Jury Waiver Agreements Revisited

Last January, we discussed the emergence of jury waiver agreements. (See Steering Clear of the Runaway Jury, Thompson Coe Labor & Employment News, Vol. 5, Issue 1). Jury waiver agreements are contractual agreements in which the parties agree that if a dispute arises and suit is filed, the parties waive their right to a trial by jury. The case is still filed in court, but if the matter proceeds to trial, the trial judge hears the testimony and decides the case.

More and more, employers are inserting jury waiver agreements into employment contracts and employee handbooks. The reason is very simple: avoiding a jury can avoid the risk of a large and disproportionate jury verdict. It is the same reason that employers have successfully relied on arbitration provisions in employee handbooks and employment agreements for years.

In Steering Clear of the Runaway Jury, we examined the first reported Texas case to address the validity of jury waiver agreements, In re Wells Fargo Bank Minnesota N.A. That case held that a jury waiver provision contained in a mortgage note was valid and enforceable in Texas. Although that was obviously a favorable decision for those who seek to use jury waiver agreements, since it was not a Texas Supreme Court decision, the possibility still remained that the highest court in this state could find jury waiver agreements to be invalid.

The issue of enforceability of jury waiver agreements finally made its way to the Texas Supreme Court last September in another case, In re The Prudential Insurance Co. of America. Prudential involved a jury waiver provision contained in a commercial lease. Like the Wells Fargo court, the Prudential court addressed a variety of arguments against the validity of such waivers, including arguments the waivers violated constitutional rights and public policy. The Texas Supreme Court found little difference between an arbitration agreement and a jury waiver agreement, except that the latter still affords a party his day in court (albeit not in front of a jury) and the right to appeal. Consequently, the court held that jury waiver agreements are enforceable in Texas.

Although neither Wells Fargo nor Prudential involved employment law claims, the reasoning of both decisions would seem to apply with equal force to a jury waiver agreement between an employer and its employees. And, since Prudential is a Texas Supreme Court case, it is likely that Texas courts will uphold jury waiver agreements in employment disputes.

For those who are interested in establishing jury waiver agreements with their employees, caution must be used in the preparation of such agreements. Both Wells Fargo and Prudential make it clear that jury waiver agreements must be “knowing and voluntary.” Jury waiver language tucked away “in small type or hidden in lengthy text” of a larger agreement may violate this principle and result in a court finding the waiver to be unenforceable.