Multistate employers with employees in Texas are subject to state laws regarding employment agreements. Whether your business is large or small, specific provisions within your agreements could render your agreements unenforceable or jeopardize proprietary business information.
Keep reading to understand the key employment agreements that are typically recommended for businesses in Texas, and what makes them enforceable by state law.
Employment Offer or Employment Contract
Employment agreements are formal contracts that include specific obligations and expectations of the employee and employer.
A standard Texas employment contract:
- Clearly states the position, compensation, benefits, and employment status (at-will or contract)
- Outlines basic terms and conditions of employment
- Sets expectations for both parties
Employers should also generally include choice of law and forum selection provisions in employment contracts, particularly in Texas. Here's why:
- Predictability in dispute resolution
- Control over which state's laws will apply
- Protection against forum shopping
Texas courts generally enforce choice of law provisions if there's a reasonable relationship to the chosen state and the choice doesn't violate Texas public policy.
Non-Disclosure Agreement (NDA)
A non-disclosure agreement (NDA) protects confidential business information, trade secrets, and intellectual property.
NDAs are particularly useful in Texas due to the state's robust trade secret protection laws. The Texas Uniform Trade Secrets Act (TUTSA) protects trade secrets as long as the information has economic value because it is not generally known.
The owner must also take reasonable measures to keep the information secret. An NDA is one of those reasonable measures.
Generally, an NDA is enforceable in Texas if it:
- Is reasonable in scope, including time limitations and geographic restrictions
- Clearly defines what constitutes confidential information; for example, customer lists, pricing strategies, research and development data, financial information, etc.
- Is signed before confidential information is shared
- Is in exchange for consideration, such as employment (for new employees) or a bonus or promotion (for existing employees)
At-Will Employment Acknowledgment
Texas is an at-will employment state, which means that employers and employees can terminate employment at any time for any reason, or no reason at all (as long it’s not illegal).
An At-Will Employment Acknowledgement formally establishes and confirms the at-will nature of employment. This helps prevent misunderstandings about employment terms and protect employers from legal disputes regarding wrongful termination claims.
This provision is usually included in an employee handbook.
A Note About Independent Contractor Agreements:
An independent contractor agreement is a legal contract that outlines the terms and conditions of a working relationship between a business (the client) and an independent contractor (the freelancer or service provider). The key difference between an independent contractor and a full-time employee boils down to control and how the work relationship is structured.
Read more about Independent Contractor Classification to make sure you are classifying workers correctly and your independent contractor agreement clearly defines the scope of work, payment terms, and other key provisions.
Employee Handbook Acknowledgment
Your employee handbook documents and clarifies internal policies, procedures, and expectations. Should a dispute arise between your company and a current or former employee, one of the most useful documents is the employee handbook and an accompanying employee acknowledgement.
Having employees sign an acknowledgment of the company’s handbook:
- Documents that employees have received and understand company policies
- Covers workplace conduct, benefits, time off, and other key policies
- Helps defend your business from employee lawsuits or complaints
- Should be updated regularly to reflect current laws and company practices
Non-Compete Agreement
Non-compete agreements are clauses within an employee contract which limit the employee from seeking employment from a direct competitor within a reasonable period and geographic area. If the employee would interact with trade secrets in a competitive enterprise, it is wise to include a non-compete clause in the employment agreement.
To be enforceable in Texas, a non-compete agreement:
- Must be ancillary to an otherwise enforceable agreement, such as an employment agreement
- Must be reasonable in scope, geography, and duration
- Be in exchange for “consideration” (i.e. something in return, such as specialized training or confidential information);
- Should be supported by legitimate business interests
There are additional state-specific requirements for physician non-compete agreements.
Next Steps for Out-of-State Employers Hiring Texas Workers
Multi-state employers entering the Texas market should work with Texas-based attorneys to draft or review employment agreements to ensure compliance and enforceability with state law.
At Hendershot Cowart P.C., our attorneys have been advising business owners and executives on multi-jurisdictional issues since 1987. We are well versed in state and federal law as it applies to employers.
When you need sound legal advice backed by experience and success, contact Hendershot Cowart P.C.
