Employers often wonder if they should require all employees to sign an employee agreement at the time of hire. Unfortunately, there is no easy answer, as there are both advantages and disadvantages to signing on the dotted line.
A contract that specifies the terms of employment can help avoid disputes because both parties understand what is expected. Employee agreements can address a variety of issues, including benefits and compensation, job responsibilities, length of employment, nondisclosure, and covenants not to complete.
Employee agreements offer protection.
Contracts can be drafted to offer a number of legal protections. For instance, you can limit the employee’s ability to compete with your business upon leaving the company, impose confidentiality obligations to protect valuable trade secrets and other proprietary information, ensure ownership of the employee’s work product (i.e. inventions, artwork, and other intellectual property), and dictate how disputes will be resolved (mediation, arbitration, etc.).
Employee agreements limit flexibility.
An employment agreement generally limits an employer’s ability to terminate an employee at will by specifying the term of employment as well as the grounds for termination. Therefore, if the employer seeks to terminate the employee before the contract has expired, it may incur costs related to negotiating an early termination.
Employee agreements impose obligations on both sides.
While an employment agreement can impose valuable obligation on employees, employers have obligations too. For instance, all contracts impose a “covenant of good faith and fair dealing.” A breach of the duty to deal with employees fairly can serve as grounds for a lawsuit.
Employee agreements should be tailored to the circumstances.
Ultimately, whether or not you require an employee to sign a written contract often depends on the role of the employee with the company. Therefore, it can make sense to require some but not all employees to sign employment agreements. In any case, it is advisable to consult an experienced employment attorney to determine if the advantages outweigh any potential downsides.
If you have questions, please contact us
If you have any questions or if you would like to discuss the matter further, please contact me, Jorge R. de Armas or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
Supreme Court and Title VII: Implications for Reverse Discrimination
Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]
Special purpose acquisition companies (better known as SPACs) appear to be making a comeback. SPAC offerings for 2025 have already nearly surpassed last year’s totals, with additional transactions in the pipeline. SPACs last experienced a boom between 2020–2021, with approximately 600 U.S. companies raising a record $163 billion in 2021. Notable companies that went public […]
Short Form Merger: Streamlining the Process for Businesses
Merging two companies is a complex legal and business transaction. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process that involves important corporate governance considerations. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process. However, […]
Tariff Response Options for Small Businesses Facing Financial Distress
The Trump Administration’s new tariffs are having an oversized impact on small businesses, which already tend to operate on razor thin margins. Many businesses have been forced to raise prices, find new suppliers, lay off staff, and delay growth plans. For businesses facing even more dire financial circumstances, there are additional tariff response options, including […]
Common Causes of Partnership Disputes and How to Resolve Them
Business partnerships, much like marriages, function exceptionally well when partners are aligned but can become challenging when disagreements arise. Partnership disputes often stem from conflicts over business strategy, financial management, and unclear role definitions among partners. Understanding Business Partnership Conflicts Partnership conflicts place significant stress on businesses, making proactive measures essential. Partnerships should establish detailed […]
Businesses Are Facing Financial Headwinds—A Practical Guide
*** The original article was featured on Bloomberg Tax, April 28, 2025 — As a tax attorney who spends much of my time helping people and companies who have large, unresolved issues with the IRS or one or more state tax departments, it often occurs to me that the best service that I can provide […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
