Additional of the advantages of an employment agreement include that employers are able to hang on to their employees through clauses that require an employee to meet certain requirements to leave the company. Further, an employer can protect trade secrets through non-disclosure agreements and covenants not to compete. Employers can also attract talent because the employment agreement provides employment security to the employee. Finally, an employer may have an easier time firing difficult employees because the standards for employment for the employee are laid out in the agreement.
However, an employment agreement may also force an employer to continue employing a lackluster employee who meets the requirements for employment but does not go the extra mile. An employment agreement also means that the employer and not just the employee must adhere to the terms, opening the employer up to litigation by the employee for breach of contract. Finally, when a business enters into an employment agreement with an employee the business is required to adhere to the covenant of good faith and fair dealing.
Despite the drawbacks of an employment agreement, it is still in a company’s best interest to utilize employee agreements in order to define the employer-employee relationship, especially with employees that the company thinks will be key components to the business. Any employment agreement that you create should include some basic terms. First, the contract should define the duties and responsibilities of both the employer and employee. The contract should also define the salary for the employee, including how bonuses and reductions in pay may be instituted. Additionally, the employment agreement should include the term of employment if there is one and any benefits offered by the company to the employee, such as health insurance, life insurance, disability insurance, retirement packages, vacation and sick day policies. The agreement should also state whether benefits are available to an employee’s spouse and children. The agreement should also include the grounds for termination of the employee, as well as the criteria an employee must adhere to in order to leave the company.
Additionally, an employer will want to include covenants not to compete, non-disclosure agreements, non-solicitation agreements, intellectual property ownership clauses, and assignment of intellectual property to the company clauses in the employment agreement. The non-disclosure agreements should include definitions of what constitutes confidential information, what constitutes a trade secret, and whether a client list is considered confidential information. The intellectual property ownership clause should include a statement that all intellectual property created by the employee during the course of their employment belongs to the company and that the employee must assign ownership of the intellectual property, including patents, to the employer.
Other terms that should be included in the contract include dispute resolution clauses, disability and death clauses that define what happens if an employee becomes disabled or passes away, collection of attorney’s fees for prevailing party in a dispute, representations and warranties by the employee that the information provided in their resume and to the company is correct and complete, and a clause stating that the contract is the entire agreement, which prevents either party from claiming other terms should be included based on verbal or written communications prior to or subsequent to the hiring of the employee.
If you are considering whether to incorporate employee agreements into your business strategy or if you would like to have an employment agreement drafted you should consult with your legal counsel for further guidance.
Please be advised that any information provided herein is not intended as legal advice. Further, all information provided is intended only for those residing in the State of Texas or those seeking legal help within the State of Texas.
For more information regarding employment agreements please refer to the following articles:
- Huebsch, Russell, “Why Use an Employment Contract?,” Chron, http://smallbusiness.chron.com/use-employment-contract-2556.html.
- “Pros and Cons of Written Employee Contracts,” FindLaw, http://smallbusiness.findlaw.com/employment-law-and-human-resources/pros-and-cons-of-written-employee-contracts.html.
- Harroch, Richard, “Negotiating Employment Agreements: Checklist of 14 Key Issues,” November 11, 2013, Forbes, https://www.forbes.com/sites/allbusiness/2013/11/11/negotiating-employment-agreements-checklist-of-14-key-issues/#6388719e24c6.
- Nacol, Mark A., “Why Texas Employment Agreements Are Critical,” The Nacol Law Firm, PC, http://www.nacollawfirmblog.com/employment/texas-employment-agreements.