You know you have reached a turning point in your business when you are officially (read: undeniably) at the point where you need employees. Cue scary music: Dun dun DUNNN! This point in the life of your business is both exhilarating and terrifying. While both of these feelings can be overwhelming, you cannot lose sight of the need to protect your business and employment contracts may be an appropriate way to do so.
The vast majority of employers do not use employment agreements and those that do may not use them for all of their employees. Employment agreements provide a number of benefits for the employers and employees but they are binding agreements that can limit an employer’s flexibility. Because of the limited flexibility, employment agreements are not for every business. Employment agreements can offer some degree of stability or certainty surrounding employment and can be used to attract in-demand, top talent to a business. By spelling out the expectations, responsibilities and benefits, employers alleviate some of the uncertainty that can often accompany the start of a new job. If you foresee needing employees for a defined period of time to work on a long-term project or some other limited venture, employment agreements can make those terms clear. By outlining and limiting a term of employment, there is a predetermined termination date that allows employers to reevaluate personnel needs. Trade secrets, client lists and other intellectual property can be protected in an employment agreement as well. Non-disclosure, non-compete and assignment of invention agreements are staples in most employment contracts. Another excellent reason to use employment agreement is when the onboarding or training process is costly in terms of resources (time, money, talent). You do not want to spend three months training an employee who turns around, resigns after six months on the job and takes the benefit of your training to another business. This is a waste of your company’s resources and you can discourage this type of behavior by including various punitive provisions in your employment contract.
Hopefully these considerations will help you evaluate whether an employment agreement is appropriate for your business’ personnel needs.