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Employment Agreement

Employment Agreements

You work hard to build a thriving and profitable business. Your employees are a key part of the success of your business, often having access to critical information such as customer lists, financials, marketing plans, and research. This information is required for their position, but risky if made public. Utilizing a comprehensive employment contract is one piece of the employee and risk management puzzle.

Why Using Employment Agreements Matters to You

Employment agreements are an effective way to ensure that an employee understands the details of their job and their responsibilities while performing it.

The agreement can prevent many misunderstandings, or in the event of a disgruntled employee, provide crucial protection of a company’s confidential information. By not utilizing an employment agreement, your business is exposed to significant risk.

Any employee presented with an employment agreement should review it with an attorney. The consultation can ensure transparency on benefits, pay, severance, and any additionally negotiated benefits such as increased vacation, maternity/paternity leave, or specific research/office space and intellectual property rights. Having all promised benefits included in the employment agreement reduces confusion and provides a clear starting point for any future conflict.

How Does Texas Handle Employment Agreements?

Texas is an “employment at will” state, which means an employer may terminate an employee’s employment at any time for any legal reason or no reason at all. Illegal grounds for termination are those based on discrimination, retaliation, or similar motivations. Conversely, an employee may also leave the company whenever they choose–with or without notice.
The employment contract primarily provides benefits and protections to the employer but also provides needed transparency to the employee. A savvy employee will also request that their must-haves be included in the contract.

Consequences of Not Having an Employment Agreement

The consequences of not having an employment agreement can be devastating. For example, a standard provision of the contract is a non-disclosure agreement which prohibits the employee from disclosing the company’s confidential information such as financials, trade secrets, or other sensitive information.

Assume you’re in the business of designing robots for manufacturing automation. After years of 80-hour weeks and expensive research, your company has developed several sophisticated ideas for improving the efficiency of the robots so your customers can drastically improve their manufacturing capabilities.

One day an employee becomes disgruntled. They download all data pertaining to the ideas for improvement and use it to secure a position with a competitor. An employment agreement would have prevented this or at least improved your chances of successful legal recourse against the disgruntled employee.

The Employment Agreement

Many variations of employment agreements exist. However, most of them contain certain critical clauses.

Basic Information

This includes the names of the employer and employee, job title, compensation, benefits, and severance pay, if any. It also states that the employment is “at will” and may be terminated at any time for any legal reason.

Non-Compete

This clause is a provision in which the employee agrees, in the event of separation, that they will not work for a competing company within the same industry for a preset period of time. A typical case would be if a Coca-Cola employee specializing in chemistry leaves and takes a job with Pepsi in its chemistry research department.

Texas law has specific requirements regarding non-compete clauses, also called “covenants” not to compete. They must be reasonable in time and limited to a particular geographic area. Legal counsel is recommended for drafting a clause that is both effective and able to stand up to legal scrutiny.

Non-Disclosure

This clause prohibits the employee from disclosing confidential information. It imposes an obligation upon the employee to protect this information – both during the employment and for a reasonable amount of time after they leave the company.

Severability

This provision provides that if one clause of the agreement is found to be unenforceable, the remaining language of the agreement will remain intact. This is an essential provision because both non-compete and non-disclosure clauses are vulnerable to challenges under Texas law.

Choice of Law

This section establishes which state’s law will apply in the event of a dispute.

Our Experts are Here for You

If you have a critical position that needs filling, we can help you draft an effective employment agreement. We can also help develop an employment agreement template for you to use as new employees are hired over time. If you’ve received an employment agreement, we can review and even negotiate changes as needed.

Our Houston Business Law Firm Can Help

Our expert Houston business attorneys will craft employment agreements that are both effective and legally enforceable.