5 Points to Consider When Drafting an Employee Agreement

Should You Draft An Employee Agreement?

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.

Below are five of the most important legal considerations for New York and New Jersey employers:

• Employee agreements bring clarity.

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.

Are you still unsure whether you should draft an employee agreement? Contact me, Ramon Rivera, to discuss the matter.