10 Considerations for Employment Contracts

Experienced employment law attorneys at Bodie, Attorneys at Law discuss considerations for employers as it pertains to employment contracts.

Employment contracts are a significant part of successful businesses, no matter how large or small the company. However, there are various types of employment agreements and it would be prudent to be aware of the differences. An employer and an employee may have a simple oral agreement regarding responsibilities, time and pay. However, solidifying those parameters in a written document can be very beneficial to you and your company.

Listed below are several types of employment agreements and clauses contained therein. An experienced employment law attorney can discuss the pros and cons of agreeing to various provisions or suggest additional terms that should be included.

  1. Confidentiality agreement. An employee confidentiality agreement is a contract in which the employee vows never to share information about the details of how the employer’s business operates. This includes procedures, tactics, data and prices the company charges for goods or services. More often than not, a confidentiality agreement lasts even after the employee is no longer with the company.
  2. Noncompetition agreement. A non-compete clause requires an employee to agree that for a specified period after termination, the employee will not become employed by a competitor or any company engaged in a similar type of business. The agreement can also state that the employee will not create a company that will compete with the employer’s business or solicit the employer’s customers. This type of agreement is generally limited to a particular geographical area and scope.
  3. Best efforts. This provision asks that the employee promise to work to the best of his or her ability and to be loyal to the employer. An employee will specifically agree to make suggestions and/or recommendations to the employer that can benefit the company.
  4. Ownership of intentions. In this provision, the employee agrees that any inventions or new designs he or she creates at work, or during a set period of time post-termination, becomes the employer’s legal intellectual property. Employees usually agree to assign inventions to the employer, cooperate with the employer in getting inventions patented and keeping information about the invention confidential.
  5. No additional compensation. The no additional compensation clause states that if the employee becomes an elected director or officer of the company/serves on a company managing committee, the employee will not be entitled to additional compensation for doing said work.
  6. Exclusive employment. In this provision, the employee agrees that as long as he or she works for the company, the employee will not work for anyone else in the same/similar type of business.
  7. No authority to contract. This makes it clear that the employer and employee have an employment relationship, not an agency relationship. The employee does not have the authority to enter into a contract or otherwise obligate the employer, unless the employer gives written consent. This clause is also referred to as an “agency” provision.
  8. Arbitration. This clause is found in many types of contracts. In this provision, the parties agree at the onset of the relationship that if they ever have a dispute about any aspect of the employment affiliation, they will submit to arbitration rather than seek resolution by a court of law.
  9. Choice of law. This provision states that if a dispute arises which results in a lawsuit, it will be governed by the laws of a particular state. This is significant as some states have laws that are viewed more or less favorable to employees than employers and vice versa.
  10. Termination. A standard part of any employment contract is the termination clause. It states that either party may terminate the employment contract for any reason by giving a certain amount of notice – most commonly, two weeks’ notice. This clause may also give the employer the right to terminate employment without notice if the employee violates terms outlined in the contract.

Although these ten factors can be helpful in drafting an employment agreement, it is important to consult with an attorney as it relates to your unique business. For more information regarding employment contracts and provisions, contact an experienced employment attorney at Bodie, Attorneys at Law today.