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Avoiding Common Issues in Employment Contracts

May 4, 2021

Contracts are the glue that hold a business together and allow a business owner to successfully run his business. A contract is a promise that is enforceable by law. When it comes to managing employees, a well-written employment contract solidifies the terms of employment in advance in a way that it is enforceable in the event of an employment dispute.

Texas is an employment at will state, meaning that without an express agreement or statute, either party may modify the terms or conditions of employment for any reason, or terminate the relationship with or without advance notice.

But as in any aspect of the business, providing a clear framework of employee rights and obligations, the work to be performed and the terms of employment creates a sense of stability as well as a standard of excellence that becomes the backbone of the company. Crafting a good employment contract can be challenging, so the Houston business owner can benefit from sound legal counsel to draw up important documents that are legally binding.

Common Pitfalls to Avoid

Some considerations that will avoid legal jeopardy when writing up employment contracts include making sure that the contract does not infringe upon employees’ rights as protected under federal or state laws. It is important to be aware of any restrictions placed on noncompete agreements by state law. If the restrictions are considered unreasonable, they may be overruled.

As employment laws change over time, doing annual reviews of employment contracts so that they stay current with changing regulations or laws is crucial. Attracting skilled workers may also require the company to offer benefits that are competitive with industry-wide practices.

Misclassifying employees as independent contractors is a common mistake that can create liability down the line. The employer controls the work hours, location and duties of an employee. If the business owner treats an independent contractor as an employee, they will be legally considered an employee and allowed the same legal rights and protections.

As all employment contracts should have an offer of salary and benefits, the acceptance in the form of the employee’s signature, and the consideration, which is the payment in exchange for work, it is the signature that is the most important part of the agreement. Handling all paperwork before the employee starts is key.

Finally, upholding the terms of the agreement is a reciprocal responsibility. Both sides are equally responsible for compliance with terms that should be precise and enforceable.