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Why an Employment Agreement Is Crucial

In an ideal world, employment relationships would be non-contentious. In reality, what began as an amicable arrangement all too often devolves into disagreements and disputes.

The best way to protect yourself from potential future conflicts is to enter into an employment agreement at the time of hiring. Whether you’re hiring contractors, part-time workers, or full-time employees, employment agreements serve to define the expectations and obligations of both parties in the employment relationship. From growing companies to established corporations, every work environment is different, and your employment agreements should reflect the needs of your unique business.

While an employment agreement is not a one-size-fits-all document, every agreement should be directed at defining the relationship and protecting against future liability.

Defining Expectations

Surprises in your employee relationships can throw your business off course. Employment agreements are designed to prevent unforeseen bumps in the road, and establish employment conditions that are stable and predictable.

Most agreements will include some, if not all, of the following terms.

Length of Employment. Some employees are hired for a set term, be it 6 months or 5 years. In other cases, employment is “at will,” meaning that employment is indefinite. The employment agreement should clearly define the nature of the employment arrangement.

  • Termination. The agreement should specify when and how the employee can be terminated. With at will employees, termination can be at any time and for any reason. For other employees, the agreement will likely include a notice period for termination, as well as the permissible termination grounds (typically, “good cause”).
  • Compensation. The agreement should clearly state the amount of the employee’s compensation, along with the payment procedure.
  • Noncompete and Nondisclosure. Some agreements include provisions preventing employees from doing similar work for a set time after termination. They also often prohibit employees from disclosing sensitive or confidential company information.
  • Dispute resolution. The employment agreement is your chance to proactively decide how future disputes will be handled in the event that they arise, be it in court or through alternative dispute resolution, such as arbitration or mediation.

Managing Risk and Liability

Dealing with employment complaints is one of the least pleasant aspects of running a business. While it may not be possible to avoid all potential conflicts, a well-crafted employment agreement can eliminate many of the risks associated with the breakdown of employment relationships.

By defining the expectations and grounds for termination at the outset of the relationship, you remove the guesswork that can accompany terminations when no such agreement is in place. Complying with the agreement’s termination procedures will help shield you from liability for wrongful termination claims. The same goes for claims related to the scope of the employment – putting expectations in writing before your employee starts will minimize later confusion.

When it comes to running your company, any tools that can minimize the likelihood of future litigation are good business practice, and employment agreements are no exception.

Legal Guidance in Building Your Business

At The Gouchev Law Firm in New York, we work with businesses of all sizes, including start-ups and franchise businesses, across New York City and New Jersey, in meeting all types of transactional needs. Call us at (212) 537-9209 or schedule a free strategy session today to see what The Gouchev Law Firm can do for your business.

Why an Employment Agreement Is Crucial

In an ideal world, employment relationships would be non-contentious. In reality, what began as an amicable arrangement all too often devolves into disagreements and disputes. The best way to protect yourself from potential future conflicts is to enter into an...

read more

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