Employment contracts are one of the first important agreements between employers and their employees. These agreements can outline and detail very important aspects of the job, which may come in handy later on. Especially for small businesses, employment contracts are often a great source of information for both parties involved.
1. Job Title and Description
This section of the contract will often keep the employee accountable. Giving a simple description of what the employee has been hired for, allows both parties to be fully aware of the expectations of the position.
2. Salary and Benefits
It is best to give an accurate description to the employee of how much they will be paid and when. Nowadays, there are many different ways to compensate employees, including equity in the company. There are often many circumstances surrounding the vesting of the equity, and these things are important to outline in the employment contract. As for benefits, it is also important to outline the different benefits (health insurance, vacation days, sick leave, etc.) in the contract, which allows both the employer and the employee to be fully aware of the benefit entitlement.
3. Term of Employment
Employees who are hired as “at will” employees will not require a length of time to be described in their contract. However, if you are hiring an employee for a specific period of time, make sure that the time is outlined in the contract. It may be also important to note the renewal process after the specified term ends.
4. Grounds for Termination
If this employee is an “at will” employee, they can be terminated for a multitude of reasons according to the “at will” doctrine followed in New York. However, if the employee is not an “at will” employee, the employment contract should describe what is considered “just cause” for termination purposes. This has two important consequences. First if that employee tries to bring a wrongful termination action against your company and you can show that they explicitly met one of the grounds for termination in their contract, most courts will dismiss the action. Secondly, at the beginning of the employment relationship, the employer has the ability to specifically say what the employee can and cannot do on the job.
5. Confidentiality Clause
If you want your employees to keep any trade secrets or other confidential information to themselves during and after their employment with your company, you should have them sign a confidentiality or non-disclosure agreement. These agreements can be included in an employment contract or signed as a separate document.
6. Assignment Agreement
If an employee invents something during their employment using your company’s resources, you may want to put into writing that your company has rights to that invention. An assignment agreement makes clear to both the employer and the employee that anything created with the company’s resources during the employment belongs to your company.
7. Non-compete Clause
These agreements are critical for employers who are involved with a skilled line of work. These agreements, depending on the restriction, usually do not allow an employee to work with a competitor during their employment and for a reasonable period of time after their employment ends. Even though they are widely unpopular with employees, New York courts have held that they are enforceable if they meet certain reasonable criteria. Similar to confidentiality agreements, these clauses may be included in the employment contract or signed as a separate document.
8. Dispute Resolution
Planning for the worst is often the best method to use. In the case of a disagreement with the employee, most companies include an arbitration clause in employment contracts, which prevent an employee from filing suit in a court without first going through binding arbitration. This is crucial to cutting down on legal fees for your company.
9. Choice of Law
In the event that an employment relationship does go south and you find yourself in court, a choice of law provision will allow you to decide what state’s laws will govern the contract. These provisions will allow you to know ahead of time, which law will govern the dispute, and ultimately predict the outcome.