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Essentials for Employment Contracts

When your business is ready to hire employees, it is essential to get legal help. An employment contract can be used to outline the legal relationship between your entity and your employees so there is no confusion regarding the rights and duties of the parties. Having an agreement in writing can help your business avoid misunderstandings and litigation in the future.

An employment contract should be drafted to meet your business’s specific needs and the job position covered in the agreement, but below are a few factors to consider:

  • The contract should set forth all information regarding how the employee will be paid, including salary, hourly wages, commissions and bonuses.
  • The hours the employee is expected to work should be defined, as well as whether the worker is expected to perform his or her job duties in the office or if he or she has the ability to work remotely.
  • If your business intends to grant equity in the company to attract employees, the terms should be detailed in the employee contract. This includes addressing topics such as the type of stock grant, exercise price, options for acceleration and vesting term.
  • Any benefits that will be provided to your employees should be covered in the agreement. Examples of benefits to address are 401k or pension programs, health insurance, vacation and sick leave, maternity or paternity leave and other similar perks of the job. The contract should specifically discuss any requirements that must be met before the benefits can be exercised.
  • You should have your employee sign a non-disclosure agreement (NDA). This could be a stand alone agreement, or it could be made a part of the employment contract. It is important to describe what must be kept confidential, as well as the consequences of violating the NDA provisions.
  • In most situations, you will want the contract to specify that the employment is “at will.” Otherwise, you should clearly set forth the term of employment. Additionally, the grounds for termination should be outlined and if compensation will be paid upon termination.
  • If your business is in a competitive industry, you may want to consider including a covenant not to compete for a certain period of time after the employee stops working for you. However, since the courts do not favor restraining an individual’s ability to work, you should obtain legal counsel in drafting these provisions and to determine if they are enforceable in your state. For example, California holds non-competition agreements to be unenforceable.

To ensure that your employment contract provides you with the most protection from liability available, contact Leslie S. Marell to schedule an appointment. Our office is located in Torrance, California, but we proudly serve businesses of all sizes from all over the country.

 

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