How Beneficial Are Retention Clauses?

Originally published by Shareef Defrawi.

In most states, employees work under an “at-will” contract. This means that the employer can terminate the employee any time, and for any reason, other than discrimination or retaliation. In the same regard, employees can quit at any time without giving their employer the typical two week’s notice.

Although more uncommon, employment contracts can be written as well. A written contract with set dates for employment and terms of compensation allow both the employer and employee to work in a more predictable business environment. Often times, employers incentivize employees to stay for the long term by offering employees a signing bonus or “retention pay,” which is a bonus paid to an employee every pay period.

But what happens when an employee quits their job, effectively breaching their contract with their employer? Well, if you’re Buc-ee’s, you sue for breach of contract. That’s exactly what the Texas sized convenience store chain did to former employee Kelly Rieves.

Is quitting a breach of contract?

In 2009, Ms. Rieves was hired by Buc-ee’s as an assistant manager. But in order to get the job, she had to sign a four year contract agreeing that her paychecks would be divided into “regular pay” and retention pay,” and that if she failed to stay for the 48 month term, she would have to return all of the retention pay back to the store.

Ms. Rieves left Buc-ee’s in 2012, well before her contract ended. Buc-ee’s decided to enforce their rights according to the contract and filed suit against Ms. Rieves for breach of contract, and demanded she pay back all the retention pay she earned over the course of her employment. The amount Buc-ee’s demanded? $67,720.29.

The case is currently in the appellate courts of Texas, but it raises an important question. How beneficial are retention clauses?

The benefits of employment contracts

Hiring and training qualified employees can be a time and resource consuming act that takes away from being able to work on the rest of your business. Hiring employees on the basis of contracts with a predetermined length of time helps minimize turnover. Furthermore, the benefit of guaranteed employment can help sweeten the deal to increase your chances of securing a hotshot employee.

However, contracts are a two-way street. By having an employee sign a contract, you are promising to pay to an employee for a predetermined amount of time. It does not matter if your industry or business is suffering a downturn and you are losing money by paying an employee doing his or her job.

Do you have questions about your employment contracts? Contact the employment law attorneys at the Vethan Law Firm today.

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

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