Understanding the Basics of Employment Agreements
Employment agreements are an integral part of any business, serving to establish a clear understanding between the employer and employee regarding their professional relationship. Formally documented with all relevant terms and conditions in writing, the agreement protects both the business and the employee by preventing misunderstandings about job expectations. Typically comprehensive, most employment agreements clearly define the scope of work, including specific duties, areas of responsibility and the authority of the employee on the job. In addition, they outline the structure of compensation to be provided, whether an hourly wage, salary, commission or other incentives , along with information on how benefits such as vacation or sick leave will be handled.
For both sides in the employment agreement, the termination cause or "severability" terms are important as well. Severability clauses establish the conditions under which the employer can terminate the employment of the individual, whether based on a breach of terms of the contract or external factors that may affect the company as a whole. Although some employment contracts list a specific period of employment, others specify that the employment is "at will," meaning that the employer can terminate the employee at any time without any reason given, unless otherwise stated by law.
The Function of an Employment Agreement Attorney
An employment agreement attorney plays a crucial role in the drafting, review and negotiation of employment contracts. One of their main responsibilities is to ensure that the agreements they work with comply with all relevant state and federal laws. Each state has its own employment laws, and the parameters of employment agreements can vary widely from one jurisdiction to another. An employment attorney who specializes in these agreements knows the laws and ensures that all agreements are compliant. They are also familiar with the Federal Labor Standards Act (FLSA), which governs overtime and minimum wage requirements. They can ensure that the agreement does not violate these provisions. Professional employment agreement attorneys also understand how to write enforceable non-compete clauses. Non-compete clauses are those that prevent an employee from working with a competing business for a certain time period after he or she leaves the company. Many courts will not uphold these clauses unless an employer is being explicit as to why a non-compete clause is necessary. The company must have a legitimate interest in keeping the employee from working with the competition based on intellectual property, trade secrets or other confidential information. A professional who works primarily in the area of employment agreements knows how to write enforceable clauses by ensuring that they are reasonably limited in both time and scope. Others with a vested interest in employment agreements should also have an attorney review the document. Potential new employees should consider having an attorney check the contract before signing to ensure there are no unfair clauses. Current employees and their unions might also be helped by having an attorney review an agreement. An employment agreement should be clear about a mutual understanding of compensation, benefits, job requirements and termination procedures for both parties. This reduces the risk of future issues.
Advantages to Hiring an Employment Agreement Attorney
A key benefit of hiring an attorney is that they can help you avoid future legal disputes. An employer who has a solid agreement in place will be able to refer back to the language in the agreement as a foundation for their decisions. Avoiding disputes is possible when an employer clearly lays out the terms of agreements with their employees, thereby protecting their own business interests. Having a professional draft your employment agreements also safeguards the company from the perception that employees are not being treated fairly. Lack of an employment agreement can contribute to misunderstandings and mistrust between the employer and employee. For instance, without an agreement you may find yourself in the position of having difficult conversations about pay or time off when an employee believes they are entitled to more. Additionally, when it becomes necessary to terminate an employee the absence of an employment agreement can make for an uncomfortable, protracted process.
Frequently Encountered Problems in Employment Agreements
Employment agreements often result in conflicts. As a business owner, both you and your employees can benefit from having an experienced attorney draft an employment contract for you. This can help to avoid problems in the future.
Below are a few examples of common issues and disputes in employment agreements:
Non-Compete Clauses _ It is not uncommon to have a non-compete clause somewhere in your employment agreement. This provision may prevent your employee from working for a competing company after their employment ends. In many cases, however, the employer is still able to force compliance with a non-compete clause after their employment has dropped. Under some circumstances, a court may rule that the non-compete clause is too broad and cannot be enforced.
Confidentiality Obligations _ There are often special clauses in employment agreements that require the employee to uphold certain confidentiality obligations and to protect your company’s private information. If someone breaks this confidentiality obligation while employed, it can result in a lawsuit. Even after a separation from employment, the breach may still result in litigation. An employment agreement can help to clarify the information that qualifies as confidential in order to avoid issues in court.
Breach of Contract _ There are a number of different ways that an employment agreement can be breached. For example, if an employee fails to acknowledge a termination of employment in writing, they may have breached the employment agreement. If they continue to work for another company and use documents from your business, that may also qualify as a breach. Whatever the reason, if the employment agreement had been drafted properly, it may make it easier to pursue compensation for that breach.
Choosing the Appropriate Attorney for Your Case
Selecting an Attorney for Your Employment Agreements and Policies
When considering an employment agreement attorney, there are a number of factors to consider. An experienced attorney should have a detailed knowledge of contract law, especially as applied in California, and should also be experienced and well-versed in the various areas of employment law that might come into play in your business, such as wage and hour laws, workplace safety, discrimination and harassment laws, and more. Your attorney should be able to provide you with a diverse set of options, including having the insight to help you craft agreements that work for your unique business.
The best way to get a good performance out of a new hire is to make expectations clear from the outset. If you’re bringing on a new employee, your employment agreement should not only include information about what the employee will receive from you, but also about what the employee is expected to contribute to your business.
Before hiring an attorney to create or revise your employment agreements and other policies and procedures, you should first research a few candidates, read client reviews, and then schedule interviews with the candidates you are considering hiring . You should be looking for an attorney who specializes in the area of needed legal services in order to effectively and efficiently resolve your issue. It may also help you to consider whether the attorney shares your goals and values. This can help forge a strong relationship.
To ascertain the attorney’s level of qualifications and knowledge in the particular practice area you require, ask the attorney about their experience, their approach to specific legal issues, and other relevant questions that arise in your case. Be sure to ask for references from previous clients. Look for attorneys who have an expertise and interest in the legal issue you need assistance with.
Your attorney should understand how the laws in California give your business certain rights and responsibilities, and be prepared to provide customized solutions to help your business execute those responsibilities. Having an effective employment agreement not only creates a baseline set of expectations for the work relationship, but also helps identify potential problems before they arise.
Financial Considerations and Attorney Remuneration
A common misconception is that hiring an attorney to draft your employment contracts will be extremely expensive. This is something that should not stop you from hiring an employment agreement attorney – there are many fee structures and payment options that fit any budget. Some attorneys charge by hourly rates while others charge a flat fee. You may have the option of paying the entire fee up front or make monthly payments. Your employment attorney may also offer a "preferred client" plan, where you receive a discount for signing multiple employment contracts or complying with your entire employment agreement assessment as outlined by the attorney.
Although it is tempting to look for the strongest employment contract language on your own, you should consider the cost of poor drafting. Many clients who attempt to do this themselves find that they have several unclear and ambiguous terms in their agreements, which leaves the firm with no choice but to hire outside counsel. It also makes it much more difficult and at times, impossible to cross reference terms and make sure that they are consistent throughout the agreement. When hiring an attorney, you should ask him or her about their preferred payment arrangements, negotiation of fees and what to expect when it comes to billing.
Illustrations and Success Stories
Consider the example of ABC Inc., a mid-sized marketing firm that was contracted to design a global advertising campaign for one of its long-standing clients. Shortly before the campaign was to launch, the key designer on the account, an employee of ABC, resigned and started his own company that is a direct competitor. The new company immediately underbid ABC on the project and was awarded the contract. ABC’s owner consulted with his employment agreement attorney who pointed out that ABC was being "topped" on the project, but that doesn’t mean ABC is completely out of luck. The attorney advised that the employee was breaking a non-compete clause that would be enforceable in court anyway. After a few letters from the attorney and the threat of a lawsuit if the designer kept pursuing the project, the designer and his associates backed off. The employment agreement, drafted by the attorney, saved ABC from losing the project and foiled the competition of the designer’s new company .
Another more involved example comes from a well-known food manufacturer who has been sued in small claims court multiple times after terminating employees without notice, as required by an employment contract. Three separate employees have taken the manufacturer to court over this. The manufacturer’s employment agreement attorney pointed out that the supplier has breached the contract and therefore is exposed to damages for these actions. In such a case, the judge is likely to side with the employee for two reasons. First, the manufacturer should have noticed the problem earlier and changed its ways. Secondly, such a penalty for breach is clearly unreasonable, and the courts don’t look kindly on such actions. Of course, the manufacturer’s insurance covers these costs, but clearly the expense could have been avoided through the use of an employment agreement.