Summer is hiring season in North Texas. Whether you run a healthcare practice in Frisco, a construction company in McKinney, a retail operation in Allen, or a technology startup along the Dallas North Tollway, chances are you are adding staff between now and September. And with every new hire comes a question that too many business owners skip until it is too late: do you have the right contracts in place?
A handshake and a simple job offer letter might get someone in the door. But without a solid employment agreement tailored to your business and the laws of the state of Texas, you could be leaving yourself exposed in ways that do not become obvious until a dispute is already underway. By then, the damage is often done — a departing employee has walked out with your client list, a contractor dispute has landed in litigation, or a poorly worded agreement has left you unable to enforce the protections you thought you had.
The good news is that this is entirely preventable. Here is what North Texas business owners should be thinking about before that next hire starts.
Understanding the purpose of an employment contract
An employment contract is not just legal paperwork. It is the foundation of your relationship with an employee. It defines expectations on both sides, reduces the likelihood of disputes down the road, and — when drafted correctly — gives you enforceable legal protections if things go sideways.
Not every position requires a comprehensive employment agreement. For entry-level or hourly roles, a solid offer letter and a well-written employee handbook may be sufficient. But for key employees — managers, senior salespeople, team leads, anyone with access to proprietary systems or client relationships — a written employment contract is worth the investment every time.
The cost of drafting a proper agreement up front is a fraction of what it costs to litigate a dispute after the fact.
What a well-drafted employment agreement should cover
A strong employment contract for a Texas business should address, at minimum, the following elements:
Compensation and benefits. This includes base salary or hourly rate, bonus structure, commission arrangements, and how and when raises are reviewed. Vague language around bonus eligibility is one of the most common sources of disputes. If a bonus is discretionary, say so clearly. If it is tied to performance metrics, define those metrics.
Job title, duties, and reporting structure. Spell out what the role actually involves and who the employee reports to. This is especially important when the employee’s scope is expected to evolve — without a defined starting point, it becomes difficult to establish what was agreed on.
At-will employment language. Texas is an at-will employment state, meaning either party can generally end the employment relationship at any time and for any lawful reason. That said, at-will status should be explicitly stated in the contract. Certain promises made during hiring — oral or written — can inadvertently create implied contract obligations if they are not carefully managed.
Confidentiality and non-disclosure obligations. This is one of the most important provisions for any business with trade secrets, proprietary processes, customer data, or competitive pricing information. A confidentiality clause that is vague or poorly worded may not hold up in court. The obligations should be clearly defined, and they should survive the end of employment.
Intellectual property assignment. If employees create work product — software, designs, written materials, marketing content — on your behalf, you want a clear provision establishing that this intellectual property belongs to the company. Without it, the ownership question can become genuinely complicated.
Dispute resolution. Where will disputes be resolved? Will you require arbitration, or will matters go to state or federal court? In which county will venue be established? These provisions matter enormously if a disagreement escalates. Collin County, Dallas County, and Denton County courts each have their own tendencies and dockets — knowing which venue governs your disputes is not a minor detail.
Termination provisions. What notice, if any, is required? Are there severance obligations? What happens to bonuses or commissions upon termination? Contracts that are silent on these points often lead to disputes about what was owed.
Non-compete agreements in Texas: what the law actually requires
Non-compete clauses have become one of the most contested areas of employment law in recent years, and with good reason. At the federal level, the FTC attempted to implement a sweeping ban on non-competes in 2024. Courts ultimately blocked that rule, and the issue continues to evolve at the federal level. In Texas, the legal framework for non-competes is governed by the Texas Covenants Not to Compete Act, and it has its own specific — and sometimes counterintuitive — requirements.
For a non-compete agreement to be enforceable in Texas, it must satisfy several tests:
First, it must be ancillary to an otherwise enforceable agreement. This typically means it is part of an employment contract that includes other enforceable obligations — most commonly, a confidentiality or non-disclosure agreement. A standalone non-compete that is not connected to any other consideration is generally not enforceable in Texas.
Second, the restrictions must be reasonable in scope, duration, and geography. This is where most non-compete disputes arise. A two-year restriction covering all of Texas is a very different legal animal than a one-year restriction covering a 30-mile radius of Collin County. Courts in Texas have the authority to reform — effectively rewrite — a non-compete that is overbroad rather than simply throwing it out. That means a judge may make your agreement enforceable on different terms than you intended.
Third, the agreement must protect a legitimate business interest. Non-competes designed simply to prevent a former employee from working in their field generally do not hold up. The restriction must be tied to something the business has a genuine interest in protecting: client relationships developed on company time, access to trade secrets, or specialized training provided at the company’s expense.
If your business currently uses non-compete agreements — or if you are considering implementing them — having an attorney review the language is essential. A non-compete that will not hold up in court provides false security and may leave you without recourse when you need it most.
The independent contractor question every North Texas business should be asking
Summer also brings a wave of seasonal work, project-based engagements, and freelance arrangements. Many businesses across the Dallas-Fort Worth area use independent contractors to handle overflow during busy periods — and many of those arrangements are not properly documented or are legally misclassified.
Texas courts and federal agencies apply multi-factor tests to determine whether a worker is truly an independent contractor or an employee in disguise. The analysis typically looks at factors such as:
- Who controls how, when, and where the work is performed
- Whether the worker uses their own tools and equipment or the company’s
- Whether the worker has the ability to work for other clients simultaneously
- How integral the work is to the company’s core business
- Whether the relationship is project-based or ongoing
If you direct the day-to-day work, provide the equipment, set the schedule, and effectively treat a contractor like a regular employee, there is a significant risk that a court or the IRS will agree — and reclassify that worker accordingly. The consequences can include back payroll taxes, penalties, interest, and liability for employment benefits you never intended to provide.
Independent contractor agreements should clearly document the nature of the relationship and include appropriate protections. If you have contractors who have been working with you on an ongoing basis without a formal agreement in place, this summer is the right time to address that.
Why mid-year is the right time to review your employment documents
Most business owners address employment contract issues reactively — when there is already a dispute on the table, a departing employee threatening litigation, or a complaint filed with an agency. The more effective approach is proactive: review your employment documents before problems arise, not after.
- Your employment agreements were drafted more than three years ago
- You downloaded templates from the internet and have not had them reviewed by a Texas attorney
- You use offer letters rather than employment contracts for key employees
- Your non-compete agreements have not been updated since the federal rulemaking discussions began
- You have independent contractors who have been working with you for more than a year without a formal agreement
- Your employee handbook references policies that your management team does not actually follow
An annual or mid-year review of your employment documents is one of the highest-value investments a growing business can make. The cost is predictable. The cost of a dispute is not.
Working with an employment and business attorney in Frisco
At Hanshaw Kennedy Hafen, our attorneys have been helping businesses across Collin, Denton, and Dallas Counties navigate employment contracts, non-compete agreements, independent contractor arrangements, and business disputes for over 20 years. We work with businesses at every stage — from early-stage startups putting their first employment agreements in place to established companies dealing with departing employees and enforcement actions.
If you are hiring this summer, updating your agreements, dealing with a non-compete dispute, or simply unsure whether your current contracts would hold up if tested, we are ready to help.
Call us today to schedule a consultation: 972-731-6500
Or reach us through our website at hanshawkennedy.com/contact.
Hanshaw Kennedy Hafen is a business and litigation law firm based in Frisco, Texas, serving clients throughout Dallas, Collin, and Denton Counties. In practice since 2004.