One of the most important processes of hiring new employees is to draft appropriate, comprehensive employment contracts. Even if it is a small company, using only verbal agreements or policy handbooks may not be sufficient to protect employers from unforeseen situations that may arise after people are hired. Enforcing verbal contracts can be especially challenging for employers, especially ones that were not specific when discussed.
In general, an employment contract documents all the shared responsibilities and rights between an employer and a W-2 worker, 1099 contracted employee, or freelancer. There are standard items that should be in all employment contracts, as well as other variables that may apply.
A basic employment contract needs to include the employee’s full legal name, the position they are being hired for, their responsibilities, and their location and working hours. Whether the job is salaried or hourly, the compensation rate should be clearly stated, along with medical/dental benefits, time off, and life insurance, if applicable. An effective employment agreement should also cover employee stock options and retirement packages.
Other important items include if the employee is employed at-will. This means that the company may terminate the worker at any time without reason, and that the employee may also quit without reason. A process for resolving grievances should also be included, and it is common for these agreements to specify that disputes be resolved via arbitration.
The agreements may also have clauses for non-solicitation, non-disclosure, and non-compete. These can be very important, especially for employees that work in competitive industries and have valuable clients and confidential information. Non-solicitation agreements protect companies from having customers stolen by past employees. This is applicable to medical practices, hair salons, and many other lines of work.
Non-disclosures are designed to prevent employees from sharing sensitive information during and after employment. This applies to confidential details about the company and its clients. Non-competes prevent employees from going into competition with former employers for specified time periods and distances. In other words, should an employee that works for a computer consulting company quit, they may not open or work for a similar company within one year that is located 10 miles away.
Every state has different employment and labor laws, so drafting and enforcing an employment agreement may be difficult for a business owner. A disgruntled employee may decide to file a wrongful termination suit, and if the original employment agreement is lacking in any way, the employer may be vulnerable.
Employment agreements may be deemed invalid in court if they have incomplete information or are not worded clearly. If an employee begins working without a contract and signs it later, the contract may be termed as void, if its original terms do not correspond with the employee’s later duties. Other problems can arise if the agreement’s terms do not correspond with state laws. Federal laws, such as the Americans with Disabilities Act or the Family and Medical Leave Act should also be taken into consideration when drafting an employment agreement.
The knowledgeable employment lawyers at MacMain Leinhauser can be a valuable resource for creating employment contracts to best serve your company’s needs. For an initial consultation, call us at 484-318-7106 or complete an online form. Located in West Chester, Pennsylvania, we serve clients throughout Philadelphia and Chester County.