When hiring a new employee, an employer should always use either an employment contract or employee offer of employment letter, to set forth the terms of the employment relationship. In addition, depending on the nature of the company or the business, additional contracts or agreements may be necessary to address a specific aspect of the employment relationship (e.g., confidentiality, trade secret protection, or proprietary rights assignment).
Three Rules Of Thumb
First, always present a job offer in writing. Second, make sure any and all employment contracts are signed BEFORE employment begins. Although employment contracts can be instituted for existing employees under certain circumstances, for the contract to be valid some form of "consideration" must accompany the signing of the agreement, such as a pay raise, promotion, bonus, or additional benefit such as health insurance, etc. Third, have your employment contracts reviewed and updated at least on an annual basis because employment laws change frequently as does the nature of the employment relationship.
Basic Terms Included In Employment Contracts
In general, the basic employment agreement, or employee offer of employment letter, should set forth the following:
- the job title and job description;
- the term of employment, at-will nature of the employment, and/or automatic renewal at certain time periods;
- the work week and/or hours;
- wages and list of benefits; and
- any special requirements or conditions (e.g. confidentiality, invention assignment).
A properly drafted clear and concise employment contract will benefit both the employer and the employee and can limit the risk of, and costs associated with, litigation resulting from oral promises.
Some employers have also found it helpful to include terms on how employment disputes are to be resolved. Some contracts require that employees submit disputes to arbitration rather than to a court. To implement this type of strategy effectively, however, certain rules may need to be followed as different states impose different regulation on pre-dispute arbitration clauses and agreements.
Contracts Cannot Waive Certain Employee Rights
The one thing a contract cannot do is waive certain rights granted to an employee under either federal or state law. For example, if state law requires the payment of overtime, an employee cannot waive his rights to that overtime by signing an agreement. Even if an employment contract has been signed, the employer is still required to conform to most of the state and federal laws regulating: (1) whether overtime must be paid; (2) when and how wages are to be paid; (3) discrimination and sexual harassment; (4) accommodations for disabilities; (5) workplace safety standards; (6) medical and family leave time to employees faced with an emergency; (7) certain employee benefits for workers injured on the job; and (8) the payment of unemployment compensation.
Do I Need A Lawyer?
Although you are not by any means required to use a lawyer to draft an employment contract, or have one reviewed, it is a good idea. The laws change rapidly and the forms found at the nearby stationary store often contain invalid, and sometimes illegal, clauses that should not be used. If a lawyer is just too expensive, then consider hiring a lawyer to review the contract, or employee offer letter you have drafted or received.