Amidst the hustle and bustle of running a business or earning a living, paperwork formalities sometimes get pushed to the side, and non-competes don’t get signed, or don’t get signed until after the employee has already started work (thereby creating issues of consideration and enforceability). Those who work in the employment law arena can all share stories of belatedly discovered paperwork defects that ultimately proved dispositive.

A recent case out of Texas provides a good lesson about workplace paperwork formalities. In Holloway v. Dekkers and Twin Lakes Golf Course, Inc., a Texas appellate court ruled that a one-year employment agreement that was not signed by the employer fell within the statute of frauds and was therefore unenforceable. In that case, Clay Holloway was hired by Gideon Dekkers to be the head golf professional at Twin Lakes Golf Course. During July 2008, the parties first met in person, and subsequently communicated via phone and email, eventually agreeing that Holloway would be employed for a one-year period. The parties also agreed to negotiate an extension prior to the expiration of the initial one-year period dependent upon Holloway’s performance review. Holloway subsequently began work on August 5, 2008 before he signed an employment agreement.

Less than a week later, Holloway was presented with an agreement (prepared by Dekkers’ daughter-in-law) dated July 23, 2008, which provided for a “[y]early contract that will be up for renewal after annual performance evaluation.” Holloway signed the agreement, but never presented it to anyone from Twin Lakes to sign. Holloway was then terminated on September 30, 2008, and subsequently filed suit against both Dekkers and Twin Lakes for breach of contract and fraud in the inducement. After the trial court entered summary judgment for Twin Lakes, Holloway appealed.

On appeal, the court reviewed the statute of frauds, and stated that “when a promise or agreement, either by its terms or by the nature of the required acts, cannot be completed within one year, it falls within the statute of frauds and is not enforceable unless it is in writing and signed by the person to be charged.” The court noted that the contract was dated July 23, 2008 and Holloway’s performance could not be completed for over a year from the date of the contract. Additionally, Holloway’s deposition testimony demonstrated he understood his employment would last from August 5, 2008 to at least August 5, 2009, or a period of 366 days.

Holloway argued that because it was necessary for his performance review to occur prior to the expiration of the one-year employment term, the agreement could have been completed within one year. However, the court concluded that the one-year term was not contingent upon his performance review. Instead, the performance review was to determine a possible extension. Therefore, the court concluded there was no way the agreement could be performed within one year, and because Twin Lakes (the party to be charged) did not sign an agreement, any agreement between the parties was unenforceable.

Despite the favorable outcome for the employer, this case should serve as a reminder to employers everywhere not to ignore paperwork formalities; sometimes they are case dispositive.

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