Protect Your Business With Employment Agreements

Protect Your Business with Employment Agreements

When you hire an employee for your business, it is important to have the employee sign an employment contract. An employment agreement is an agreement between your business and the employee that discusses both the employee's and your company's responsibilities, rights.

Elements of an Employment Agreement

An employment contract provides the full and complete contract between your company and your employee, explaining the rights and obligations of each party. 

Some provisions that an employment contract may include are:

• Name, address of employer and employee

• Salary including bonuses or commissions

• Payment for expenses

• Benefits (including health, life insurance, education assistance, and flexible spending accounts)

• Time off (holidays, personal time, vacation, and sick days)

• Job title

• Job description (including roles,responsibilities and requirements of the position)

• Full- or part-time employment status

• Schedule (days and times to be worked, as well as shift time, if applicable)

• Confidentiality clause (this prevents an employee from sharing proprietary information with others)

• Conflict of interest clause (prohibiting the employee from undertaking any other work that conflicts with working for the company while employed there)

• Noncompete clause (preventing the employee from working for a competitor for a certain period of time after leaving the organization)

• Nonsolicitation clause (preventing the employee from seeking business from the clients of the company or hiring its employees after leaving the organization)

• Exclusive employment clause (stating the employee won't work anywhere else while working at your company)

• Statement of no agency (a legal provision that makes it clear the employee is just an employee and cannot enter into contracts on behalf of the company)

• Termination of employment (this section includes the reasons the employer can terminate the employee, as well as the notice the employee must give when leaving)

• A statement that ownership of materials and inventions created by the employee for the employer (including social media) belongs to the employer

• A statement that the employee is to use their best efforts to fulfill their job responsibilities

• Probationary period (if required, this should be explained and described)

• Arbitration clause (this requires that the parties use arbitration if there are any disagreements regarding the contract or employment, instead of going to court)

• Choice of law (this states which state's laws apply to the contract)

• A description of the employer's procedures and policies, or reference to a separate employee handbook that provides these

Advantages and Disadvantages of an Employment Agreement

An employment contract can be useful because it clearly states all the requirements of the job and all the obligations the employer is entering into. It clarifies the agreement between the parties. A solid employment agreement can help protect both parties in the future, if confusion or disputes should arise between the employee and the employer.

An employment contract has disadvantages as well. It legally obligates you as the employer to do certain things and to provide the stated salary and benefits. If you want to change these later, then you will have to renegotiate the employment agreement.

When to Use an Employment Agreement

While, in the past, employment agreements were used primarily for executives and professional staff, an employment agreement should be used for all of your full- and part-time employees. If you hire interns, you should have an employment agreement for these positions as well. If you are hiring an employee on a temporary basis, you will want to use an employment agreement that specifies the nature of the temporary employment and the length of the position.

To help ensure you don't miss addressing any important issues, it's wise to develop an employment agreement template you can use for all of your employees. You may choose to hire an employment attorney to help you, or you can use an online service provider to guide you through the process.