From Casetext: Smarter Legal Research

Hathaway v. General Mills Inc.

Supreme Court of Texas
Jul 9, 1986
711 S.W.2d 227 (Tex. 1986)

Summary

holding that an employee who continued working after he was notified that his employment conditions would be modified by an arbitration policy was bound to arbitrate

Summary of this case from Armstrong v. Associates Intern

Opinion

No. C-4481.

April 23, 1986. Rehearing Denied July 9, 1986.

Appeal from the 298th District Court, Dallas County, Sid Fitzwater, J.

Daniel J. Sheehan, Jr., Sheehan, Young, Smith Culp, San Antonio, for petitioners.

Robert H. Mow, Jr., and Michael Braden, Carrington, Coleman, Sloman Blumenthal, Dallas, for respondent.


This employment contract case involves a dispute between a salesman and his former employer over commission rates. The issue on appeal is whether General Mills and Gregg N. Hathaway agreed to modify their employment at will contract to lower commission rates. The trial court rendered judgment for Hathaway based on jury findings that Hathaway did not accept the modification. The court of appeals reversed, 694 S.W.2d 96. We reverse the court of appeal's judgment and affirm the trial court's.

Hathaway began selling La Coste "Izod" shirts for General Mills on a commission basis in 1978. On January 21, 1980, Hathaway met with Stephen Berkley, General Mills' national sales manager, to discuss lowering Hathaway's 1980 commission rate. Their versions of the discussion differ. Berkley testified that he told Hathaway of a proposed new commission rate and that Hathaway "would either [have to] accept it or leave." Berkley also stated that Hathaway neither rejected nor disputed the lower rates. Hathaway testified that he disagreed with the rate change and told Berkley that he "thought it was ridiculous." According to Hathaway, Berkley then told him to discuss the proposed new commission rate with Gary Duncan, Hathaway's regional sales manager in Dallas. Hathaway further testified that Duncan told him not to worry about the rate change and that Duncan would "take care of the situation."

Hathaway continued to work for General Mills. In February of 1980, General Mills sent Hathaway a letter proposal containing the new rates. Hathaway did not sign the letter. Hathaway testified that Duncan told Hathaway not to sign the letter and that Duncan would talk to Berkley about the rate changes.

After firing Hathaway in April, 1980, General Mills offered to pay him under the proposed new, lower commission rates for his work to that time. Hathaway sued for the old, higher commissions, alleging that he never accepted the new rates.

In its answers to special issues, the jury found that Hathaway never accepted or ratified the commission rate change, and that General Mills ratified Hathaway's refusal to accept the changes. Based on these findings, the trial court rendered judgment for Hathaway for $106,042 in commissions plus pre-judgment interest and attorney's fees. The court of appeals reversed, holding that Hathaway accepted the lower rates as a matter of law by continuing to work for General Mills knowing of the changed rates.

Hathaway argues that General Mills did not clearly notify him of the rate changes and, therefore, he did not accept the modification as a matter of law by remaining with General Mills. We agree.

Parties have the power to modify their contracts. A modification must satisfy the elements of a contract: a meeting of the minds supported by consideration. Rhoads Drilling Co. v. Allred, 123 Tex. 229, 70 S.W.2d 576, 583 (1934); Mandril v. Kasishke, 620 S.W.2d 238 (Tex.Civ.App. — Amarillo 1981, writ ref'd n.r.e.). Whether a contract is modified depends on the parties'

intentions and is a question of fact. Coastal Plains Development Corp. v. Tech-Can Corp., 531 S.W.2d 143 (Tex.Civ.App.-Houston [1st Dist.] 1975, writ ref'd n.r.e.). The burden of proving modification rests on the party asserting the modification. Stower v. Harper, 376 S.W.2d 34 (Tex.Civ.App.-Tyler 1964, writ ref'd n.r.e.).

In employment at will situations, either party may impose modifications to the employment terms as a condition of continued employment. L.G. Balfour Co. v. Brown, 110 S.W.2d 104, 107 (Tex.Civ.App.-Fort Worth 1937, no writ). The party asserting the modification still must prove that the other party agreed to modify the employment terms. Generally, when the employer notifies an employee of changes in employment terms, the employee must accept the new terms or quit. If the employee continues working with knowledge of the changes, he has accepted the changes as a matter of law. Balfour, 110 S.W.2d at 107. Thus, to prove a modification of an at will employment contract, the party asserting the modification must prove two things: (1) notice of the change; and, (2) acceptance of the change.

To prove notice, an employer asserting a modification must prove that he unequivocally notified the employee of definite changes in employment terms. Stowers v. Harper, 376 S.W.2d 34, 39 (Tex.Civ.App.-Tyler 1964, writ ref'd n.r.e.). Cases dealing with employment modifications require that the employee have knowledge of the proposed modification. Id. at 39. See also Pine River State Bank v. Mettille, 333 N.W.2d 622 (Minn. 1983) (employee with knowledge of changes accepts by retaining employment); Sterba v. Blaser, 33 Ill. App.3d 1, 337 N.E.2d 410, 416 (1975) (same); Gishen v. Dura Corp., 362 Mass. 177, 285 N.E.2d 117, 121 (1972) (same). Fairness also dictates this rule. To have knowledge of a modification, the employee must know the nature of the changes and the certainty of their imposition. Stowers, 364 S.W.2d at 39.

The employer asserting a modification must also prove that the employee accepted the proposed changes. If the employer proves that he has unequivocably notified the employee of the changes, the employee's continuing employment will constitute acceptance as a matter of law. Balfour, 110 S.W.2d at 107.

The court of appeals held that Hathaway accepted the modification as a matter of law by remaining with General Mills. The court of appeals, however, ignored the fact that no issue on notification was submitted or requested. We must deem notification in support of the trial court's judgment for Hathaway unless notification was conclusively proven. Tex.R.Civ.P. 279.

General Mills did not conclusively prove unequivocal notification. Although the versions differ, Hathaway testified that Berkley told him to discuss the changes with Duncan. Hathaway further testified that Duncan, Hathaway's superior, told him that Duncan would take care of the problem. Further, General Mills sent Hathaway a letter containing the new rates, and Duncan again told Hathaway not to worry and that Duncan would take care of it. These conflicting signals from General Mills' managers make unequivocal notification a jury question.

Because General Mills did not conclusively prove or request an issue on notification, we must deem this element in support of the judgment and against unequivocal notification. TEX.R.CIV.P. 279. Without proof of unequivocal notification, Hathaway's continued employment under protest did not equal acceptance as a matter of law. Therefore, the court of appeals erred in setting aside the jury's answer that Hathaway did not accept the modification.

Because a contract modification was not proven, Hathaway is entitled to payment at the previous contract rate as determined in the trial court's judgment. See Stowers, 376 S.W.2d at 39. We reverse the judgment of the court of appeals and affirm that of the trial court.


Summaries of

Hathaway v. General Mills Inc.

Supreme Court of Texas
Jul 9, 1986
711 S.W.2d 227 (Tex. 1986)

holding that an employee who continued working after he was notified that his employment conditions would be modified by an arbitration policy was bound to arbitrate

Summary of this case from Armstrong v. Associates Intern

Holding that when an employee "continues working with knowledge of the changes, he has accepted the changes as a matter of law."

Summary of this case from Douglas v. Oceanview Healthcare, Inc.

holding that an at-will employee's continuing to work after receiving modifications to the terms of employment constitutes acceptance of those terms "as a matter of law"

Summary of this case from Alex v. Johnson

holding that contradicting written and oral communications did not constitute conclusive proof of unequivocal notice

Summary of this case from In re Dallas Peterbilt, Ltd., L.L.P.

holding that notice is provided if the employee has knowledge of the employment terms

Summary of this case from In re Dallas Peterbilt, Ltd., L.L.P.

holding that "[p]arties have the power to modify their contracts"

Summary of this case from Crowell v. Crowell

holding that unequivocal notice was question for jury when employee received written notice of policy modification but was told by superior "not to worry" about it and that he would "take care of it"

Summary of this case from HSS Systems v. Lucan

holding that when employer notifies employee of change to at-will employment contract and employee "continues working with knowledge of the changes, he has accepted the changes as a matter of law"

Summary of this case from Ledig v. Duke Energy

holding issue of modification depends on the intent of the parties and is for the jury to determine

Summary of this case from Tractebel Energy Marketing, Inc. v. E.I. Du Pont de Nemours & Co.

recognizing that terms of employment of at-will employees may be modified

Summary of this case from City of Dall. v. Arredondo

recognizing that terms of employment of at-will employees may be modified

Summary of this case from City of Dall. v. Arredondo

In Hathaway, the issue on appeal was whether the parties agreed to modify their employment-at-will contract to lower commission rates. 711 S.W.2d at 228.

Summary of this case from Moran v. Ceiling Fans Direct, Inc.

noting that employees who continue to work after an employer has notified them of changes in the employment contract are deemed to have accepted the changes

Summary of this case from Garrett v. Circuit City Stores, Inc.

discussing the requirements for proving a modification of an "at will employment contract"

Summary of this case from Fadeyi v. Planned Parenthood Asso. of Lubbock

addressing a salesman's commissions

Summary of this case from Galan v. Valero Servs., Inc.

In Hathaway the Texas Supreme Court explained that "to prove notice, an employer asserting a modification must prove that he unequivocally notified the employee of definite changes in employment terms."

Summary of this case from David v. KBR Technical Services, Inc.

commenting that, under common law principles of contract law, an employee at will is deemed to accept unilateral changes imposed by an employer if the employee continues to work with knowledge of the change

Summary of this case from Martin v. Airborne Exp.

In Hathaway, we explained the employee must have knowledge of the employer's proposed modification to an at-will employment policy to constitute effective notice; that is, the employee must "know the nature of the changes and the certainty of their imposition."

Summary of this case from J.M. Davidson Inc. v. Webster

In Hathaway, we held that an employer may enforce changes to an at-will employment contract if the employer unequivocally provides notice of a definite change and the employee accepts the change by continuing employment.

Summary of this case from J.M. Davidson Inc. v. Webster

In Hathaway, we held that the party asserting a change to an at-will employment contract "must prove two things: (1) notice of the change; and, (2) acceptance of the change."

Summary of this case from J.M. Davidson Inc. v. Webster

In Hathaway v. General Mills, Inc., 711 S.W.2d 227 (Tex. 1986), we outlined the manner in which an employer may change the terms of an at-will employment contract.

Summary of this case from In re Halliburton Co.

stating that employee must have knowledge and notice of proposed modification when employer modifies at-will employment agreement

Summary of this case from Malone v. American Business Information, Inc.

indicating that employer must unequivocally notify employee of the changes before the employee's continuing employment will constitute acceptance as a matter of law

Summary of this case from Firstlight Fed. Credit Union v. Loya

In Hathaway, the employee was found to have not accepted the modification where his supervisor twice told him not to "worry about" the changes because he (the supervisor) would "take care of the situation."

Summary of this case from Omoruyi v. Grocers

explaining that employer may enforce changes to at-will employment contract if it unequivocally provides notice of definite change and employee accepts change by continuing employment

Summary of this case from Anaheim Indus v. GMC
Case details for

Hathaway v. General Mills Inc.

Case Details

Full title:Gregg N. HATHAWAY, et ux., Petitioners, v. GENERAL MILLS, INC., Respondent

Court:Supreme Court of Texas

Date published: Jul 9, 1986

Citations

711 S.W.2d 227 (Tex. 1986)
69 A.L.R.4th 1139

Citing Cases

Sempra Energy Trading, LLC v. Holmes

"In employment at will situations, either party may impose modifications to the employment terms as a…

Perkins v. Ulrich

See In re Dillard Dep't Stores, Inc., 198 S.W.3d 778, 780 (Tex. 2006) (orig. proceeding); Hathaway v. Gen.…