In City of Houston v. Williams, 353 S.W.3d 128, 133 (Tex. 2011), a group of former firefighters for the City of Houston alleged a breach of contract claim against the City for underpayment of lump sums due upon termination of employment. 353 S.W.3d at 131.
In construing the ordinances the firefighters relied on to form their contractual relationship, the Texas Supreme Court noted that the ordinances promised the firefighters "specific compensation in the form of overtime pay and termination pay" in exchange for their performance of the duties expressly set forth in the ordinances. Id. at 138.
The court then examined whether the ordinances stated the essential terms of the agreement between the firefighters and the City. Id. at 138-39.
The court noted, "In the context of employment agreements, typical essential terms include, among others, compensation, duties or responsibilities." Id. at 139.
After examining the ordinances, the court held that they contained the essential terms of an employment agreement, including:
(1) defining the "workweek" as the time of performance;
(2) setting forth the specific compensation to be paid in defining "regular rate of pay" and "overtime" and in the various termination pay, overtime, holiday, vacation, and leave provisions;
(3) describing the services to be performed. Id.
The court discounted the City's concern about the impact of its holding, noting, "most municipal ordinances will not function as contracts within the meaning of section 271.151(2), because most will not contain the detailed request for performance and promised compensation found in the ordinances in question, nor will they be cognizable as an offer to identifiable offerees as these Ordinances are." Id. at 143.
In order to meet the definition of a "contract subject to this subchapter," the contract must:
(1) be in writing;
(2) state the essential terms of the agreement;
(3) provide for goods and services to the local governmental entity;
(4) be executed on behalf of the local governmental entity. City of Houston, 353 S.W.3d at 135.
The Texas Supreme Court has recognized that "a unilateral employment contract is created when an employer promises an employee certain benefits in exchange for the employee's performance, and the employee performs." Id. at 136.
The Texas Supreme Court has also recognized that " in some circumstances, an ordinance or group of ordinances can constitute a unilateral contract," noting "a court may determine, as a matter of law, that multiple documents comprise a written contract." Id. at 136-37.
The Supreme Court of Texas found that individual firefighters had standing to enforce a pair of meet-and-confer agreements and a collective-bargaining agreement between the City of Houston and the Houston Professional Fire Fighters Association. 353 S.W.3d at 145--49.
The Association had negotiated on behalf of the firefighters in a representative capacity. Id. at 146.
Accordingly, the meet-and-confer agreements conferred a variety of direct benefits on individual firefighters, providing for certain wages, hours, conditions of employment, salary and termination payments, overtime pay, and vacation leave. Id.
The Court explained, "These benefits are not offered to the world at large as a general beneficence, but are limited to the Firefighters through the definition of 'employee' included in the agreements." Id.
It continued, "These guarantees of compensation are not promised to the City or to the Association, but to the Firefighters." Id.
The collective-bargaining agreement made similar promises directly to the firefighters. Id. at 148. The Court therefore held that the firefighters had standing to sue under those agreements. Id. at 146, 148--49.
In sum, 540 former Houston Firefighters brought suit against the City alleging the wrongful underpayment of lump sums due upon termination of their employment. Id. at 131.
Although the central issue was whether the Legislature waived immunity so that the firefighters could sue the City, an issue not raised in this case, the Court had to first determine whether the firefighters, through certain city ordinances and agreements, had a contract for goods or services that would bring their suit within the waiver of immunity provision of Section 271.152 of the Local Government Code. Loc. Gov't Code Ann. § 271.152 (West 2005).
After reviewing the law regarding unilateral contracts and recognizing that ordinances can be construed as contracts, the Court held that because the ordinances collectively constituted an offer that was communicated to the firefighters which the firefighters accepted by performance, the promise was a unilateral contract that became binding when the firefighters performed. Williams, 353 S.W.3d at 138.