Business owners often believe that having employees sign an employment contract is a beneficial way to conduct business. While there are a number of ways an employment contract will protect a company, it can also offer benefits for the employee. As a business owner, determining whether to use an employment contract and what the contract should entail can be challenging. If you are thinking about creating an employment contract, consider consulting a legal professional like The Jordan Law Firm in Texas.
Before weighing the pros and cons of employment contracts, consider what can be included in the contract. Aside from describing the employee’s duties and the employer’s obligations in response to performance of these duties, an employment contract can address a number of other issues. An employment contract can set a duration for a job in cases when employment is not considered to be indefinite. The contract can clarify what benefits an employee will receive. Benefits can include paid vacation time, health insurance, paid time off for injuries and disabilities, and various other perks of the employee-employer relationship.
The contract will outline what is considered grounds for termination, and will specify any limitations on the employee’s ability to work elsewhere once they leave the company. There will be information concerning ownership of anything the employee creates or develops while employed by the company, and it will offer some sort of protection for knowledge that is unique to a company (often called trade secrets). Finally, the contract will include information about how conflicts will be resolved.
Employment contracts are often presented to an employee in the form of an employee handbook. While employment contracts are designed to protect the employer, having the information clarified at the beginning of the employment relationship is beneficial to the employee. Before approaching a legal professional about the development of your employment contract, consider the following advantages and disadvantages.
Advantages of Contracts
Employment contracts control an employee’s ability to leave your company. If you have found a valuable employee that you want to hang onto, having an employment contract will help you maintain your relationship with them without risk of losing them to a higher paying competitor. Presenting an employee with a contract that includes a time frame in which he will work for you encourages him to stay on your team for a set period of time. Keep in mind, this will not force an employee to stay, but it can make it complicated for them to leave if they are under contract.
Employment contracts can be used as a tool to entice valuable employees to work for you. The contract can offer job security which may be enough to bring a talented employee into your business.
If your employees have access to confidential information, you need to make sure that information is protected. Inserting a confidentiality clause into an employment agreement holds employees responsible for their knowledge and it prevents them from using the information for personal gain.
The contract gives business owners more control over his employees. If there are clear expectations for an employee, and the inability to meet those expectations is listed as grounds for termination, an employer will have an easier time firing a problem employee.
Disadvantages of Contracts
There are reasons why you may choose not to use an employment contract. The contract binds both you and your employee, so as a business owner, your flexibility will have limits. If you develop a contract and realize a few months or years down the road it is not working, you will need to renegotiate the contract. This puts the employer at a disadvantage.
An example of this inflexibility would be signing an employment contract with an employee for the duration of two years. If the economy changes and you find your business in peril after a year, you cannot just let the employee go. If you did, you would be in breach of the contract. The same is true if the contract makes promises you are no longer able to provide based on financial difficulty. Reducing paid vacation time from four weeks to two in order to trim the budget would not be permitted under an employment contract that includes set vacation benefits.
Your only option for making these changes, should you choose to use an employment contract, is to renegotiate the contract. This is possible, but it can be expensive and time-consuming. While employment contracts may be beneficial to business owners, it is important to consider both the pros and cons of using them. In order to determine what is right for you and your business, speak with an experienced legal professional like The Jordan Law Firm in Texas.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.
