There are numerous contracts and legally binding agreements used to protect a variety of business relationships, confidential information, and trade secrets. Companies who rely on such documents experience greater confidence and stability when first establishing a company, within the course of everyday business, with contractors, and when employees come and go.
In Texas, types of contracts (or agreements) businesses may use can include:
- Employment Agreements
- Non-Compete Agreements
- Confidentiality Agreements
- Independent Contractor Agreements
- Work-for-Hire Agreements
- Partnership Agreements
- Shareholder Agreements
Common Contracts Texas Businesses Use - Explained:
1. Employment Agreements
This formal agreement specifies the obligations and expectations of an employer/employee relationship. A standard contract can be created for all employees and customized for specific jobs.
Common elements to consider in an employment agreement include:
- The specific job position offered and accepted, including job title
- Duties of the employee and role of the employer
- Wages and compensation
- Procedures for termination
- The duration of employment, or an “at will” clause stating that the employment term is open-ended
- Restrictive covenants or a non-compete or non-disclosure agreement
2. Non-Compete Agreements
It is not uncommon for an employee agreement to include a Non-Compete Clause (covenant not to compete) or separate non-compete agreement for executives, employees, or other owners or partners. In Texas, medical practices and providers should be aware that physician non-competes have unique stipulations specific to health care laws.
The signing party agrees that, if terminated or otherwise removed, not to engage in a similar trade or profession, for a reasonable specified period of time and geographic area, that would compete with the employer. Some of the reasons a company would use a non-compete agreement are:
- Protection against former employees using trade secrets in a competitive enterprise
- Prevent poaching or solicitation of clients and customers
- Protect integrity of current products in development
- Safeguard public relations
- Maintain privacy of company operations and structure
3. Confidentiality Agreements
Commonly referred to as an NDA (Non-Disclosure Agreement), this type of contract is a promise to maintain secrecy of the items specified within the contract. The terms are effective for the duration of employment and a specified period of time after the employment relationship ends. Here are a few circumstances when a company would want to implement an NDA:
- Prospective upper management interviews that will include discussion of confidential company information
- Business relationship with a consultant or contractor engaged in a temporary project
- Vendor or contractor relationship that is privy to proprietary information
- Stockholder and shareholder with a right to confidential company information
Confidentiality agreements make it possible for companies to protect the security of information that is critical to business success. It prevents proprietary information from falling into the hands of competitors. It also helps prevent disgruntled former employees from exploiting confidential information for retaliatory purposes.
4. Independent Contractor Agreements
A written contract between two parties for a specific service or project. One person or company hires another to help on a short-term project or job or occasionally on a project to project basis. Unlike an employment agreement, an Independent Contractor Agreement clearly explains why the party hired is an independent contractor in lieu of an employee for legal and tax purposes. Elements of an independent contract agreement may include:
- Payment details and dates
- Duration or period of the contract
- Details of the parties to the contract, including any sub-contracting arrangements
- A description of the goods and/or services that your business will receive or provide, including key deliverables
- Key dates and milestones
- Termination conditions and any other special conditions
- Definitions of key terms used within the contract
- Required insurance and indemnity provisions
- Renegotiation or renewal options
- Dispute resolution process
5. Work-For-Hire Agreements
Commonly used by independent contractors, a Work-For-Hire Agreement (WFH) is a contract that defines the scope of a project and the expectations to be fulfilled by both parties. With a work-for-hire agreement, all of the attributes of copyright ownership, typically including credit and control, vest in the hiring party, not the creator. Situations in which a WFH can exist include work created by an independent contractor OR work prepared by an employee, within the scope of his or her employment.
A work-for-hire agreement usually includes details such as:
- Project timeline
- Work schedule
- Milestone schedule
- Terms of compensation
6. Partnership Agreements
Having detailed agreements in place when establishing a new business, as well as a small businesses, can protect your interests when unforeseen events cause dilemmas. This is especially important when working with a business partner, whether you possess equal shares of the company or not.
Partnership agreements can be tailored to your unique business, and outline matters such as:
- Which partners contribute what assets: Upon building a business, one partner may have more cash to contribute while another partner may be devoting more time and energy. Designating who supplies what and the kind of assets provided is important to establish roles.
- Who has more say: This can be agreed upon depending on the partners and their roles. In some cases, a partner who contributes more cash to the business may have more authority. In other situations, the partner devoting more hours and labor into the business may have more control, even if they contribute less financially
7. Shareholder Agreements
A shareholder agreement should be specific to your unique business. Numerous factors are considered when drafting a shareholder agreement, including the number of shareholders involved, the seniority of each, the roles of each individual voting rights and dissolution procedures, and more. Having a shareholder agreement can protect the assets of both majority and minority shareholders in the event of a dispute if all bases are covered.
Drafting and Enforcing Your Business Contracts and Agreements
Carefully considered and well-written contracts offer many benefits and protections for employers and employees. If you wish to discuss a potential business agreement or enforcement of a business contract, a breach of contract case, or another intellectual property law matter, contact our legal team at Hendershot Cowart P.C.
As industry leaders who counsel businesses of all types and sizes, our Houston attorneys have extensive experience helping clients draft, protect, enforce, and defend business agreements, intellectual property, and trade secrets. Call (713) 909-7323 or contact us online to schedule a consultation.