Texas Supreme Court Denies Contract Formation Using Course of Conduct

The Texas Supreme Court issued its opinion in McAllen Hospitals, L.P. et al. v. Yolanda Lopez et al., 17-0733, 2019 WL 2147252, and reversed an award to three nurses because it found the evidence did not show that the Hospital agreed to pay the nurses fixed annual salaries rather than an hourly rate.

McAllen emphasizes that to show a course of conduct demonstrating an implied agreement exists, a party must submit sufficient evidence to establish the parties had a meeting of the minds as to the terms of the agreement. Here, there was no evidence demonstrating that the Hospital had agreed to pay the nurses annual salaries at the time the agreement was allegedly formed.

Plaintiffs sought full salaries from 2007 through 2010 based on an alleged agreement starting in 2007 that the nurses would be paid an annual salary rather than an hourly rate. Although the nurses had worked at the Hospital for several years, none had ever received the entire salary amount, nor complained about the discrepancy between the annual salary and hourly rate pre-suit. The parties’ course of conduct evidenced the Hospital’s agreement to pay the plaintiffs an hourly rate, not a salary. Key factors to the Court’s decision were disclaimers in the Hospital’s employee handbook that certain documents the nurses submitted as evidence of an agreement were only “informational guidelines” and “not a contract of employment.”

While evidence of a course of conduct can sometimes establish that parties created an implied agreement, the evidence here did not. Indeed, the Court here found it established the opposite. The parties’ course of conduct actually showed that the Hospital only agreed to pay the nurses for the hours that they worked. And because there was no agreement concerning a fixed annual salary, the evidence was insufficient to support the jury award for breach of that agreement.

By: Jennifer Bartlett

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