Texas Court Legalizes Corporate Fraud

Texas is an “at will” state but why should that give permission to commit corporate fraud? According to the Texas Supreme Court, it does.

Nature Red in Tooth and Claw

According to Main Street, here is what happened:

In 2002 E.I. du Pont de Nemours announced plans to turn some of its operations into a separate subsidiary. Most of the affected employees were under a union agreement that gave them the right to transfer within DuPont if they preferred, a decision which would have cost the company an enormous amount of money to retrain the transfers and hire their replacements.

The employees were worried that if DuPont sold the new subsidiary it would hurt both their pay and retirement funds. To convince them to work in the subsidiary instead of transferring within the company, DuPont assured its employees that it had absolutely no plans to sell the spin-off. Based on this promise almost everyone moved to the subsidiary, which a few weeks later DuPont sold to Koch Industries. Koch cut both salaries and retirement packages. DuPont had, as it turns out, been negotiating this deal the entire time.

Notice that it was confirmed that DuPont was working on the deal while they promised their employees they “had no plans” to sell the subsidiary. This isn’t a case where DuPont had a change of mind. Their intention all along was to sell the subsidiary. They just wanted to avoid the expense of paying to retrain workers. So they lied to their present employees so they could save money and reduce their stream of income.

[See also, “Bank of America Crimes Are Taxed, not Punished.”]

I understand there were business realities that made this deal financially attractive. I’m not a fan of unions so I’m not necessarily happy with all the rules DuPont had to work around.  (I’d need to know more to have a settled opinion on the matter.) But the fact remains that they committed an act of fraud, lying to employees to make them do something that was not in their best interests but that profited DuPont.

The Texas Supreme Court has legalized theft. The rich and powerful have a legal “right” to rob the relatively poor and weak.

The only good that can come out of this is that employees learn that future promises should never be the basis of their negotiations with their employer. People need to take care of their own benefits and simply demand higher pay, nothing else. You can’t trust pensions and you can’t trust much else that companies promise you.

So my personal advice goes to everyone in every state (because even if your state is not “at will,” when the crisis hits, the politicians will side with big business). There are no such things as “retirement benefits.” We should all be telling our employers that it is exclusively “pay as you go.” You take responsibility for saving for your own future and for emergencies.

To the extent that the government has created incentives that make it seem like a good deal to offer benefits rather than an increased salary, we should look at that as a way in which the government is making us vulnerable and more dependent than we need to be.