law-Sabine-Pilot-wrongful-termination-claim

law-Sabine-Pilot-wrongful-termination-claim | employment-contract-disputes & litigation | at-will employment
doctrine | arbitration of employer-employee disputes | bonus disputes between employer and employee |
employment litigation | discrimination retaliation claims | e mployee discipline | employee vs. independent
contractor | noncompete, nonsolicitation agreements |

SABINE-PILOT CLAIMS FROM THE HOUSTON COURTS OF APPEALS

Texas is an employment at will state, meaning that employment contracts can be terminated at will by either party
unless they have bargained otherwise. See Fed. Express Corp. v. Dutschmann, 846 S.W.2d 282, 283 (Tex.
1993); see also Armijo v. Mazda Int’l, No. 14-03-00365-CV, 2004 WL 1175335, at *3 (Tex. App.—Houston [14th
Dist.] May 27, 2004, pet. denied) (mem. op.) (holding that an employment at will agreement is an enforceable
contract until terminated by either party). The one common-law exception to the employment at will doctrine is set
forth in Sabine Pilot: an employer cannot fire an employee for the sole reason of refusing to perform an illegal
act. 687 S.W.2d at 735. The Texas Supreme Court created this tort to promote the public policy of preventing an
employee from being forced to choose between keeping his job and facing criminal liability. See Winters v.
Houston Chronicle Publ’g Co., 795 S.W.2d 723, 724 (Tex. 1990); Sabine Pilot, 687 S.W.2d at 735.
The issue of whether an individual, as opposed to the employer, can be held personally liable for a Sabine Pilot
violation appears to be an issue of first impression in Texas. Neither party identified any cases that are on point
to this issue, either in the trial court or in this court.[5] However, several other states have addressed the issue of
individual liability under their version of a tort of wrongful discharge in violation of public policy.
Some states allow individual liability, reasoning that individuals are liable for their own torts, even agents acting on
behalf of their employers. See, e.g., Jasper v. H. Nizam, Inc., 764 N.W.2d 751, 775–76 (Iowa 2009); Ballinger v.
Del. River Port Auth., 800 A.2d 97, 110–11 (N.J. 2002); Harless v. First Nat’l Bank in Fairmont, 289 S.E.2d 692,
698–99 (W. Va. 1982). According to their logic, employees can therefore be liable for a Sabine Pilot violation the
same as any other tort. See, e.g., Jasper, 764 N.W.2d at 775–76; Ballinger, 800 A.2d at 110–11; Harless, 289 S.
E.2d at 683–85. They further reason that individual liability promotes deterrence and better decision making
because it allows the active wrongdoer to be held directly responsible. See Borecki v. E. Int’l Mgmt. Corp., 694 F.
Supp. 47, 59 (D.N.J. 1988); Jasper, 764 N.W.2d at 776.
We disagree with this analysis and are persuaded by the courts holding that individual liability is inappropriate in
such circumstances. The employment relationship is the source of the duty in wrongful discharge torts such as
Sabine Pilot. See Miklosy v. Regents of Univ. of Cal., 188 P.3d 629, 644–45 (Cal. 2008); Schram v. Albertson’s,
Inc., 934 P.2d 483, 490–91 (Or. Ct. App. 1997).
The employment relationship exists only between the employer and employee, not between two employees, even
when one of those employees is a supervisor or even the owner. See Miklosy, 188 P.3d at 644–45; Buckner v.
Atl. Plant Maint., Inc., 694 N.E.2d 565, 569 (Ill. 1998); Schram, 934 P.2d at 490–91. Only the employer has the
power to hire and fire, and supervisors merely exercise that power on the employer’s behalf. See Miklosy, 188 P.
3d at 644–45; Smith v. Waukegan Park Dist., 896 N.E.2d 232, 235–36 (Ill. 2008); Schram, 934 P.2d at 490.
Corporate employees cannot, in their personal capacity, wrongfully discharge an employee because they have no
personal authority to fire an employee. See Miklosy, 188 P.3d at 644; Smith, 896 N.E.2d at 235–36; Schram, 934
P.2d at 490–91. Furthermore, individual liability is not necessary to promote deterrence because liable
employers will likely take their own measures to deter agents or employees from wrongfully exercising termination
authority. See Buckner, 694 N.E.2d at 570. Fear of financial responsibility for a potential lawsuit could
discourage supervisors from terminating employees in legitimate situations. Cf. Reno v. Baird, 957 P.2d 1333,
1347 (Cal. 1998) (analyzing supervisor liability under state discrimination statute). Moreover, it can be difficult to
determine—or limit in scope—the individuals who might be held accountable for a decision to terminate. This is
particularly true in a corporate environment involving group evaluation of employees and collective
decisionmaking for terminations. See id. at 1346–47.
Naifeh argues, and the trial court found, that liability is appropriate because individuals are liable for their own
torts in the corporate setting. See Walker v. Anderson, 232 S.W.3d 899, 918 (Tex. App.—Dallas 2007, no pet.);
Ennis v. Loiseau, 164 S.W.3d 698, 707 (Tex. App.—Austin 2005, no pet.). However, these cases involve torts
such as fraud that can be committed by an individual.[6] See Ennis, 164 S.W.3d at 700–01. The purpose of
individual liability in the corporate setting is to prevent an individual from using the corporate structure or agency
law as a blanket to insulate himself from liability for his otherwise tortious conduct. See Walker, 232 S.W.3d at
919. But only an employer can wrongfully terminate the employment relationship, so the individual’s conduct
logically could not be otherwise tortious. See Miklosy, 188 P.3d at 644–45; Buckner, 694 N.E.2d at 570; Schram,
934 P.2d at 490–91.
Moreover, Sabine Pilot is an extremely specific and narrow exception to the employment at will doctrine, and both
the Texas Supreme Court and this court have consistently rejected attempts to expand its scope. See Ed Rachal
Found. v. D’Unger, 207 S.W.3d 330, 332–33 (Tex. 2006); Mayfield v. Lockheed Eng’g & Scis. Co., 970 S.W.2d
185, 187–88 (Tex. App.—Houston [14th Dist.] 1998, pet. denied); see also Buckner, 694 N.E.2d at 568. Naifeh
has a remedy against Physio,[7] and expanding Sabine Pilot to impose individual liability against the Saadats is
more appropriately the task of the Texas Supreme Court or the Texas Legislature. See Ed Rachal, 207 S.W.3d
at 333; Melendez v. Exxon Corp., 998 S.W.2d 266, 273 (Tex. App.—Houston [14th Dist.] 1999, no pet.); Mayfield,
970 S.W.2d at 188.
Absent a finding of alter ego, we conclude that the trial court erred in finding that the Saadats were personally
liable on Naifeh’s Sabine Pilot claim. We sustain the Saadats’ first issue. We need not reach the Saadats’ other
two issues, which challenge the validity of a Sabine Pilot claim in these circumstances on other grounds. We
reverse the trial court’s judgment against the Saadats and render judgment that Naifeh take nothing against
them.
Physi o , Ltd v. Naifeh (Tex.App. - Houston [14th Dist.] Feb. 4, 2010)(Yates)
(employment law - wrongful termination; liability on Sabine-Pilot wrongful termination claim)
Appellants appeal the trial court’s judgment holding them individually liable for firing appellee for the sole reason
that she refused to perform an illegal act. See Sabine Pilot Serv., Inc. v. Hauck, 687 S.W.2d 733, 735 (Tex.
1985). Because we hold that the Sabine Pilot doctrine should not be extended to impose liability on individual
employees rather than the plaintiff’s employer, we reverse and render.
DISMISSED IN PART AND REVERSED AND RENDERED IN PART: Opinion by Justice Brock Yates
Before Justices Brock Yates, Hudson and Sullivan
14-08-00017-CV   Physio GP, Inc., Physio, Ltd, Tanja Saadat and Shawn Saadat v. Natalie Naifeh
Appeal from 295th District Court of Harris County
Trial Court Judge: T racy Kee Christopher
Dissenting Opinion by Justice Hudson in Physio GP, Inc.v. Natalie Naifeh (Sabine Pilot claim against bosses
individually should be viable) In my view, the public policy considerations raised in Sabine Pilot, i.e., to relieve “at-
will” employees from being pressured to commit criminal acts, would rationally apply to both the employer and its
agents. The pressure exerted against Naifeh to falsify records was no less intimidating because it was asserted
by a fellow employee. Tanja had the power to terminate Naifeh and did so because she would not become a
party to a criminal enterprise. Her conduct constitutes the very essence of the common law tort created by
Sabine Pilot. Accordingly, I respectfully dissent.



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