Many companies have policies which govern what employees can expect from their employer as well as what the employer expects of its of employees. However, such policies usually do not create contractual obligations for either the employer or the employee. Where there is an interest in seeking the protections of a contractual commitment, an employer and employee may enter into a written contract which protects certain interests of one or both parties.
Non-Compete and Confidentiality Agreements
If a company wants to limit its employees’ competitive activity, it can enter into agreements with its employees that restrict the employees’ ability to accept competitive jobs with other employers. Such agreements can also contain provisions prohibiting an employee from soliciting the company’s clients, vendors, and other employees to leave the company or do business with a competing company. These agreements usually restrict employees both during their employment and for a limited time period thereafter, as well impose a geographic area where the restrictions will apply. Such contracts can also provide employers with additional protections for their confidential information and trade secrets, above those that may already be provided by law. It is important for employers to know that the laws relating to enforceability of such contracts can vary widely from state to state.
Agreements for Salespeople (Commission Agreements)
The amount of commissions owed to employees paid on a commission basis is often a subject of controversy. For this reason, it is a good idea to put a company’s commission arrangements in writing. Such contracts should clearly set forth the arrangements between the parties so that the employer does not incur unanticipated liability for commissions. Clear contractual language can help avoid disputes, including, for example, how a commission may be split with others, what commissions are due after termination of employment, and under what circumstances commissions can be offset, reduced, or forfeited.
Company executives usually want an employment contract to provide security in terms of compensation, length of employment, benefits, equity interests, and perks. At the same time, while a company wants to properly motivate an executive to perform well, the company also needs to maintain its flexibility in determining whether an executive’s continued employment is in the company’s best interests. Such contracts need to set forth in clear terms the parties’ intent as it relates to multiple scenarios that could occur during the executive’s employment to minimize the chance for disputes. Ultimately, a contract should address all the circumstances in which an executive’s employment may end and what the obligations of each party will be when and if that occurs.
Depending on the situation and a company’s business, many other agreements might make sense for a company to consider implementing. Examples of contracts that many companies use include arbitration agreements, work-for-hire agreements, incentive plan agreements, and severance agreements.