Must-Have Employment Agreement Provisions
By Ross Zettler
An employment agreement is a written, binding contract between an employer and a prospective or current employee. When an employment agreement is properly drafted, it can be an effective tool for protecting a company’s resources. Most organizations require an employment contract as a condition of employment when the position is highly influential, involves sensitive trade secrets or client list information, or requires a significant amount of “front-end” cost such as extensive or specialized training.
When drafting an employment agreement, be sure to remember the following provisions:
1. Term of Employment: Specify when the employment period begins, and if it is for a definite or indefinite period of time.
2. Salary / Compensation: Specify the employee’s salary, whether it will be paid weekly or monthly. This provision may state the salary shall be payable at “regular payroll periods.”
3. Duties and Position: Describe what position the employee is being hired for, what the employee is being hired to do, what the expectations are, whether the duties may be modified at the Company’s discretion, and any other pertinent information relating to the job duties of the employee.
4. Full-time vs. Part-time: The Agreement must indicate whether the employee is devoting his or her services to the company on a part-time or full-time basis. If it is a full-time employment agreement, the company may want to force the employee to promise that during the term of the employment, the employee will devote full-time attention and energies to the business of the Company, and, during this employment, will not engage in any other business activity, regardless of whether such activity is pursued for profit, gain, or other pecuniary advantage.
5. Confidentiality: The Company will want the employee to agree that during or after the term of this employment, not to reveal confidential information, or trade secrets to any person, firm, corporation, or entity. This provision can provide for remedies if the employee violates this confidentiality provision, such as seeing an injunction or right to bring an action for damages. If confidentiality is important to the employer, the company will probably want to draft a separate Confidentiality and Non-Disclosure Agreement, which can serve as a separate agreement or as an addendum to the Employment Agreement.
6. Reimbursement: The Agreement should specify that the company shall reimburse the employee for reasonable business expenses upon receipt of an itemized account of expenditures.
7. Vacation, Disability, and Benefits: The Agreement should address the amount of vacation the employee will received, the Company’s disability policy, and the benefit package.
8. Termination of Employment: The Agreement should specify whether the company is allowed to terminate the employee “without cause” or only with “good cause.” Absent a termination provision, the Company will be allowed to terminate the employee for good cause, bad cause, or no cause at all, since the default scheme in the United States is for employees to work as “at-will” employees. However, a carefully drafted employment agreement by an employee’s counsel will likely include a termination provision specifying that the employee can only be terminated for good cause. Likewise, the company may want to seek assurance that the employee will not terminate the employment agreement absent good cause. This provision should also specify the amount of severance pay, if any, that will be awarded to the employee upon termination.
These are the most basic, key provisions that must be included in an employment agreement. Other boilerplate provisions relating to severability, assignment, and waiver are important to include as well. Above all, be careful to carefully draft these provisions so they are clear to both employee and employer alike.
Ross Zettler is an (employment agreement) Research Analyst for RealDealDocs.com. RealDealDocs is a division of Practice Technologies, Inc. the creators of SmartRules.com, which provides step by step guides to (local rules) and civil procedure for state courts & federal courts throughout the country.
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Just because your employer has a employee manual or employment agreement doesn’t mean the company’s got iron clad protection from their own screw-ups. Read my article on how to use the employee manual against your employer when things go south for you.
