Employee Contracts – Everything You Need in These Essential Agreements

Many employers use contracts with employees to protect their business interests and their trade secrets. Yet, more than that is at stake with these agreements. Employee contracts also protect the value of your business if you want to sell it in the future.

Podcast Time Index For “The Employment Agreement”

• 00:27 – The Employment Agreement
• 01:05 – What is an Employment Agreement
• 01:41 – Advantages
• 02:18 – Disadvantages
• 03:02 – Get Legal Assistance
• 03:28 – Why you need Employee Agreements
• 05:16 – What is in an Employment Agreement
• 12:31 – Protection
• 14:18 – Wrap Up

Everyone’s in Agreement

Often called an employee agreement, an employment contract is a formal declaration that details the relationship between employers and employees. Typically, employers execute the agreements for a period of time such as one to five years, or they make the agreement’s lifespan indefinite.

Advantageously, the employee contract helps you control employee actions during their tenure with your company because the documents clarify employee roles, responsibilities, and duties. You can also use employee agreements to enforce confidentiality, to prevent high turnover, to prevent competition, and to protect intellectual property.

Yet, you must remember that employee agreements legally bind business owners, too. If you agree to certain bonuses, revenue sharing, or compensation plans, then you must be prepared to uphold your side of the bargain.

What is Included in Employee Contracts?

So just what should you include in employee contracts? What provisions do you need to protect your business from potential harm? What do you need to clarify when employees begin work for you?

Here are key items I recommend including in your agreements with your employees:

1. 1. Type of employment (full or part-time)
   2. Term of employment (if applicable)
   3. Business hours and amount of work hours expected each week
   4. Job title, duties, and responsibilities
   5. Work product expected
   6. The extent of service expected
   7. Type of compensation (W-2, 1099)
   8. Amount of compensation (hourly wages, salary, revenue sharing, performance bonuses, etc.)
   9. Benefits offered (medical insurance, life insurance, disability insurance, etc.)
   10. Fringe benefits offered (time-off, holidays, etc.)
   11. Business expense reimbursements
   12. Grounds for termination
   13. Non-compete agreements
   14. Non-solicit agreements
   15. Confidentiality agreements
   16. Industry-specific regulatory agreements
   17. Laws applicable to general employment or employment within a specific industry

Obviously, you want to contact your business advisors and attorney as you draft and implement employee agreements to make sure your interests are protected. Depending on your unique situation, you may need to add more provisions to your employment agreements or include fewer provisions.

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How do Employee Contracts Protect the Value of Your Business?

Now, just because you have employment contracts doesn’t mean that employees are always going to abide by them. Yet, employee contracts do tend to protect you if a conflict arises and ends in litigation or mediation.

Employee contracts also protect one other thing…the value of your business. If you are hoping to sell your business at some point in the future, the last thing the buyer wants to do is lose all of your all-star employees the second he purchases your company. The buyer will want key employees to stay for cohesion and continuity. Therefore, you want your employee contracts in place, whether you plan to sell your company tomorrow or 10 years down the road.