Texas is an employment-at-will state. That means either party can end the employment relationship at any time without reason. In an employment-at-will state, the employer does not have to have good cause to fire an employee. However, an employee who is terminated without good cause related to the job may be eligible to collect unemployment benefits.
Like any legal concept, there are a few exceptions.
An employment contract that specifies the situations when the relationship can be terminated will form a contract that overrides employment-at-will. That is why it is important that an employee handbook not create a contractual relationship between the employer and the employee.
A well-crafted employee handbook is a valuable asset to your business. A handbook describes operating policies, employee benefits, and sets clear expectations for the employment relationship. A common practice is for employees to sign and agree to abide by the policies outlined in an employee handbook; however, careful wording is necessary to avoid creating an employment contract that would abridge the employer’s ability to terminate the relationship at will.
What turns a handbook into a contract?
An enforceable contract must contain a mutual agreement and consideration (benefit). To avoid turning an employee handbook into an employment contract, set expectations but avoid making promises, state clearly that either party can terminate the relationship without cause, make no promises of continued employment, and avoid creating inflexible discipline systems. Employers whose handbooks contained discipline systems that abrogate the right to terminate the employee at will have inadvertently created employment contracts.
The simplest way to avoid turning an employee handbook into a contract is to provide a disclaimer that acknowledges the handbook contains guidelines only, does not create a contract of employment, and that it is subject to change including revocation by the employer at any time. Including a disclaimer protects the employer from claims that an employee handbook creates an employment contract that modifies the at-will employment relationship.