The Fiduciary Shield Doctrine and Personal Jurisdiction over Non-resident Employees

Should an individual who resides in another state be subject to a Texas Court’s jurisdiction for his work done in Texas when his work was done solely on behalf of his employer?

Generally, an out-of-state resident who is working on behalf of an employer would not be individually liable in Texas because of the “fiduciary shield doctrine.”  The “fiduciary shield doctrine” protects nonresident employees from the jurisdiction of Texas courts when all of the employee’s contacts with Texas were made on behalf of his employer.  Nichols v. Tseng Hsiang Lin, 282 S.W.3d 743, 750 (Tex. App.–Dallas 2009, no pet.)  This doctrine is consistent with the Texas Supreme Court’s holding that an out-of-state employee, in his individual capacity, cannot be subject to Texas personal jurisdiction based solely on the activities of his employer.  Siskind v. Villa Found. for Educ., Inc., 642 S.W.2d 434, 437-38 (Tex. 1982).  For example, a Texas court should not exercise personal jurisdiction over a Colorado resident who traveled to a Texas office every few months to conduct business on behalf of his employer.  See Urban v. Barker, 2007 Tex. App. LEXIS 1633, at *21 (Tex. App.–Houston [14th Dist.], March 6, 2007).

The fiduciary shield doctrine does not apply to an officer’s or employee’s tort’s  committed in Texas.  See Ennis v. Losieau, 164 S.W.3d 698, 707 (Tex. App.–Austin 2005, no pet.)  This rule is not based on an exception to the fiduciary shield doctrine, but rather on the well-established principal that "a corporate officer is primarily liable for his own torts."  Morris v. Kohls-York, 164 S.W.3d 686, 695 (Tex. App.–Austin 2005, no pet.).

Employee's Personal Liability for Tortious Interference

Can a corporate officer be personally liable for tortious interference for his or her acts on behalf of the corporation?

It has long been the law in Texas that "a corporate agent is personally liable for his own fraudulent or tortious acts."  Miller v. Keyser, 90 S.W.3d 712, 717 (Tex. 2002).  If a corporate agent directs or participates in a tort during his employment, he faces personal liability for the tortious act. Leyendecker & Assocs., Inc. v. Wechter, 683 S.W.2d 369, 375 (Tex. 1984).  Therefore, regardless of whether the person performed the tortious acts in his or her capacity as an officer, he or she can still face personal liability for those acts.  See Leyendecker & Assocs., Inc. v. Wechter, 683 S.W.2d 369, 375 (Tex. 1984).

Duty of Discharged Employee to Mitigate Damages

Discharged employee’s duty to mitigate damages.

The general rule as to mitigation of damages in breach of employment suits is that the discharged employee must use reasonable diligence to mitigate damages by seeking other employment.  The correct measure of damages for wrongful discharge of an employee is the present cash value of the contract if it had not been breached, less any amounts that the employee should in the exercise of reasonable diligence be able to earn through other employment.  See Gulf Consol. Int'l, Inc. v. Murphy, 658 S.W.2d 565, 565-66 (Tex. 1983).

Texas is an at-will Employment State

What is meant by “at-will” employment?

Texas is an at-will employment state, meaning that employers generally may terminate their employees at any time, for any or no reason, without incurring  liability under Texas law, unless they have contractually agreed otherwise.  See E. Line & R.R.R. Co. v. Scott, 72 Tex. 70, 10 S.W. 99, 102 (Tex. 1888) (adopting at-will employment doctrine); see also Montgomery Cnty. Hosp. Dist. v. Brown, 965 S.W.2d 501, 502 (Tex. 1998) (“For well over a century, the general rule in this State, as in most American jurisdictions, has been that absent a specific agreement to the contrary, employment may be terminated by the employer or the employee at will, for good cause, bad cause, or no cause at all.”); Sabine Pilot Serv., Inc. v. Hauck, 687 S.W.2d 733, 734-35 (Tex. 1985) (noting certain statutory exceptions to general rule). In Sabine Pilot, the Texas Supreme Court judicially crafted a “very narrow exception” to this general rule, recognizing a cause of action against an employer that discharges its employee “for the sole reason that the employee refused to perform an illegal act.” Sabine Pilot Serv., Inc. v. Hauck, 687 S.W.2d 733, 735 (Tex. 1985).

Tortious Interference with the Employer-Employee Relationship

Can an employer claim someone else tortiously interfered with the at will relationship between the employer and his employees?  

It is well settled that a cause of action exists for tortious interference with an employment relationship terminable at will.  See Sterner v. Marathon Oil Co., 767 S.W.2d 686, 689 (Tex. 1989).

Employees and Use of Trade Secrets

Can an employee use his employer’s trade secrets for his own benefit?

Upon the formation of an employment relationship, certain duties arise apart from any written contract.  One of those duties forbids an employee from using trade secret information acquired during the employment relationship in a manner adverse to the employer.  Miller Paper Co. v. Roberts Paper Co., 901 S.W.2d 593, 600 (Tex. App.-Amarillo 1995, no writ).