Texas Employment Agreements

Employment Agreements in Texas

Most employment relationships in Texas are not expressly defined in a written agreement. Employees and employers generally have the right to end employment “at will,” as they choose, if that choice is not based on illegal reasons, such as race, age, or gender discrimination. Even though written employment agreements are not required by law in Texas, employment contracts are sometimes appropriate for a number of reasons.

Advantages of Employment agreements

Employees benefit from employment agreements in several ways. Contracts may offer guarantees for employees that “at will” jobs do not. For example, a contract might limit the employer’s ability to terminate employment without just cause. It also clearly defines job expectations, hours, pay and other terms which both parties agree to. Importantly, the contract is legally binding and enforceable in a court of law. The contract might also include key employee compensation packages such as stock/ownership options, performance bonuses or severance payments.

Employers also benefit from employment agreements. Term employees bound by contract, unlike “at will” employees, generally have greater incentive to continue employment for the expected term, so employers minimize the challenges of replacing employees unexpectedly. A contract allows an employer to define company policies and acceptable employee behaviors, clearly communicating to employees those situations which might lead to termination. The employer has the option to define the length of employment within the contract and specify causes for termination. An employment agreement also allows an employer to require confidentiality, thereby protecting trade secrets, customer data, patents, and other important information. Employment agreements also may be necessary to subject the employee to an enforceable noncompete clause.

Key Components of Employment Agreements

Because of the wide variety of business needs, employment agreements vary greatly. However, every employment agreement should somehow include the following: a section indicating the mutual agreement to employ and to be employed, the job description and expectations, the anticipated length of employment, and the grounds for terminating employment.

Depending on the job, other clauses may be important as well. For example, a Duration of Employment clause is standard and determines the length of employment. A clause for the Automatic Extension of Employment allows the employer and employee to easily extend that employment as warranted but does not bind either party longer than necessary.

Along with a Compensations and Expenses clause, standard for most contracts, employers may want to include clauses regarding Commissions, Profit-sharing, and Bonuses as appropriate.

If an employer provides a company car, the contract should state that as well as including a clause defining exactly how the employee is allowed to use that automobile.

Of great concern to most employees is the benefits package an employer provides. Personal leave and vacation time should be defined within the contract. In addition, the contract should specify whether or not the employee receives insurance, retirement, disability, and death benefits. In contrast to independent contractors, employees subject to employment agreements are not responsible for withholding their own income tax, social security, and Medicare and will receive a W-2 form from the employer each year.

Employers may benefit by including non-compete clauses in their contracts if appropriate. Confidentiality clauses are also important to many employers, not only because they define which information is to remain confidential but also because the contract is legal binding and cannot be breached without consequences.

While an “at will” working relationship maximizes freedoms for employer and employee, employment agreements are sometimes the best choice. An employment contract should reflect the unique needs of each company as it protects the rights of employer. Consulting an experienced business lawyer is a prudent choice to create employee agreements that benefit everyone involved.

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