Employment contracts are agreements between employers and employees that spell out the terms and conditions of employment. These written and signed documents are crucial to understanding the expectations and inner workings of a job, and serve as legal protection for both employee and employer.
"When I am representing a company, the contract often will set a precedent for numerous other individuals that are subsequently hired in similar positions," said Jeffrey Scolaro, attorney at Daley Mohan Groble P.C. and a Legal Services Link member. "The company will not likely know for years whether they have adequately protected their intellectual property, trade secrets, customer lists and business relationships."
For employees, the employment contract will indicate whether they are "at will" employees or classified as something else. That alone will dictate the manner in which the employee can be terminated and certain obligations to which they must adhere.
"By signing any employment agreement, the employee could also be obligating themselves to other restrictive terms regarding potential future commissions, vesting in company shares and many other compensation terms that are, of course, vitally important to any employee," Scolaro said.
Scolaro advised professionals to carefully review the following items in any employment contract before signing it:
1. Job description
Clarity of the job description prevents disgruntled employees from feeling overloaded or misled regarding what is expected of them. A company may desire a vague job description, but it is typically something most employees will want detailed.
If there is a term on the contract, it is vital to know the specifics of the term and, at the same time, the grounds for termination in advance of the contract's expiration.
3. Restrictive covenants
Businesses often attempt to protect themselves through restrictive covenants, including noncompete, nonsolicitation, and confidentiality or nondisclosure clauses. Each of these attempt to restrict an employee after (or during) their employment. Noncompete clauses are likely the most important, because they affect an employee's ability to work or start their own business in the industry for a period of time after their employment term ends.
This is likely the most critical aspect of any employment contract. Often times, compensation is more than just certain biweekly payments of salary. It can include complicated or vague bonus structures, certain profit-sharing plans that may or may not be tied to performance and commission structures.
When it comes to suggesting changes to an employment contract, there is no set etiquette. It could depend on the level of job in question, the relationship between the employer/employee and the part of the process in which they find themselves. If there is anything in your contract you are unsure or wary of, you may want to review it with an attorney.
"Each attorney will approach agreements differently and advise ways, but the important thing is following that advice and asking questions when you are confused by something," Scolaro said. "Failing to ask about something that does not appear clear can lead to misunderstandings and larger problems in the future."
Scolaro cautioned that the potential employer-employee relationship is in its infancy, and many potential employees do not want to appear aggressive or difficult by injecting their lawyer into the process immediately.
"However, typically, the more sophisticated the employee might be, such as executive-level employees, the expectation can often be that an attorney will negotiate on their behalf from the start," Scolaro said.