Court Opinion

ID: 4398429
Source: CourtListenerOpinion
Date Created: 2019-05-20 08:43:09.276302+00
Date Added: 2024-06-11T12:19:42.099899
License: Public Domain

IN THE SUPREME COURT OF TEXAS
                                       ══════════
                                         No. 17-0733
                                       ══════════

            MCALLEN HOSPITALS, L.P. D/B/A MCALLEN MEDICAL CENTER
               AND SOUTH TEXAS HEALTH SYSTEMS, PETITIONERS,

                                              V.

                YOLANDA LOPEZ, SHERYL HAMER, ELMER DEGUZMAN
                      AND RICHARD WECKER, RESPONDENTS

            ══════════════════════════════════════════
                          ON PETITION FOR REVIEW FROM THE
                COURT OF APPEALS FOR THE THIRTEENTH DISTRICT OF TEXAS
            ══════════════════════════════════════════

                                   Argued March 12, 2019

       JUSTICE BUSBY delivered the opinion of the Court.

       In this breach-of-contract case, we consider whether there is legally sufficient evidence

that an employer impliedly agreed to change the compensation of four employees from payment

based on hours worked to fixed annual salaries. We hold there is no evidence that would have

allowed reasonable, fair-minded people to find that the employer and its employees had a meeting

of the minds on a fixed amount of pay. We therefore reverse and render judgment that the

employees take nothing.

                                        I. Background

       Yolanda Lopez, Sheryl Hamer, Elmer DeGuzman, and Richard Wecker (the Nurses)

worked as house supervisor nurses for McAllen Hospitals, L.P. (the Hospital).         As house
supervisors, the Nurses served as administrative representatives and supervised other nurses at the

Hospital. The Nurses were paid based on the hours they worked.

         In 2011, the Nurses sued the Hospital for breach of contract, among other things. They

alleged the Hospital had promised to pay them annual salaries from 2007 through 2010 and

breached that agreement by failing to pay them the full annual amounts. As evidence of the implied

agreement, the Nurses relied on their 2009 and 2010 performance reviews listing an “Annual Rate”

of pay, payroll change forms providing the Nurses were to receive a certain amount of “salary,”

and Hospital policies explaining that “exempt” employees (the classification the Hospital gave the

Nurses) are paid to perform a job, while “nonexempt” employees are paid by the hour. The Nurses

testified they had expected to be paid the salaries listed in the performance reviews and their

supervisor did not inform them they would be compensated at an hourly rate. The Hospital argued

it consistently paid the Nurses based on the hours they worked and the Nurses’ pay rates were

calculated by dividing the annual salaries by 2080 hours (which the Hospital deemed full-time

working hours). In the Hospital’s view, the Nurses were only entitled to the full sum if they worked

full time during a given year, which they did not.

         Question one of the jury charge asked: “Did Plaintiffs and Defendant agree that Plaintiffs

would receive a fixed amount of pay?” In connection with this question, the trial court instructed

the jury: “In deciding whether the parties reached an agreement, you may consider what they said

in light of the surrounding circumstances, including any personnel files and policies, and including

course of dealing. You may not consider the parties’ unexpressed thoughts or intentions.” 1 The

         1
           The Nurses unsuccessfully objected to the inclusion of “course of dealing” in the instruction. They do not
challenge the instruction on appeal.

                                                         2
jury found that the parties agreed the Nurses would receive a fixed amount of pay and that the

Hospital breached the agreement. The jury awarded total damages of $389,014.68 for the period

November 23, 2007 through December 31, 2010. The trial court rendered judgment accordingly.

       The Hospital appealed, arguing the evidence was legally and factually insufficient to

support the jury’s findings of an implied agreement and breach, and evidence of the Nurses’

exempt status was inadmissible. The court of appeals affirmed, concluding the evidence admitted

in the trial court “would enable reasonable and fair-minded people to find that the Hospital agreed

to pay the Nurses a fixed amount.” 567 S.W.3d 748, 751 (Tex. App.—Corpus Christi–Edinburg

2017). The court of appeals also held that even if the evidence challenged by the Hospital was

improperly admitted, the error was harmless because other documents admitted without objection

contained the same information. Id. at 752.

       The Hospital filed a petition for review with this Court, raising three issues. First, the

Hospital asserts the evidence is legally insufficient to support the jury’s finding that the Hospital

agreed to pay the Nurses fixed salaries. Second, the Hospital argues that because no contract for

fixed pay existed, the evidence was legally insufficient to support the jury’s finding that the

Hospital breached that contract. Third, the Hospital contends the trial court erred in admitting

evidence regarding “exempt” and “nonexempt” employee classifications under the Fair Labor

Standards Act. We granted the Hospital’s petition for review. 62 Tex. Sup. Ct. J. 308 (January

18, 2019).

                                            II. Analysis

       Because we conclude the first issue is dispositive, we begin with that issue. As we stated

in City of Keller v. Wilson, “[t]he final test for legal sufficiency must always be whether the

                                                 3
evidence at trial would enable reasonable and fair-minded people to reach the verdict under

review.” 168 S.W.3d 802, 827 (Tex. 2005). We “credit favorable evidence if reasonable jurors

could, and disregard contrary evidence unless reasonable jurors could not.” Id. “It is the province

of the jury to resolve conflicts in the evidence,” but the jury must do so reasonably. See id. at 820,

827. “Evidence is legally insufficient to support a jury finding when (1) the record discloses a

complete absence of evidence of a vital fact; (2) the court is barred by rules of law or of evidence

from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to

prove a vital fact is no more than a mere scintilla; or (4) the evidence establishes conclusively the

opposite of a vital fact.” Crosstex N. Tex. Pipeline, L.P. v. Gardiner, 505 S.W.3d 580, 613 (Tex.

2016).

         The Nurses argue that the Hospital’s agreement to pay them fixed salaries was an implied

contract. The difference between implied and express contracts is the “character and manner of

proof required to establish them.” Haws & Garrett Gen. Contractors, Inc. v. Gorbett Bros.

Welding Co., 480 S.W.2d 607, 609 (Tex. 1972). Both express and implied contracts require the

element of mutual agreement, “which, in the case of an implied contract, is inferred from the

circumstances.” Id. “The conception is that of a meeting of the minds of the parties as implied

from and evidenced by their conduct and course of dealing, . . . the essence of which is consent to

be bound.” Id.

         As the parties alleging breach of contract, the Nurses had the burden of proving the

existence of a valid contract. TRO-X, L.P. v. Anadarko Petroleum Corp., 548 S.W.3d 458, 464–

65 (Tex. 2018). The Nurses argue that the Hospital impliedly agreed to pay them a fixed annual

salary starting in 2007 and continuing through 2010. Consistent with this timeline, the damages

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portion of the jury charge specified that the alleged agreement was to pay the Nurses from

November 23, 2007 through December 31, 2010. The charge also instructed the jury that in

deciding whether the parties reached an agreement, it could consider the parties’ course of dealing

and the surrounding circumstances, including personnel files and policies. We therefore focus our

analysis of the evidence primarily on the parties’ course of dealing and the circumstances

surrounding the alleged formation of the fixed-salary contract in 2007.

       As to course of dealing, the evidence not only fails to support the Nurses’ position but

shows that the Hospital intended to pay the Nurses based on the hours they worked. Before filing

suit, each of the Nurses had worked for the Hospital for years. Lopez had been employed by the

Hospital since 1975, Hamer and Wecker began working for the Hospital around 1984, and

DeGuzman started in 2000. The Nurses agreed that during the time period at issue, they were paid

based on the hours they worked. Despite the significant differences between the annual salaries

to which they claimed to be entitled and the wages they actually received, none of the Nurses

complained of the discrepancy before filing their lawsuit. At the time of trial, Hamer and

DeGuzman were still employed by the Hospital and were receiving an hourly wage. Thus, the

record shows the Hospital paid the Nurses based on the hours they worked, and there are no

indications from the course of dealing between the parties that the Hospital ever intended to do

otherwise. Reasonable and fair-minded people could not infer from the Hospital’s course of

dealing that it agreed to pay the Nurses a fixed annual salary. See City of Keller, 168 S.W.3d at

827.

       The Nurses respond by pointing to certain surrounding circumstances: their annual

performance reviews, payroll change forms, provisions of the Hospital’s employee handbook, and

                                                5
policies circulated by the Hospital’s Accounting and Human Resources Departments.                 We

conclude that this evidence does not show a meeting of the minds between the Hospital and the

Nurses on an agreement regarding fixed pay beginning in 2007. Although the Nurses’ choice to

continue their employment with the Hospital could indicate agreement and acceptance by

performance, the Hospital must first have given the Nurses some clear indication of its intent to be

bound to pay them a fixed salary. See Haws & Garrett Gen. Contractors, 480 S.W.2d at 609. As

we explain, none of the circumstances cited by the Nurses indicates that the Hospital had such an

intent.

          A. Performance Reviews

          The record includes the Hospital’s annual written performance reviews of the Nurses for

the years 2007 through 2010, except that Hamer’s 2007 review is missing. The reviews, which

were completed in June or July of each year, contain an evaluation of each nurse’s performance

for the prior twelve months and state what each nurse’s pay would be going forward. These

reviews cannot serve as evidence of the Hospital’s intent to contract with the Nurses for a fixed

salary for two reasons.

          First, the reviews are inconsistent with the Nurses’ theory of contractual formation. If the

Hospital intended to be bound to pay the Nurses a fixed annual salary from 2007 through 2010, as

the Nurses contend, then circumstances surrounding the formation of the alleged agreement in

2007 would indicate that intent. To the contrary, the 2007 and 2008 performance reviews state the

                                                   6
Nurses’ new base rates of pay in dollars “per hour.” 2 Only in 2009 and 2010 do the reviews list

an “Annual Rate.” 3

         Second, the Hospital’s employee handbook states: “A performance review is not a contract

or a commitment to provide a salary increase, a bonus, or continued employment. It is a

communication process aimed at facilitating optimum employee performance.” The Nurses argue

the Hospital’s reliance on the disclaimer in the handbook is misplaced because the performance

reviews were not offered as express contracts themselves but rather as circumstantial evidence of

implied contracts. But the question before us is not whether the handbook disclaimer prevents the

performance reviews from being admitted into evidence for any purpose. Instead, the question is

whether those reviews can provide evidence of a commitment by the Hospital to pay a fixed salary.

The handbook expressly barred the jury from giving weight to the reviews for that purpose. See

Fed. Express Corp. v. Dutschmann, 846 S.W.2d 282, 283–84 (Tex. 1993) (per curiam)

(recognizing use of handbook disclaimer to prevent contract formation).

         The Nurses also testified at trial that they (1) were never told they were going to be paid

an hourly rate during the years at issue, and (2) believed the Hospital had promised them an annual

salary. 4 The Nurses were consistently paid based on the hours they worked, however, and they

attributed their belief in a promised salary to their written performance reviews and to annual

discussions they had with their supervisor regarding the reviews. These oral discussions, which

         2
            One page of Hamer’s 2008 review does list what appears to be an annual pay rate, but elsewhere in the
form it states an hourly rate.
          3
            Hand-written notations were added to most of the 2010 reviews, marking out “Hourly” and writing in
“Annual.” “Hourly” is scratched out on Wecker’s 2010 review and what appears to be an annual amount of pay is
written in; however, “Annual” is not handwritten on the form as it is for the other Nurses.
          4
            Not all of the Nurses consistently testified that the annual salary they were promised was a “fixed amount
of pay,” as the jury charge required. At certain points, DeGuzman and Wecker testified that they had to work full-
time hours to be entitled to the annual salary, which they did not do.

                                                          7
the written reviews specifically contemplated, were part of the review “communication process”

and thus covered by the handbook disclaimer.

        In other portions of their testimony, the Nurses stated their belief that they were promised

annual salaries without identifying a basis for that belief. As to those statements, “[i]t is well

settled that the naked and unsupported opinion or conclusion of a witness does not constitute

evidence of probative force and will not support a jury finding even when admitted without

objection.” Dall. Ry. & Terminal Co. v. Gossett, 294 S.W.2d 377, 380 (Tex. 1956). Consequently,

the Nurses’ testimony would not enable reasonable and fair-minded people to find the Hospital

intended to enter an agreement for fixed pay.

        B. Payroll Change Forms

        The supervisor who reviewed each nurse also completed a payroll change form for that

nurse and submitted it to the Hospital’s Payroll Department, which approved the change. The

record contains no forms for 2007, but it does include forms for each nurse that were effective in

July of 2008, 2009, and 2010. All of the July 2008 payroll change forms include both a printed

annual “salary” and what appears to be a handwritten hourly rate. 5 With one exception, the hourly

rates on the 2008 payroll change forms correspond with the hourly rates stated in the Nurses’ 2008

        5
           The handwritten hourly rates for Lopez and DeGuzman, when multiplied by 2080, match the printed
salaries on the payroll change forms. The handwritten hourly rate listed for Wecker does not correspond with the
printed salary on the form; however, the handwritten rate also does not correspond with the hourly rate listed on
Wecker’s 2008 performance review. The correct hourly rate from his 2008 performance review, when multiplied by
2080, does match the printed salary on his 2008 payroll change form. The handwritten hourly rate on Hamer’s 2008
payroll change form does not correspond with the printed salary when multiplied by 2080, and there does not appear
to be any way to make those numbers match.

                                                        8
performance reviews. 6 All of the 2009 and 2010 payroll change forms list a “salary” and no hourly

rate.

        As with the Nurses’ 2007 and 2008 performance reviews, the payroll change forms do not

support the Nurses’ theory that the Hospital intended to pay them a fixed annual salary starting in

2007. The 2007 payroll change forms are not in the record, and the July 2008 forms state both an

hourly and an annual rate of pay. Although the jury could have inferred from the 2008 forms that

the Hospital intended to change the Nurses’ pay from an hourly to an annual rate, the evidence is

equally consistent with a simple change in the manner in which these forms were filled out by the

Hospital’s Human Resources Department, unconnected to any change in the form of pay from an

hourly wage to an annual salary. When circumstantial evidence “is susceptible to multiple, equally

probable inferences, requiring the factfinder to guess in order to reach a conclusion[,]” it is in legal

effect no evidence. Suarez v. City of Tex. City, 465 S.W.3d 623, 634 (Tex. 2015). Because the

2008 payroll change forms are susceptible to equally probable inferences regarding the Hospital’s

intended form of pay, they are no evidence of its intent to contract with the Nurses for fixed pay

beginning in 2007.

        The 2009 and 2010 payroll change forms do state annual salaries, but there is no evidence

linking those forms to an intent by the Hospital to pay fixed salaries beginning in 2007. Moreover,

unlike the performance reviews, the payroll change forms were not signed by the Nurses and

nothing in the record indicates the Nurses ever saw the forms. Thus, the Nurses could not have

accepted any promise the Hospital made in those forms by performance.                       See generally

        6
           The handwritten hourly rate on Wecker’s 2008 payroll change form does not correspond with the rate
provided in his 2008 performance review.

                                                     9
Montgomery Cty. Hosp. Dist. v. Brown, 965 S.W.2d 501, 502 (Tex. 1998) (“A promise, acceptance

of which will form a contract, ‘is a manifestation of intention to act or refrain from acting in a

specified way, so made as to justify a promisee in understanding that a commitment has been

made.’” (quoting RESTATEMENT (SECOND) OF CONTRACTS § 2(1) (AM. LAW INST. 1981)).

          C. Employee Handbook Provisions

          The Nurses argue that provisions of the Hospital’s employee handbook distinguishing

between exempt and nonexempt employees show the Hospital treated the Nurses like salaried

employees and thus provide some evidence of the Hospital’s intent to contract with the Nurses for

fixed pay. The Hospital does not dispute that the Nurses were classified as “exempt employees.”

The handbook states that “[nonexempt] employees are eligible for overtime pay for all hours

worked over forty hours in a work-week,” while “exempt employees are not eligible for overtime

pay” and “may not be eligible for callback pay.” According to the handbook, nonexempt

employees are required to record their “hours worked each day,” while exempt employees are

required to record their “presence each day.” In addition, “[e]veryone is expected to take at least

thirty minutes for lunch each day,” and nonexempt employees who are required to work through

their lunch break will be paid for that time. The handbook does not address exempt employees

who work through their lunch break.

          As with the performance reviews, however, the handbook expressly bars the jury from

giving contractual weight to these provisions. The handbook includes its own disclaimer, which

states:

          This Employee Handbook is designed to provide you with information concerning
          [the Hospital] and sets out informational guidelines. It is not a contract of
          employment. Conditions from time to time may require [the Hospital] to
          supplement, modify or eliminate benefits, work rules and guidelines described in

                                                10
           this Handbook. [The Hospital] reserves the right to exercise its discretion, and
           unilaterally make changes, including both deletions from and additions to this
           Handbook. Such changes will be communicated to employees through normal
           channels and will become effective as indicated. If you have any questions about
           the content of this book, please consult your supervisor or a representative of the
           Human Resources Department.

(Emphasis added). As we have previously held, an employee handbook that contains such a

disclaimer of contractual intent “is not a contract.” In re 24R, Inc., 324 S.W.3d 564, 567 (Tex.

2010) (per curiam); see also Fed. Express Corp., 846 S.W.2d at 283; Brown v. Sabre, Inc., 173
S.W.3d 581, 589 (Tex. App.—Fort Worth 2005, no pet.) (concluding a disclaimer demonstrated

the employer’s “clear intent not to create any binding contractual rights through its employee

handbook”). Given this disclaimer, no reasonable jury could infer from the Hospital’s statements

in the handbook an intent to contract with the Nurses for fixed pay.

           D. Hospital Policies

           Finally, the Nurses point to several written policies issued by the Hospital’s Human

Resources Department.         One policy elaborates on the overtime principles discussed in the

handbook, including that exempt employees are not entitled to overtime pay. This policy further

notes the Hospital “may . . . elect to pay exempt employees above their regular weekly salary in

other situations.” Another policy expands a bit on the handbook’s provisions regarding benefit

eligibility for full-time, part-time, temporary, and per diem employees, as well as for students and

interns.

           A third policy goes into more detail than the handbook about nonexempt employees

receiving approval for overtime, when time is considered hours worked, and the procedure for

dealing with unauthorized work time. The policy reiterates that nonexempt employees “are

required to accurately record and report all hours worked,” but it does not discuss time-keeping

                                                   11
requirements for exempt employees. The policy also provides that “[g]enerally, under the Fair

Labor Standards Act (FLSA), exempt employees are paid to perform a job and nonexempt

employees are paid for hours worked.”

        It is unclear whether these policies were intended to stand alone or were changes or

additions to the employee handbook. The policies speak to topics that are at least generally

touched upon within the handbook and, for the most part, provide additional procedures or

explanations regarding those topics. To the extent the policies are additions to the handbook,

which the Hospital reserved the right to make, the handbook’s disclaimer prevents them from

serving as evidence of the Hospital’s intent to contract with the Nurses.

        Even if treated as separate from the handbook, however, these policies do not provide a

basis for reasonable and fair-minded people to infer that the Hospital intended to provide the

Nurses a fixed amount of pay. The record contains no evidence that any of the policies were in

force when the alleged agreement was formed in 2007. Nor do the policies provide that exempt

employees will be paid fixed salaries. The policies generally explain that exempt employees are

“paid to perform a job” and not entitled to overtime pay. Even if the Nurses are correct that

employees classified as “exempt” under the FLSA generally are entitled to payment on a salary or

fee basis, this generalization is not evidence that the parties in this particular case agreed the Nurses

would receive a fixed amount of pay. Indeed, the FLSA permits deductions from exempt

employees’ salaries (including for weeks they do not work), see 29 C.F.R. § 541.602, and one of the

policies contemplates situations in which exempt employees will be paid more. In addition, the

course-of-dealing evidence shows that the parties agreed the Nurses, although categorized as

exempt employees, would be paid based on the hours they worked and not receive overtime.

                                                   12
       “When the evidence offered to prove a vital fact is so weak as to do no more than create a

mere surmise or suspicion of its existence, the evidence is no more than a scintilla and, in legal

effect, is no evidence.” Suarez, 465 S.W.3d at 634 (quoting Browning–Ferris, Inc. v. Reyna, 865
S.W.2d 925, 927 & n.3 (Tex.1993)). Here, the Hospital’s policies create no more than a suspicion

of the Hospital’s intent to contract for a fixed amount of pay; therefore, they are no evidence of

the Hospital’s intent to do so. See id.

                                          III. Conclusion

       In summary, the evidence before the jury was insufficient to establish the Hospital’s intent

to be bound by an agreement to pay the Nurses fixed annual salaries. See generally Haws &

Garrett Gen. Contractors, 480 S.W.2d at 609.           The course of dealing among the parties

demonstrates only that the Nurses were paid based on the hours they worked, the performance

reviews and employee handbook are subject to explicit disclaimers of contractual intent that

prevent them from serving as evidence of the Hospital’s agreement to pay the Nurses fixed salaries,

and the Hospital’s policies are either subject to the handbook’s disclaimer or constitute no more

than a scintilla of evidence regarding the Hospital’s contractual intent. Even viewed in the light

most favorable to the verdict, the evidence is insufficient to allow reasonable, fair-minded people

to conclude there was a meeting of the minds between the Hospital and the Nurses as to the issue

of fixed pay. Consequently, we hold the evidence was legally insufficient to support the jury’s

finding that the Hospital agreed to pay the Nurses a fixed salary. Because there was no agreement

over fixed pay, the evidence was likewise insufficient to support the jury’s verdict that the Hospital

breached that agreement.

                                                 13
       Having concluded the Hospital is entitled to judgment in its favor, we do not reach its third

issue regarding the admission of evidence of exempt and nonexempt employee status under the

FLSA. We reverse the court of appeals’ judgment and render judgment that the Nurses take

nothing.

                                             __________________________________
                                             J. Brett Busby
                                             Justice

OPINION DELIVERED: May 17, 2019

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