New York Employment Law Blog

Thursday, February 2, 2017

Employment Contracts 101

Does my business need to rely on employment contracts?

Business owners face a number of challenges, not the least of which is the potential for employee lawsuits. One way to minimize their legal liabilities is to put in place comprehensive employment agreements. In short, a well thought out agreement will clarify the rights and responsibilities of both employers and employees.

Obviously, employment contracts are not necessary for all employees, but rather executives, senior management, sales people and others who have a decision making role or an ownership interest. Let's take a look at some of the key elements of an employment agreement.

First, an employment agreement must describe the nature of the employee's role, clarify his or her responsibilities, and the term of employment, either permanent or temporary. Further, the agreement should specify compensation: salary, vacation pay and bonuses as well as employee benefits including health insurance and retirement plans, such as 401(k)s, or employee stock ownership plans(ESOPs), and stock options.

In addition, it is crucial to clarify if the employee is working "at will" and the grounds for termination. Because New York is at will state, an employee can be fired at any time, for any reason, or for no reason at all. Nonetheless, if the contract lacks a provision in this regard and the employee is fired for reasons not stated in the agreement, he or she may have grounds for a wrongful termination lawsuit.

Lastly, one of the key considerations for any business is protecting confidential business information, or trade secrets. Therefore, an employment contract must include provisions on confidentiality that prohibit an employee from sharing this information. In addition, non-compete provisions should specify that the employee will not accept a similar position with a business competitor for a set amount of time.

The Takeaway

In the end, a well designed employment agreement serves a variety of purposes. Beyond minimizing the risks of employee lawsuits, these contracts can help retain key employees, enable a business to terminate employees for poor performance, and protect the business from the misappropriation of intellectual property. By engaging the services of an experienced employment law attorney, your business can put in place these essential contracts.

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