Some companies need their employees to sign contracts, but most do not. You most often see them for high level positions where the employee will have access to a lot of private company information.
Employment contracts are useful to your business if you want to protect company trade secrets and have control over when and how your employees are terminated. If you want to draft employment contracts for your business, take a look at these four things to consider.
1. Important Things to Include in Employment Contracts
Basic employment contracts set forth the terms of your business relationship with your employees. They typically include information about the duration of the job, employee job responsibilities, health benefits, other incentives, and grounds for termination.
Some employment contracts also include non-compete and trade secret disclosures. All of the basics should be included in your employment contract, with clauses for anything special you want to include. You can find employment contract templates to help you get started on the Internet.
2. Decide Whether to Include an "At-Will Agreement"
Some companies require their employees to sign an "at-will employment agreement." This basically means that the employee can be fired at any time, with or without explanation. This protects your business from being sued for discrimination or firing an employee without good cause. You can also put a certain employment timeframe in the employment contract and choose to extend at a later time.
Additionally, written employment contracts lock employees into a certain term of employment. This is useful if their replacement will require a lot of training or if it is very costly and time-consuming to replace the employee. If the employee does not follow the contract, they can face penalties to benefits or other agreements to their employment.
3. Decide Whether to Include a "Non-Compete Agreement"
Sometimes it''s appropriate to include a "non-compete agreement" in your employment contracts. This means that the employee has to agree not to steal clients, work for another directly related company for a set period of time, or anything else you don''t want them to do.
Without a "non-compete agreement" you could potentially lose business if your employee decides to go solo or freelance. You should also make it clear that copyright information, trade secrets, and proprietary information cannot be stolen or used for any purpose other than your business operations.
4. Have a Lawyer Review Your Employment Contracts
There is a lot of legal terms involved in employment contracts, so you''re always safer to have them reviewed by a lawyer before getting them signed. You don''t want to go to court over a "covenant of good faith and fair dealing" breach. Plus, every state has different employment laws that are constantly changing.
A lawyer stays up to date on what is OK to include in an employment contract and what is not. You want to get a specialized lawyer, like Steven Guynn, that has worked on employment contracts before.
Employment contracts are great because they protect your business in many ways. However, they are also a two-way street. You have to make promises to your employers through the contracts, which is why many companies decide to avoid them. You''ll have to decide for yourself whether they are important to have in your business.