Employment agreements protect both the employer and the employee during, and sometimes after, the employment arrangement. Employers can tailor these contracts to each individual hiring situation.
Although the exact language within the employment agreement will vary depending on the market, position and other relevant factors, there are certain provisions that are common in most employment contracts. Three examples include:
- Specialized compensation agreements. If part of the employment agreement involves compensation that is unique to an employee, it is wise to include language explaining these differences within the employment contract. This could include fringe benefits, bonuses or stock options.
- Time commitments. For certain positions, it is wise to include an expected length of employment. Examples would include key positions like executives within the business. Although a definite term provision offers protection from another employer taking the coveted employee, it can result in difficulties if the employee’s position is terminated. A recent publication by The National Law Review recommends addressing the use of severance packages in these situations.
- Restrictive covenants. In some situations, it is wise to include restrictive covenants with in the employment contract. These covenants can include non-compete agreements and confidentiality provisions. State law governs these covenants. Employers should carefully review these laws for any recent changes, as they often evolve.
A failure to carefully abide by applicable state law can result in an employment contract that would not survive a challenge. As such, it is wise for any employer to have an employment contract carefully reviewed by legal counsel. An attorney experienced in business transactions can offer guidance on the best way to achieve your goals. This step can help mitigate the risk of ineffective provisions within an employment contract.