Well-Constructed Employee Contracts Are Essential
Effective contracts between employers and employees can significantly improve a business’s success and help to avoid damaging litigation.
—Dan Fredenberg, Esq.
Imagine if you rightfully terminated an employee and that person turned around and sued you. Your success in the ensuing trial would depend almost entirely on the quality and characteristics of the contract that you signed with that person when you hired him or her.
If the contract was weak and did not cover all reasonably foreseeable circumstances, you could be in for a serious and expensive challenge in court. Irrespective of the veracity of the ex-employee’s claims, if specific circumstances are not addressed in the contract, the court may decide in the employee’s favor and you will pay a penalty for injury to that person.
“I can’t tell you how many times we have had clients who used strong contracts and were spared significant lost time and money in litigation,” noted Kevin Perlberg, CFP®, and Managing Partner of Blackhawk Capital Partners. “I know the time and money were significant because we’ve also had clients who were careless with their contracts and ended up losing in court.”
Necessary Standard Clauses for Most Employee Contracts
- Create a detailed employee handbook that contains all of the company’s policies, including grounds for termination.
- Include obvious grounds for termination, such as destruction of company property, illegal activity, abusive or inappropriate language, physical violence, theft, and the like. While nearly everyone knows that these are grounds for termination, you can still end up in court if this policy handbook does not include every reasonably foreseeable situation.
- Conduct training sessions to educate employees on the guidance contained within the handbook.
- Make sure that policies are enforced fairly throughout the company.
- Require mandatory mediation for disputes among employees or between an employee and the employer. A clause of this type would require that, should a dispute arise, both parties to the dispute must, by contract, participate in a mandatory mediation program.
If the employees are unable to resolve the dispute between themselves, or if the dispute is threatening someone’s employment, the mandatory mediation clause will compel the disputants to meet with a mediator – an attorney or other professional trained in dispute resolution.