Employment Contracts and What Should be IncludedMay 19, 2015
5 important sections that should be built-in your employment contracts.
An employment contract between your business and its employees can be extremely important, and all businesses should make sure that they have a legally enforceable contract for certain of its prospective employees prepared prior to the hire date. Often times, employment contracts may not be necessary, although a company should still have in place sufficient confidentiality, non-competition or non-solicitation agreements to protect its valuable trade secrets, confidential and proprietary information. However, when an employment contract is used, such as for a sales representative or key executive, a contract helps prevent needless and costly disputes and, most importantly, litigation which may form issues or potential disputes in the workplace. Employment contracts can also serve as important tools to help protect your business from losing its business interests, clients or good will. However, it is important to work with an attorney to create a sound agreement so that it provides adequate protections for your business and clearly expresses the terms of the employment relationship. The following are some of the most important provisions that every contract should include.
1. Term and Termination
Each employment contract should specify whether the employment relationship is at-will (otherwise without any specific term and terminable at-will), or for a specific term, such as one or two years, and what happens at the end of such term. If an employment contract has no term, or if you have no employment contract, then the employment relationship is considered “at-will.” In addition, if there is a term, the contract should express whether the contract can be terminated with or without cause, and specifically identify what occurrences justify termination with cause.
The employee’s compensation, including any salary or hourly pay, commissions, bonus policies or benefits should be outlined in the contract. This should include any prerequisites or milestones that must be met before commissions, bonuses and the like are due. Written contracts also help set forth terms as to when such items will be paid by the company, and under what circumstances or conditions. A contract can also outline what expenses are reimbursable, such a travel related expenses or other costs incurred for business development, networking, or social events.
3. Holidays, Sick Days and Vacation Days
The contract should also mention the number of vacation days that a person earns per year, and how they can go about taking those vacation days. The same is true of the sick days they accrue. The contract may also include a list of the holidays the employees get off each calendar year.
4. Confidentiality and Non-Disclosure
A confidentiality or non-disclosure agreement could be a part of the employment contract as well, or it can be a separate agreement when, for example, no employment contract is in place. These agreements will provide that the employee will not share private, confidential and trade secret information of your business or how the company conducts its unique business, and that they will keep any secret processes, client names or lists and the like private and confidential. The agreement should also include limits on how long the agreement will be in effect and how the information can and cannot be used. Importantly, the agreement should also state how a breach of the agreement will be handled, and under what limited circumstances or conditions the information may be disclosed to another individual or entity.
5. Non-competition and Non-solicitation
Some businesses and employers can benefit from non-compete or non-competition agreements, which can help a business protect its business interests and its goodwill. For instance, a company may spend considerable time and resources to train its new employees, and divulge trade secrets and important information about the business which it does not want to all into the hands of a competitor. However, in order to be considered valid, a non-compete or non-competition agreement, the agreement must be supported by valid consideration, protect only a legitimate business interest of the employer, and be reasonable in time, geographic area and scope. In other words, the employee must receive something of value in return, the company can only protect its real and actual business interests through the agreement, and the agreement cannot be overbroad. Reasonableness is key. However, courts generally disapprove of these types of agreements because of an employee’s general right to work and earn a living. Additionally, non-solicitation provisions are used to protect against an employee’s ability to take your clients or customers, or attempt to hire away your other employees. Both can be very powerful tools to protect your business, but it is important an attorney adequately reviews and prepares the agreement so that it can later be enforced.
There are many more things that can be included in an employment contract, at Marshall Socarrras Grant, P.L. we can not only create your employment contracts, but we can provide legal guidance on a breach of contract issue to ensure your best interests are protected. You should always consult an experienced business lawyer or employment lawyer to ensure you have all of the provisions needed for your company, and that all of your contracts, whether existing or new are enforceable under Florida Law. Contact us today for a free consultation.