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5 important clauses to include in an employment agreement

| Apr 27, 2020 | Business Law |

When you are starting your business, you may be your only employee. But once you are ready to hire an employee, you should have an attorney draft an employment agreement (or several different agreements for different types of employees) to clearly outline the employee’s responsibilities and the company’s expectations.

Critical clauses to include in the employment agreement include:

1. Details of the employment: Your agreement should include details about the role. It is critical to outline whether the employee is in an at-will position, the rate of compensation, and the employee’s expected work schedule.

2. Confidentiality or privacy clauses: Your employees should know what information your company considers sensitive, and how you wish to protect it. You can use clauses that limit an employee’s use of technology and social media. You should also consider a nondisclosure agreement.

3. Explanation of benefits: The agreement should outline benefits, including healthcare coverage, vacation time, and other leave policies.

4. Dispute resolution methods: Should a dispute between employer and employee arise, clearly outlined dispute resolution clauses allow the employer and employee to resolve the dispute quickly and effectively. Consider alternative dispute resolution such as mediation or arbitration.

5. Termination and resignation clauses: The agreement should include clauses defining termination with cause and without cause. It should also include the company’s discipline policy and both the employer and employee’s rights and remedies when employment ends.

Clauses that may not be necessary

Employers are often tempted to include clauses that ultimately are invalid or unnecessary. For instance, every agreement does not need to have a noncompetition clause. In some cases, including a noncompetition or nonsolicitation clause can expose your business to unnecessary litigation over an employee’s status or whether the clause applies to the employee. Consider the employee’s role, your business, and the purpose of including the clause.

Employers should also be cautious about including vague provisions that create ambiguity as to an employee’s rights and duties, which can fuel disputes. Carefully consider your company’s needs in drafting an employment agreement.

Building a better agreement

When you are ready to hire employees for your emerging or existing business, an employment agreement can ensure each party understands the rules of the road for the employment relationship. For guidance in creating an effective, enforceable agreement, you should consult an attorney experienced in Oregon employment laws and regulations.