Arbitration provisions in employment agreements have become increasingly more commonplace in recent years as companies continue to value the confidentiality and the potential for quick resolution that arbitration offers in employment disputes. Both Federal and State legislatures have continued to develop policies favoring arbitration as an alternative means to resolving legal disputes. However, arbitration agreements contained in employment agreements run the risk of being unenforceable if they are interpreted as being conditioned on an employee's at-will employment. The public policy behind this is to prevent one of the parties to the agreement from avoiding performance by simply terminating the employment relationship, thereby rendering the agreement to arbitrate illusory.
Under Texas law, an employee's at-will employment does not prohibit the employee and employer from entering into other agreements as long as the employee's continued employment is not relied on as consideration for the agreement.1 The Texas Supreme Court has drawn a distinction between arbitration agreements that are conditioned on an employee's continued employment and...
