Employment Agreements - Do you need them?

One day over dinner, a friend and I were talking about his business. 

He had 3 three employees and he happened to mention that he was having problems with one of them.  The employee had been there well over a year, and while performance wasn't awful it also wasn't something you could characterize as good (or even average for that matter).  The culture of his business was starting to be affected (the other two employees couldn't stand to be in the same room as him) and clients would often say the sales process was great, but the installation tech on the other hand didn't seem to have any manners.  The work itself was good -- but all those other things that make a business great just didn't match up.

My first question was, "Why are you keeping him?"  He said, he thought he had no other choice.  He was certain that he would go to court if he let him go.  I replied by saying, "Don't you have a termination clause in your employment agreement?" His response was, "Employment agreements?"  "Oh boy!" I thought.

Employment Agreements in general not only protect you and your company, they also lay out expectations, so both you and your employees operate from the same position.  In addition to that, if your employee will have access to sensitive information such as your customer lists or methods of operation, you should consider having a written employment agreement before you hire the employee.


The employment agreement usually addresses many legal issues important in the employer-employee relationship including:

• Term of employment (is the employment for a fixed time period or is it for an indefinite time period?)
• Amount of compensation (salary / pay) and any included benefits such as automobile, vacation or health plan
• The duties, tasks and responsibilities expected of the employee
• Right to terminate the employee for cause if certain events occur (eg. theft)
• Right to terminate the employee without cause if certain events occur (eg. poor performance)
• Confidentiality of information to prevent employee from disclosing to others any confidential information after the employment ends
• Non-competition restrictions during and after employment with your company
• Non-solicitation restrictions to prevent the employee from attempting to solicit your customers/clients and other employees
• Clarification that the employer is the owner of the customer lists, contact information, customer records, business methods, copyrights, and patents (if any)
• Details of any office procedures and policies
• Any other issues specific to the employment situation

As long as your expectations are clear and well within the law, a termination would be possible (provided you give notice as per the contract).  In addition, this keeps any small business owner from being sued and they can move on to build the business they want to.

If you'd like more information on how to build employment agreements contact me at michelleb@elvatedhr.com

http://www.elevatedhr.com/