Employment Agreement

 An agreement is made at the time of hiring that specifies the nature of the employer-employee relationship, including the amount of money that will be given to the employee in exchange for performing a certain amount of labor.

Most of the time, hiring personnel is a simple process. The majority of states consider employment to be "at will," meaning that you have the right to fire a worker at any moment for any reason or no reason. (Alternatively, your employee has the option to resign for any reason.) However, there are some situations when employment contracts are sensible.

The benefits come first. You may recruit and keep critical personnel by using an employment contract. Even while you can't make workers remain, a contract can guarantee that they'll give you a fair amount of notice—typically 60 to 90 days—before leaving.

In high-tech businesses, employment contracts are particularly important for protecting vital trade secrets. Employees may be prohibited from disclosing trade secrets, working for other businesses, or cold-calling clients by an employment contract. You must be careful when designing noncompete agreements since they might be challenging to uphold in court. Noncompete agreements will often only be upheld by courts if they are fair since it is anti-competitive to prevent individuals from making a living in their industry. Although you cannot forbid workers from ever working for a rival firm everywhere in the nation, you might be able to enforce a clause stating that they must not work for a rival company for two years within a 30-mile radius of your business or that they must not approach your clientele.

In order to prevent essential employees from leaving when you acquire or sell a firm, employment contracts are also helpful. A substantial severance payment may be forfeited if an employee leaves, so you can either reward them for staying or tell them they will receive a retention incentive.

Contracts also define each job's duties, pay, benefits, stock options, rights to any ideas and patents, expense accounts, and other details, making them more clear. If no party gives notice of termination, the contract will automatically renew on a specific day each year if it has an "evergreen" clause. Furthermore, an arbitration provision can guarantee that any employment-related disputes will be resolved through binding arbitration rather than in court, which can be costly and time-consuming.

Now for the negative. The "at will" relationship is altered by the employment agreement, which limits your authority to fire individuals who aren't doing well. Unless you're near the end of the contract term, you usually only agree to terminate "for reason," which leaves you up to the possibility of having the courts question whether your cause was sufficient.

Pay close attention to the termination clause while drafting an employment contract. You may wish to include a provision that states that if you terminate for any reason—such as committing a crime or acting in a way that is obviously harmful—certain benefits will not be granted. Some workers may agree to double-trigger conditions, which would allow them to leave their jobs "for good reason" (such as being transferred to another department) and still be eligible for severance pay.