Keep Non-Compete Agreements and Other Contracts Out of Your Employee Manual
Keep Non-Compete Agreements and Other Contracts Out of Employee Manuals
As a general rule and best practice, you should keep non-compete agreements and other contracts out of your employee and policies/procedures manuals. If you have downloaded forms from the internet, many of these forms come from states where this practice is permitted. Texas, however, is not such a state. Placing agreements in your manuals fundamentally change the business relationship with your employee/contractor. How so?
First, Your Policies and Procedures are not Contracts
Your policies and procedures outline the way your business is run. They are not contracts, but policies, which are subject to change without notice to fit changing business needs. Continued work/employment is typically conditioned upon compliance with your company’s policies and procedures. Termination for cause often stems from failure to follow your company’s written policies and procedures. Including contracts or agreements in your policies fundamentally changes what your policies are. Such inclusion may (inadvertently or intentionally) make your policies contractual. If this occurs, then contract requirements may come into play. For example, they may require additional consideration (money) to be enforceable. You may not be able to change them without staff/employee agreement.
Second, You May Modify the “At Will” Status of Employees
Texas is an “employment at will” state. “At will” employees can be fired for cause or no cause, and they can also quit at any time. Most businesses do not intend to modify the “at will” employment arrangement by implementing policies and procedures. However, placing contractual agreements in the policies and procedures manual could make your employees contract instead of “at will”. This modification of the “at will” employment relationship could place unintended contractual obligations and duties on your business and its employees.
Finally, Non-compete Agreements May Result in Classification of Independent Contractors as Employees
Placing blanket non-compete agreements in the policies and procedures manuals may also classify independent contractors as employees. The existence of a non-compete agreement is a factor many government agencies consider in determining whether a worker is an employee or independent contractor. If a blanket non-compete is in your manuals, a worker the business has classified as an independent contractor may be found by the government to be an employee. It is black letter law in Texas that non-compete agreements cannot be made with independent contractors – only employees! If there is a non-compete agreement in your manuals, this is a significant factor weighing in favor of employee status.
These are just a few reasons why it is best practice to keep non-compete agreements and other contracts out of your business manuals. Does your business need an attorney to assist with creating or to review your employee or policies/procedures? We’d be happy to help. Schedule your consultation online now or check out our business law pages for more information about the firm’s business law services.
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Do you have questions about this topic or about other legal issues? We’d be happy to help. Schedule your consultation online now, and we'll talk with you about your concerns. You can also check out our business law pages and our family law pages for more information about the firm’s services.
Patric McCallum is a principal attorney with Drew & McCallum. He focuses his practice on family and business law, helping business leaders and Texas families with their legal challenges and needs. He brings a wealth of trial experience and industry knowledge to every matter he handles.