Posted by: Robin Gronsky | March 21, 2013

Why Your Small Business Should Use Employment Agreements

If your business has people working for you, you should have a written agreement with them to define their responsibilities, their wages, and their benefits.  You can have one form of employment agreement for each employee or you can tailor the agreement to each employee’s personal situation.

If you don’t think your business needs a huge employment agreement with each employee, then use a more limited contract.  Think of whether each employee is exposed to company secrets or company customer lists or anything else that you don’t want your competitors to know.  If your employees have access to this information, you want them to sign a confidentiality agreement which can be part of a more comprehensive employment contract or a separate agreement.

If an employee is particularly valuable to you, you may not want them working for your competition.  To ensure that they cannot leave you with your company secrets and work for your competitors, you can have them sign a non-compete agreement.  These agreements must be carefully drawn or a judge will not allow you to enforce their terms.  See a lawyer, this is not a do-it-yourself project.

Does your business involve creating new things or do you welcome your employees doing things differently?  Unless your employment agreement explicitly states who owns your employees’ inventions, new processes, new business ideas, your employees will take their ideas and make money from them at your expense.  A paragraph in your employment agreement that states that any invention or new idea that an employee has belongs to your business gives you protection.

You may also be concerned that your employee not take on a second job that will so exhaust him/her that he/she will not put in his/her best efforts at your business.  To prevent your employees from moonlighting, you can add a clause in your employment agreement that they agree to not work for any other business while they work for you.  You will probably need to pay them very well for them to give up the right to earn extra money on what is normally their own time but it’s all a matter of negotiation.

You will also want to define the conditions under which an employee can be terminated.  It could be for cause or your employee could be an “at will” employee who can be fired for no reason.  As long as your employment agreement defines the conditions under which an employee can be fired, you are protected.

A written contract is not necessary for each employee but the more necessary an employee is to your business, the more your business needs a written employment contract.   Consult with your business lawyer to have one drafted for you that includes the protections that your business needs.  It is always cheaper to pay for a contract than to have an employee steal your company secrets, work for your competition or have a question about whether this employee can be legally terminated.

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