What are common employment contract provisions?

Apart from job position and duties, compensation, duration, and termination, there are a few other provisions that might be included in an employment contract that can have a substantial affect on how the agreement is enforced.

Choice of Law

A choice of law provision specifies which state’s law will be used to interpret the agreement. For example, an agreement between a Texas drilling company and an Oklahoma pipeline company to drill for oil in Texas might provide that any disputes arising out of the contract will be governed by Texas law. Similarly, most contracts will provide that the law of the state where the employee performed the services will govern.

Choice of Forum

A choice of forum clause specifies a particular court or county for resolving any disputes. For example, the same agreement above between the Texas drilling company and the Oklahoma pipeline company might provide that any disputes will be resolved by the federal district court sitting in Dallas. These agreements are presumed to be valid and enforceable.

Successors and Assigns

Successorship provisions come into play when the employer merges with or is acquired by another company. Such a provision may be advantageous to an employee because the employee can require the employer to make sure that the employee has a position with the new company.

Modification

While Texas law allows parties to a written agreement to orally modify that agreement, many contracts will require that any modification be in writing and signed by all parties by using a modification clause.

Severability

What happens when a particular provision or clause of an agreement is found by a court to be unenforceable? Unless there is a severability clause, the entire agreement is unenforceable. A severability clause provides that if any particular provision or clause of an agreement is found to be unenforceable, the other provisions can still be enforced. In other words, a court can simply remove the unenforceable provision from the agreement.

Waiver

A waiver provision applies where one party to the contract fails to comply exactly with the terms of the contract and the other party continues to hold up its end of the bargain. Under general contract principles, the fact that the other party continued to hold up its end would mean that it cannot then claim that the first party breached the contract. In other words, the other party has waived its right to claim breach of contract. However, a waiver clause acts to protect the non-breaching party’s right to sue for breach of contract. It states that either party’s failure to insist upon strict compliance with terms of a provision does not constitute a waiver.

Non-Compete Clauses

A non-compete clause prevents an employee from taking work that competes with his former employer. These clauses may or may not be enforceable. In Texas, a non-compete clause is generally enforceable when it is limited to less than two years, limited to specific job duties, and geographic area.