Often business owners wish to require employees to sign employment agreements. Before doing so, however, it is important to know the basics.

First, is an employment agreement needed?  Employment agreements, like all contracts, are two-sided.  A business owner should be aware of how he or she may be limiting the company in the event of a dispute.  For example, even though Texas is an "employment at will" state, an employment agreement which states that an employee may be terminated for "cause" could be interpreted to mean that the employee can only be terminated for cause.

Is the employee exposed to trade secrets or confidential information of the business that needs to be protected?  If so, a non-disclosure agreement should describe what sort of information he or she is prohibited from disclosing.  Broad, "catch all" definitions of confidential information may be more difficult to enforce.

Considering a non-competition provision?  First, decide whether it is necessary.  If so, determine what are the legitimate interests of the business which needs to be protected.  To be enforceable, Texas law requires non-competition agreements to have specific time, geographic and scope limitations.  The more tailored those limitations are to the ex-employee, the more likely it is that the agreement would be enforced.  For example, a contract prohibiting the employee from selling medical software systems in the Dallas/Fort Worth area for twelve months is more likely to be enforced than a contract prohibiting the employee from selling technology products in the United States for five years. 

Finally, avoid "standard" employment agreements or reusing old forms.  Consult with your attorney concerning whether an employment contract is needed, what interests your business needs to protect and the most effective method of protecting those interests.