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When is an employment contract a good idea?

It can prove to be a great relief when the hiring process draws to a close. That's because you, the employer, will no longer have to deal with corporate recruiters, piles of resumes, rounds of interviews and prolonged discussions about who would be the best fit in your organization.

Indeed, you are finally free to start focusing on the future and the only thing that may be standing in the way of taking this first step may be the execution of an employment contract.

It's important to understand that while the majority of employees in the U.S. do not execute employment contracts, there are scenarios in which it behooves your business to take this step.

This naturally begs the question as to when it is in the best interests of an employer to have a new hire sign an employment contract.

Before any meaningful discussion of this issue can occur, however, it's imperative to understand exactly what sort of terms an employer will want to consider including in the contract.

Standard employment contracts typically include terms clearly outlining the following:

  • Duties and expectations for the employee
  • Salary, benefits (insurance, retirement account, etc.) and vacation/sick policies
  • Length of employment (months, years, indefinite)
  • Grounds for termination
  • Dispute resolution forum (arbitration or mediation)
  • Nondisclosure agreements covering client lists, trade secrets, etc.
  • Assignment clauses concerning any patents secured by the employee during their time with the organization
  • Ownership agreements concerning any materials developed by the employee during their time with the organization  

In our next post on this subject, we'll explore situations in which it may or may not be advantageous for an employer to draft an employment contract.

Given the stakes involved in litigation, employers should strongly consider speaking with an experienced legal professional about reviewing, amending or preparing everything from employment contracts to employee handbooks.

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