Contract to hire in Texas

Question

There are a lot of employers who normally hire people only after a period of time as a contractor.

They seem to hire people as contractors and they go through a contracting agency that is separate from the employers business. The contracting agency pays them hourly and then bills the employer.

They normally will either convert the person from a contractor to employee if they like their work, or they will let them go if they don't like them. The normal period of time as a contractor seems to be from 6 to 12 months.

Lately a company that is providing contractors in this scenario has begun to tell contractors that if they go to work for the company as employees they will sue them.

Is that legal given that the original deal was as a contract-to-hire basis? What would someone do if they were offered employment and then the contracting agency threatened to sue the person?

Answer 1

Is that legal given that the original deal was as a contract-to-hire basis?

No, unless the contractor agrees to an amendment/contract that incorporates a non-compete clause. A party is not allowed to unilaterally modify against a counterparty's will an existing, binding contract. What you describe seemingly falls short of being a cognizable amendment to the contract.

What would someone do if they were offered employment and then the contracting agency threatened to sue the person?

The person might want to educate the intermediary/agency about the invalidity of unilateral amendments that are not agreed upon. The intermediary's awareness of this tenet of contract law --or its awareness that the threatened person is knowledgeable of that principle-- might dissuade the intermediary from litigating its unviable claim. Regardless, given the prospect of litigation, the person needs to make sure that henceforth all his communications with the intermediary are in writing.

The person might also want to inquire of the employer whether its contract with the intermediary contains a clause entitling the employer to hire the intermediary's contractors. If it does, the intermediary's threats to the person sound in intermediary's breach of that contract. A claim of tortious interference with relation is unavailable unless the intermediary's misconduct actually disrupts the relation or prospect between the employer and the person, but it is clear that the intermediary's acts are in the direction of frustrating that relation.

Even if there is no such clause between the employer and the intermediary, the person might want to update the employer on how the intermediary is trying to disrupt their tacitly agreed contract-to-hire basis.

Answer 2

They would sue their ex-employee and (probably) win

Assuming that the prohibition is contained in the contract between the labour-hire company and the employee and providing it is a reasonable non-compete covenant clause, then there is no reason that it would not be upheld and the ex-employee would owe damages to their ex-employer.

§ 15.50. CRITERIA FOR ENFORCEABILITY OF COVENANTS NOT TO COMPETE. (a) Notwithstanding Section 15.05 of this code, and subject to any applicable provision of Subsection (b), a covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made to the extent that it contains limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.