Diana Garcia began working for Parkland Hospital (Dallas County Hospital District) in 2015 as an at-will nurse in its Resident/Graduate Nurse program. As a condition of the program, Parkland required her to sign an agreement committing her to work for Parkland for approximately 3.2 years (through February 2019) or reimburse a portion of her training costs -- Parkland says this reflected the value of the training it provided; Garcia characterizes it as a labor-mobility restriction. Garcia resigned before the term ended and refused to pay the reimbursement Parkland demanded.
Parkland sued Garcia for breach of contract. Garcia moved for summary judgment, arguing the retention/reimbursement provision was an unenforceable penalty and violated both the Texas Free Enterprise and Antitrust Act (TFEAA) and the Covenant Not to Compete Act. The 44th District Court of Dallas County denied Garcia's motion, granted Parkland's competing summary-judgment motion, and awarded Parkland damages and attorney's fees. On original submission, the Fifth Court of Appeals affirmed in part and reversed in part, holding the reimbursement provision was an unenforceable penalty and remanding for a trial on Parkland's actual damages. After Parkland moved for en banc rehearing and Garcia moved for panel rehearing, the panel ordered rehearing on its own initiative, denied Garcia's rehearing motion, and vacated its original opinion -- issuing a new opinion and judgment fully affirming for Parkland instead. The Supreme Court granted Garcia's petition for review, with oral argument set for February 9, 2027.
Petitioner (Diana Garcia): The court of appeals announced a new categorical rule holding that a labor-mobility restriction escapes reasonableness scrutiny entirely unless it's challenged either as violating the antitrust "rule of reason" under TFEAA Section 15.05(a) or qualifies as a formal noncompete under the common law -- a rule Garcia says conflicts with this Court's precedent and other appellate districts, and that would let employers impose severe restrictions on labor mobility as long as they avoid noncompete language. Separately, at-will employment means neither side has an enforceable expectancy of continued employment, so Garcia's lawful resignation cannot be recharacterized as a "breach" supporting damages -- doing so effectively converts at-will employment into term employment through contract labeling alone. Even if a breach occurred, Parkland never proved its $20,000 figure was a "reasonable forecast of just compensation" as required by this Court's liquidated-damages precedent (Phillips, Atrium Medical Center) -- Parkland's cost estimates were generalized, didn't account for mitigation, and weren't tied to Garcia's specific departure.
Respondent (Dallas County Hospital District d/b/a Parkland Hospital): Garcia never raised her second and third issues in the trial court, making them poor candidates for review, and the court of appeals' rehearing opinion creates no conflict with existing authority. Even on the first issue, granting review wouldn't change the outcome, since every Texas court -- state or federal -- to address similar training-reimbursement provisions has agreed that the Covenant Not to Compete Act generally doesn't apply to them. The reimbursement provision reflected a bargained-for exchange (valuable residency training in return for a multi-year commitment or reimbursement), not an anticompetitive restraint, and the court of appeals' corrected judgment reached the right result.
Yes. The petition argues the court of appeals' new rule -- that a labor-mobility restriction is immune from reasonableness review unless it's expressly a noncompete or independently violates antitrust law -- directly conflicts with this Court's precedent and diverges from other Texas appellate districts, and that the decision has broad consequences for at-will employment generally by allowing employers to convert at-will jobs into de facto term employment through contract-label alone.
employment, contracts, antitrust
Petition for Review (Tex. R. App. P. 53.1); granted; set for oral argument February 9, 2027. Not yet decided.
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