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The Importance of Employment Contracts

Every Employer should use Employment Contracts

#512attorney #lynchpintosucess Dec. 29, 2022

The importance of having a written employment contract that details the agreement between the employer and an employee cannot be overstated. Employment agreements provide a written account of the terms of the relationship and give both parties a clear understanding of their responsibilities and obligations during employment.

Terms of an Employment Contract

The terms and conditions of employment agreements usually contain the following:

  • Identification: The parties to the contract must be identified. 

  • Effective date: The date both parties signed the contract.

  • Duration of employment: The period of time when the contract remains in effect.

  • Compensation and benefits: Details regarding compensation, pay dates, and benefits provided by the company.

  • Terms of employment: The employee must agree to devote their efforts to the company and not work for another organization,

  • Responsibilities: A description of the employee's duties, obligations, and responsibilities.

  • The extent of services: The days and times when the employee is expected to be at work.

  • Company ownership: The employee's work products are the property of your business.

  • Trade secret protection: The employee will not share the organization's trade secrets or confidential information.

  • Grounds for termination: The circumstances that must exist for either party to terminate employment.

  • Methods for dispute resolution. The process by which both parties agree to seek resolution to a dispute.

  • Applicable law: The state in which the employment contract is effective.

When Do Employers Need an Employment Contract?

Companies often implement employment contracts for their top employees, executives, managers, and key professionals. This tier of essential members of the organization are those who have access to sensitive and confidential information about the inner workings of the company. Hourly employees generally do not have written contracts because the terms of their employment and company policies and procedures are outlined in the company handbook. 

How an Attorney Can Assist You with Your Company’s Employment Contract

Employers who draft employment contracts are wise to retain the services of a labor and employment attorney. An experienced attorney can review the language contained in the agreement before either party has signed, assist with contract negotiations, assess the validity of the stipulations, review for enforceability, and establish the terms for contract renewal. Having a lawyer review the document will help protect you and your company.

·      Keeping Up with Employment Law

Employment law is constantly changing. Labor and employment attorneys keep abreast of new legislation and update their client’s employment contracts accordingly. 

·      Duty of Good Faith

When both parties sign an employment contract, the employee and employer are considered to be in a "covenant of good faith and fair dealing." This means that both parties are obligated to abide by the terms of the agreement. When either party fails to deliver their contractual obligations, this may be considered a contract violation and a breach of the duty to act in good faith.

·      Breach of Contract

A contract is breached when one of the actions or inactions of one of the parties to the agreement has violated the terms of the legally binding document. For example, if the non-compete agreement states that the employee must abide by a non-compete clause and accepts a position at a competing organization, their actions would be equivalent to a breach of the employment contract. A violation of the contract could lead to litigation and the need for assistance from an experienced labor and employment attorney. 

·      Invalid Terms

An experienced labor and employment attorney can also review your organization’s employment contract to ensure that you have not used invalid terms that are not legitimate in a court of law. In their review of the agreement, your attorney can ensure that you do not include inappropriate stipulations contrary to state laws. The use of invalid terminology in your employment contract could be grounds to invalidate the entire agreement and lead to issues regarding enforceability.


·      Enforceability in the Courts

A labor and employment attorney can include the necessary language to ensure that your company's employment contract is enforceable by the courts. Including invalid or illegal verbiage could result in a court ruling to void the warranty. 

·      Contract Expiration or Termination

Contract Expiration:

When the employment contract is scheduled to expire, the parties may choose to:

  • Renew the warranty on the same terms

  • Renegotiate and enter into a new contract agreement

  • Allow the contract to conclude

If the parties choose not to renew, employers will want to ensure the return of all company equipment. If the parties decide to renew or extend the employment agreement, it can be by consent (continuing to perform under the contract) or by a new agreement between the parties.

Contract Termination:

If the contract was terminated, the employer should demand the return of all company equipment and may seek to recover relocation bonuses, sign-on bonuses, and/ or vacation or PTO pay.

Restrictive Covenants in Employment Contracts

Restrictive covenants are clauses that restrict the actions of one of the parties, and labor and employment lawyers often include restrictive clauses in their client’s employment contracts. These covenants protect the employer from the actions of an employee and prevent the employee from doing something that would cause damages to the employer during or after the contract term. Restrictive covenants are generally designed to protect the employer's business, employees, and clients. 

·      Non-Compete Agreement

Non-compete agreements restrict employees from competing with the employer during the employment contract term and for some time after the employee has left the organization. These agreements include a specific geographical area and a period within which the employee cannot become a competitor or an employee of a competing business. Non-compete agreements must be carefully worded to ensure they can be upheld by a court of law. Agreements that contain stipulations that cover too broad an area, or a limited time frame, can result in the court disallowing the contract because it violates state laws.

·      Non-Solicitation Agreement

Businesses often use non-solicitation agreements for salespeople or customer service employees. A non-solicitation agreement is a contractual agreement that stops former employees from inducing current employees away from the company. These agreements also prevent former employees from taking steps to lure customers away from the company.

·      Non – Disclosure Agreement

A non-disclosure agreement, also called a confidentiality agreement, is an agreement in which the employee agrees to keep private company information confidential. 

The Help of a Lawyer in Employment Contract Legal Issues

Employers who want to prepare an employment contract for an employee should consult with an attorney to help them draft or review the agreement. State laws are constantly changing, and each business situation is unique. If you need assistance drafting your employment agreement or believe your agreement has been violated, speak with an employment lawyer to determine your legal options. Our labor and employment lawyers at the Lynch Law Firm will review the contract and discuss the best way to proceed.  

Contact the Lynch Law Firm to Schedule a Free Consultation Now

Labor and employment matters arise in all types of businesses and industries. The Lynch Law Firm's team of attorneys is equipped with the resources, experience, and knowledge to help you resolve your legal matter. In addition to representing individuals and businesses in various labor and employment issues, our attorneys can also assist you in developing employment contracts, employee handbooks, performance evaluation materials, and drafting legal agreements to address issues that include non-disclosure, non-competition, severance, and separation. 

The Lynch Law Firm's Clients Include:

  • Individuals

  • Limited Liability Companies

  • Corporations

  • Limited partnerships

  • Sole proprietorships

  • Family businesses

  • Investors

  • Beneficiaries

  • Vendors

  • Suppliers

  • Consultants

  • Professionals

  • Government Entities

If you are an employer working to resolve a labor and employment dispute, protect yourself, your employees, and your business by contacting us at the Lynch Law Firm. Our lawyers can help you navigate the complexities of your legal dispute from inception to resolution. If you have questions about a legal matter or are involved in a labor or employment dispute, contact us for help now. Email us or call 512 298 2346.