Now that you have hired an employee (or employees) it is important to ensure diligence when bringing them into your organization. We will discuss employment agreements, and essential provisions to include, as well as other documents to have in place for new hires.
Each employment scenario is unique, and it is very likely that you may need to include more specific protections depending on the person and the position.
In general, some important things to include in these agreements are:
- At-Will Employment Clause: “At-Will Employment” refers to the idea that either party (employee or employer) may terminate the employment relationship at any time, and for any reason (or no reason at all). This may sound severe, but this allows for both employees and employers to possess freedom in their employment. In New York, it is implied that all employment relationships are at-will, but writing it down in the contract may help protect you if disputes arise down the road.
- Description of Employee Services: Although employment relationships in New York are considered “at-will”, an employee who is performing their job services up to par may still have a claim with the Department of Labor for wrongful termination. It is important to include a specific breakdown of performance expectations so that non-performing employees may be terminated without issue.
- Non-Compete Clause: Though not always enforced by a court, it is still important to build in a non-compete clauses that will protect you in the event your new employee leaves the company. Non-compete clauses prevent the employee from working for directly competing companies for a specified period of time.
- Non-Solicitation Clause: Similar to a non-compete clause, a non-solicitation clause specifies that employees may not solicit customers or clients of you company after the end of the employment. Include provisions that they may not take client lists or contact information away from the company.
- Non-Disparagement Clause: To bulk up the protection one step further, include a non-disparagement provision that prevents former employees from speaking negatively about your company; or in the event that they do, lay out remedies for addressing the disparagement.
- Confidential Information Clauses: The previous clauses address what happens at the end of an employment relationship, but it is equally as important to protect your company during the span of their employment. Mandate that all company information and trade secrets should be kept in the strictest confidence (the usual standard is – to protect company confidential information in the same way you would protect your own confidential information). Provide remedies for failure to maintain confidentiality.
Other documents to supplement employment agreements:
- Proprietary Information and Inventions Agreement: This is a document that specifically protects all information or inventions created by the employee, during the span of their employment with you.
- Restricted Stock Purchase Agreements / Stock Option Agreements: If you are granting equity to the new employee, make sure you have them sign the proper stock issuance document outlining the rights, obligations, and privileges of becoming a shareholder in the corporation. Often times, you may want to include provisions specifying that the company has the right to repurchase any unvested shares or specific vesting provisions that ensure the company benefits from the issuance of stock (to be discussed in further detail in later posts).
It is not pleasant to think of, but in the event that this employment relationship ends poorly, having these provisions in place will ensure that your company does not suffer. Protecting your clients, reputation, and intellectual property is non-negotiable when negotiating employment contracts.
This post is intended as an educational guide to the elements of an employment contract and should not be interpreted as legal advice or the formation of an attorney-client relationship.