Texas Employment Contract: Definition, Key Considerations

What is a Texas Employment Contract?

A Texas employment contract is a legally binding agreement that is entered into by an employer and an employee. The parties will negotiate the terms of the contract like compensation and benefits and then create a document that will serve as the foundation for the business relationship.

Employers in Texas usually execute employment contracts when hiring high level permanent employees with unique skills, but these contracts can also be used when hiring temporary employees, contractors, and consultants.

Texas is an “at-will” employment state. This means that without a valid employment contract, an employer can fire an employee at any time without cause or reason. The only exception is that the termination cannot violate any laws like discrimination laws.

An employment contract is the only way to override the “at-will” employment law and protect an employee’s job.

Are Employment Contracts Enforceable in Texas?

Yes. Employment contracts are legally enforceable in Texas. Texas treats an employment contract like any other contract under the state contract laws. The agreement must be based on mutual consent, involve consideration, and cannot violate any laws or public policy.

Texas courts will not enforce a contract that is ruled to be unconscionable. For employment contracts, the following factors are considered when determining if a contract is unconscionable:

1. Are any legal rights prohibited by the agreement?
2. Is there a lack of mutuality?
3. Is the contract unfairly one-sided?

Employers are usually in charge of drafting employment contracts so it is not uncommon to have a contract that heavily favors the employer over the employee. To ensure that the contract is legal in Texas, employers should have their employment contract drafted or reviewed by a contract lawyer.

What Are the Legal Requirements for Texas Employment Contracts?

Texas employment contracts must follow the legal requirements of Texas contract law and the Texas labor code. It is common for employment contracts to be in writing, but oral employment contracts with a duration of less than one year can also be enforced.

Many people think of an employment contract as an express written contract with specific terms and conditions. While this is one type of employment contract, other written documents can also create a legally binding contract.

Legally binding employment contracts can be created in the following ways:

• Verbal agreements
• Implied agreements based on conduct and representations
• Offer letters
• Employee handbooks
• Company notice boards
• Emails

Employers need to be aware that contracts can be created from a variety of communications and actions.

One essential element that must be included in an employment contract to make the contract legally binding is a definite term of employment or specific circumstances under which an employee can be fired. Without defining duration of employment or causes for termination, the terms of employment could be interpreted as “at will” and leave an employee vulnerable to termination for any reason.

Types of Texas Employment Contracts

Employment contracts come in many forms based on the type of work the company does or the type of employee being hired to complete the job. Restrictive agreements are often used to protect the employer’s business interests.

Some common types of Texas employment contracts include:

• Permanent employment contract. Used by a company to hire a permanent employee with regular hours and an hourly wage or salary.
• Contractor agreement. Used when a company hires a contractor or a freelance worker who is not an employee of the company but will be completing work for the company.
• Non-disclosure agreement (NDA). A restrictive contract that prevents the employee from releasing valuable information about the business.
• Non-compete agreement. Protects the employer by limiting the employee from working for competitors or creating a competing business.