the Employee must sign a Repayment Agreement that states that if he leaves the job within the first two (2) years following the date of his relocation, he will reimburse Employer for those expenses. If the departure occurs during the first year, the Employee must pay back 100% of the amounts paid to him for the relocation. If he leaves during the second year, the Employee must pay back 75% if he leaves between months 12-16, 50% if he leaves between months 17-20, and 25% if he leaves between months 21-14.

Employee signed a Relocation Agreement on September 6, 2006 and immediately began the process of relocating to Dallas, Texas from Eugene, Oregon. The move to Dallas was completed in January 2007. Employer incurred $84,000 in relocation costs. On December 29, 2007, Employee voluntarily resigned his employment with Employer and left Texas for another job in Tulsa, Oklahoma.

The Questions

Can the Employer recover money from Employee under the terms of the written Relocation Agreement? If so, how much can the Employer recover? If suit if filed, can the Employer also recover attorneys’ fees and costs?

Of course, in any situation where there is a written document that governs the parties (e.g. a written contract); the first place to look for an answer is what the parties agreed to in that writing.

Official Ruling

In this fact scenario, the Employer may recover 75% of its relocation expenses. If the Relocation Agreement had stated that the two (2) year period began to run on the date that the Employee first reported to work at the new location, Employer would have been able to recover 100% of those expenses since Employee left before one year from that date. However, since the Relocation Agreement was dated in early September 2006, there is an argument that the Employee left after 16 months, thereby reducing the Employer’s recovery and the Employee’s exposure.

Under Texas law, Employer may recover its reasonable attorneys’ fees in an action against Employee. Attorneys’ fees are usually recoverable by the prevailing party in a breach of contract case.

 

 

 

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