Top 10 Must Have Terms in any Employment Contract
Whether you are an employee who just secured their dream job, or an employer who has made a key hire, there exist certain key terms and obligations that must specifically be set forth in any resulting employment contract to protect all parties’ interests and set the ground rules for the duration of the employment relationship and beyond. A well-drafted employment contract significantly lowers the potential for conflict down the line, increases employee morale and provides a means for redress should the employment relationship break down and eventually terminate.
Towards that lofty end, I have set down the Top 10 things an effective employment contract should include. By no means is this an exhaustive list, but is rather meant to provide a general framework from which the parties may commence negotiations.
Job responsibilities and information
Job title, a description of job duties and expectations, as well as the department with which the employee shall work should all be set forth. Equally important is providing clarity with respect to how the employee will be evaluated and to whom the employee will directly report.
Job compensation and benefits package
Clearly outline the employee’s compensation and benefits package, including the salary or hourly rate, specific information about performance and merit-based raises, bonuses and incentives, as well as detail the process under which each such benefit is obtained. Explain when medical benefits become effective, what plans are available and what percentage is covered by the employer, as well as provide information about other possible benefits including a 401(k) plan, equity options and other negotiated benefits.
Vacation, PTO and sick time
The employer’s policy for employee time off should be fully explained. At what rate does PTO, including sick and vacation, time accrue? What is the employer policy with respect to emergency, sick or unpaid leaves? Is flex-time permitted and if so, under what circumstances and approvals?
As a new hire, will an employee be considered an employee or an independent contractor? Once a designation has been made, cross-reference to the job duties and responsibilities section should be made to support such designation.
Period of employment and job schedule
Whether or not an employee is being hired for a set term or on an ongoing basis is an integral term. Key terms in this section include expected total weekly hours, daily hours of work, whether overtime hours are possible and if so, how they will be paid, and whether night and weekend work is expected, even if occasionally.
The Confidentiality Agreement
This section cannot be stressed enough and is the most litigated issue in most employment relationships. Therefore, it is imperative that not only do the parties agree to strict confidentiality of all of the employer’s intellectual property and trade secrets, such as client lists, but that the parties mutually detail what information is considered confidential so that there is no confusion should this issue ever be disputed.
In this age of Facebook, Twitter and Instagram, we exist in a culture of immediate gratification. That translates to an employee’s frequent use of the employer’s technology to access social media during working hours. The employer should clearly set forth what their policy is with respect to an employee’s use of social media during working hours, not only for use of the employer’s computer, but also for use of the employee’s cell phone and other on site technology.
Let’s face it, nearly all employment relationships end, hopefully on good terms but that is by no means a guarantee. Provide concise direction as to what notice period is required for either party to terminate the relationship, whether such notice must be in writing, and explain the employer’s policy with respect to severance, if any.
An employer’s brand is their lifeblood and should be protected at all costs. That translates into consideration of putting into place an outplacement plan should the employee and employer part ways. Explaining what types of assistance may be available to a terminated employee goes a long way in buying good faith in a potentially bad situation.
If the new hire is a key player in the employer’s organization, the parties may want to enter into a non-complete that is carefully tailored to the circumstances while providing the employee a means to earn a living should the parties decide to part ways. Overly broad non-competes are rarely enforced, and while Courts have wide discretion in narrowing an overly broad non-compete, the employer risks having it rejected in its entirety. Thus it is in the parties’ mutual best interest to carefully negotiate this section to account for all competing interests.
We at the Van De Water Law Firm, P.C. are well versed in all manner of employment contracts and are happy to answer any and all of your questions regarding employment contracts and all other employment issues at (631) 923-1314 or Chris@vdwlawfirm.com. You can also find more informative articles about the employment relationship by visiting our employment website.