From non-disclosure to non-compete agreements, independent contractor, at-will, fixed-term employment, and executive contracts. There are many different types of work-related agreements you and your contractors, consultants, and employees may enter during the course of your business operations. These agreements should be put in writing to make clear the terms and conditions of your work together.
Clarity protects your company’s interests. Poorly drafted agreements may give you a false sense of security. Most are construed against the drafting party, and ambiguities potentially expose your company to legal or financial losses. Verbal or informal agreements are no substitute for well drafted contracts. Crafting effective agreements should consider these five provisions.
Provisions To Include in Your Work Contracts
Other than terms required by applicable law, paying attention to these areas should improve the quality of your agreements. Depending on the nature of the position, more information may need to be included; however, the items listed are often impactful.
#1: Job Information
The agreement should include the job or project title, a description of the role, and some of the primary tasks the worker might be asked to perform. There should also be details about whether the role is part- or full-time or a contract role, along with the days and hours the other party can expect to work and where (in person, remote, etc.) and whether it’s an hourly, salaried, or exempt role, and also detail what remuneration (pay) for the role. Agreements with contractors should specify the terms of performance and essential constraints imposed on subs by general or master contracts.
#2: Benefits Provided
Employment agreements should clarify whether the worker is entitled to paid time off or sick leave and also any other benefits like health insurance. Additionally, if the employer contributes to a 401(k) program, provides employee discounts on their products or services, offers bonuses, or any other benefits, those should be clearly documented in its own provision in the agreement. Agreements with contractors should distinguish them from employees receiving benefits, as any confusion could lead to contractors being deemed employees.
#3: Non-Solicit, Non-Disclosure, and Non-Compete Clauses
Any agreement can include these clauses, but take note that non-compete agreements for lower skilled workers are becoming disfavored. Federal regulators are considering prohibiting them. Employees and contractors should confirm that they are not subject to another restrictive agreement they would violate by performing work for your company.
A non-compete clause may restrict a worker from leaving your company and going on to compete directly against it in a certain area for a specified amount of time. A non-solicitation agreement may limit a worker’s ability to steal your customers and make them your own if they set up a competing business. A confidentiality or non-disclosure agreement protects you from having a worker who becomes aware of trade secrets or other proprietary information from disseminating it. Including a clause that clarifies who owns work product is also important.
#4: Termination Clause
Agreements can describe situations in which a company may terminate the relationship, but be careful not to convert at-will employment by expressly agreeing to termination for cause. State whether separation from employment is handled differently depending on a period of probationary employment. Agreements should discuss terms that apply if a contractor or an employee initiates departure from the relationship.
#5: Preferred Dispute Resolution Methods
Disputes are inevitable in the lifetime of successful long-term operation. It is important that agreements detail preferred methods of dispute resolution. Should workers have a disagreement, businesses may opt for mediation or arbitration rather than litigation. This helps ensure matters are handled privately without public court filings.
Understanding Key Aspects of Contracts
A few key elements of any enforceable contract are offer, consideration, acceptance, and breach. The offer is a description of the work requested with all the terms and conditions of the work. The consideration is value exchanged for performance of the work. Acceptance, is the agreement to perform the work for the consideration offered. Breach is an act inconsistent with the agreed upon terms. Reducing these concepts to a signed writing seems simple, but it becomes difficult when other facets impacting the relationship are not contemplated or omitted from terms in the agreement.
Getting Help in Drafting or Enforcing Agreements and Their Terms
Having a signed agreement can clarify where you and those working for you stand on issues related to the work they perform for you. Written agreements anticipate and address potential conflicts so that issues are resolved more quickly and more cost-effectively. If you are planning to pay persons or entities for the performance of work, our firm can help review, draft, and enforce your written contracts. If you need help understanding your legal options, Anderson Jones, PLLC can help. Contact our law firm to speak with an attorney who is well-versed in handling a wide range of employment and business concerns.