Here, learn about employment contracts in Texas. Employment contracts can outline the terms of employment, specifying wages, benefits, and job duties. They can protect both employers and employees and can include provisions on job descriptions and expectations, the duration and termination of employment, and confidentiality and non-compete agreements.
Special thanks to the Texas Young Lawyers Association.
What are employment contracts in Texas?
An employment contract is a legal agreement between an employee and an employer. It sets the terms of employment, such as wages and job duties.
Texas law does not require employment contracts. As a “right to work” state, Texas does not put many legal limits on employment relationships:
An “at will” employee can leave their job at any time and for any reason.
An employer can fire an “at will” employee at any time and for any lawful reason. Unlawful reasons include discrimination based on race, religion, sex, etc.
More and more employers in Texas are using employment contracts. These contracts can be rather intimidating. They may be quite long, with legal language that is difficult to understand. Prospective employees might be afraid to ask questions, fearing the loss of a job offer. You should always have a right to review a contract and ask a lawyer for help understanding it.
When someone takes the time to go through the terms of an employment contract with you, their benefits become clear. A well-written contract protects both the employer and the employee.
What are some important parts of an employment contract?
Every employment contract is different. Most contracts between employers and employees have some common features, though. These tend to be matters that apply to all jobs, such as the rate of pay. Below, read descriptions of some of the most common employment contract provisions.
Job Description and Expectations
When you start a new job, one of the first questions you might have is about what you will be doing. An employment contract can define a job's expectations. What does the employer expect from the employee? What will the employee have to do on the job? What will the employee not have to do?
This part of an employment contract can include the following:
Hours when the employee should be at work, or when they should be available for remote work;
Benchmarks for the employee’s performance, such as sales quotas; and
Limits on activities outside of work, such as not disparaging the employer on social media.
An employment contract’s job description offers important protections for the employee. If a written contract describes an employee's duties, the employer cannot change the job duties without notice. A change in the job description would require an amendment to the contract. That could give the employee a chance to negotiate other changes, such as more pay for more work.
Length of Employment
An employment contract can state how long the employment relationship with last, such as six months, one year, or five years. It can identify situations when the employment relationship can end earlier, such as employee misconduct At the end of the contract’s term, the employment ends unless:
The parties agree to renew or extend the contract as is; or
The parties sign a new contract.
The length of employment can also be indefinite. In that situation, employment continues until either party terminates the relationship.
Termination of Employment
When an employment contract does not state how long employment will last, it needs to describe how the employer can terminate the employee. This is important for matters like unemployment insurance. An employer can fire an employee in two ways:
For cause: The employer has a good reason to terminate the employee, such as poor performance or excessive absences.
Without cause: The employer does not have a justification for firing a specific employee. Layoffs are the most common type of termination without cause.
A former employee will not qualify for unemployment benefits if their termination was for cause. Employment contracts can provide benefits like severance pay to employees who face termination without cause.
A contract can allow an employee to challenge their termination. Many contracts allow employees to demand a process known as arbitration. This type of dispute resolution takes place outside of a courtroom but resembles a trial in many ways. A neutral third party—the arbitrator—conducts a hearing. Both sides can offer evidence. The arbitrator considers their cases and makes a decision. That decision is usually binding.
The employee may also have obligations to the employer when they leave their job. A contract may require advance notice, so the employer is not caught by surprise. The employee must return the employer’s property, such as keys, ID cards, uniforms, laptops, and cell phones. The contract can provide penalties if the employee does not fulfill their responsibilities. For example, an employer may be able to withhold part of an employee’s final paycheck until they have returned all of the employer’s property.
What should I watch out for in an employment contract?
Some employment contracts place extra restrictions on employees. Employees should review these provisions carefully. An employment lawyer can help you understand your rights. They can tell you how the following types of clauses can affect you. These types of clauses include:
- Drug testing programs
- Confidentiality agreements
- Covenants not to compete, or non-competition clauses
- Non-solicitation clauses
Drug Testing Program
Some employers mandate that their employees submit to random drug testing. They may also require their employees to refrain from illegal drug use.
Various laws require drug testing by employers in certain industries. For example, employees who operate heavy machinery may face mandatory drug testing.
The employment contract should describe any drug testing program in detail. The employee will have to sign a medical release so the employer can see the test results.
Many employees have access to their employer’s confidential information. Employment contracts may contain provisions that protect this information. Confidentiality is often an issue when an employee leaves to work for a competitor.
Examples of confidential information may include:
Formulas or designs; or
A confidentiality agreement imposes a duty on an employee to protect this information. This duty can exist both during and after their time with the employer. The agreement can establish penalties for breaches. For example, employees could be liable for the employer’s financial losses if they disclose confidential information.
Covenant Not to Compete/Non-Competition Clauses
In a covenant not to compete, employees agree that they will not compete with the employer after their employment ends. Competition, in this kind of situation, could involve:
Going to work for a competing company in the same business or trade; or
Starting a new business that competes with the employer.
Non-competition clauses have legal limits in Texas:
It must have a limited scope regarding what kind of work the employee cannot do.
It must apply for a limited time, such as 6 months or a year after employment ends.
It must apply to a limited geographic area, such as within the same city or county as the employer.
Its restrictions cannot be greater than necessary to protect the employer’s business interests.
A court may find a non-competition agreement unenforceable if it exceeds these limits.
Employers should have an attorney review a non-competition clause before including it in employment contracts. Employees should also ask a lawyer to look at any proposed non-competition clauses. An overbroad clause could hurt their ability to find future employment.
Non-solicitation or “non-poaching” clauses are similar to non-competition clauses. They prevent former employees from trying to solicit or recruit clients or other employees.
What do I need to know about teacher employment contracts?
Employment contracts are common for educators in Texas. They are also among the most highly-regulated employment contracts in the state.
Chapter 21 of the Texas Education Code requires specific types of contracts for every classroom teacher, principal, librarian, nurse, and school counselor:
A probationary contract for new hires;
A continuing contract for veteran employees; or
A term contract that specifies the length of employment.
State law also mandates many of the terms for these contracts. School employees must meet certain legal requirements with regard to qualifications, for example. Some jobs have fairly standardized job duties.
Employment contracts for public school educators have the most legal requirements. State law does not regulate private school contracts as much.
What about unions and collective bargaining agreements?
Skilled labor employees may join together to form a union. The purpose of a union is to bargain collectively with an employer. Each employee typically negotiates their own employment contract. With collective bargaining, the union negotiates on behalf of many or all employees at once. A collective bargaining agreement can address issues like:
Employee pay scales;
Health and safety rules; and
Procedures for filing a complaint or grievance.
Federal law protects employees’ right to organize for collective bargaining. It prohibits employers from interfering with those rights.
Where can I get additional information?
You can find more information at the following sites:
This article gives basic information on contracts and the general rights and remedies under a contract.
About unemployment benefits in Texas.
This article tells you about what to do if you are injured at work and what covered and non-covered-employers are.