A written employment contract does not provide license to get around anti-discrimination laws and other types of employment regulations. Moreover, systematic deception and coercion may run afoul of an obligation to act with “good faith and fair dealing.” With this in mind, here are some of things businesses commonly include in these contracts:
- The terms of employment set forth the essential job responsibilities, compensation and benefits, and grounds for termination. One common difference with a written employment contract is that the basic terms also frequently set forth the length of employment—whether it’s 2 years, 4 years, or indefinitely. It may also ask the employee to affirm that they’ve read the company’s employee handbook.
- A non-compete agreement lays out the terms and limits on the employee’s ability to compete with the employer’s business. It’s designed to limit an employee’s ability to leverage a position with a direct competitor or to start their own company with the newly created connections they’ll have to the company’s suppliers and/or organizational clients. In exchange, the employer typically guarantees a certain length of employment.
- Similarly, a confidentiality/non-disclosure agreement states that the employee can’t use the company’s proprietary information for person gain, to damage the company, or for other stated reasons. It may also lay out a secrets clause in which the employee is prohibited from publicly disclosing certain information.
- The contract may also spell out who owns the work and intellectual property created in connection with the employment. In other words, if you come in after-hours and use the company’s infrastructure to produce something, you may not be able to claim the same type of ownership rights over the work as if you had produced at home with your own equipment.
- Apart from superseding employment laws, there are few things one can’t include in an employment contract. Put another way, if your company is thinking about offering any number of really cool or really weird job perks, an employment contract can help explain how these benefits fit into the larger employment terms and expectations.
Employment Agreements and New Hire Documentation
An employment agreement is kind of like an informal contract. It’s still a written agreement, but its primary goal is communication and transparency and has little practical application as a legal contract. For example, the most common employment agreement is simply to affirm that the job is at-will employment—which is already true of most jobs in most states. At-will employment means that—within existing laws and statutory protections—the employer can fire the employee at any time for any reason AND that the employee can quit at any time for any reason.
- As most employers already know, there are also a number of filing forms you’re supposed to create and maintain when first hiring someone. You’ll want to verify the employee’s eligibility with Form I-9.
- You’ll want to know how much of the employee’s pay to withhold for income taxes with Form W-4.
- Hiring an independent contractor instead? Use Form W-9 to document the contractor’s mailing address and taxpayer identification number.
You should also know that some states require new hire documentation. New York, for example, requires employers to report certain information when making a new hire. Be sure to check with your state for applicable rules and employee documentation.
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