Employment agreements provide clarity for both the employer and the employee, set a tone and expectations early on in the relationship, and mitigate risk. These agreements are a great method for detailing all aspects of the employment relationship so that the parties are on the same page and there is less room for disagreements down the road, which can be harmful to the employer’s business or the employee’s employment opportunities. Below is a list of key issues to consider and include in employment agreements, most of which can be modified to fit the specific relationship.
1. At-Will Clause
In Colorado and many other states, many employment relationships are at-will, meaning that either the employer or the employee can terminate employment at any time and for any reason, with or without cause. It should be explicitly stated that, if the parties desire, the employment relationship is at-will even though it is likely the default, especially if the employee is signing some sort of contract. If an employer ever has to appear in court regarding an issue surrounding the employee’s termination, the employer can use the at-will clause in the employment agreement to show that the employer was within its rights in terminating the employee without cause.
2. Employee Obligations
An employee obligations section can include rules, guidelines, and standards that the employee must follow in carrying out its duties. This can be anything from the employee agreeing not to engage in work that conflicts with the employer, using best efforts to carry out their duties, and agreeing to abide by the employer’s policies. This section can be useful for the employer to establish the employer’s culture at the workplace.
This section may seem obvious but in addition to detailing how the employee will be compensated, the employer will also want to include information on the pay schedule, any deductions the employer is entitled to take, whether there are any bonuses or discretionary compensation, and if the employer has any reimbursement policies.
The legality of non-competition clauses varies from state to state. In Colorado, courts typically do not uphold non-competition provisions in most instances. However, there are some instances where the courts have ruled that non-competes are valid. These include agreements involving the sale of a business, key employees, and trade secrets. There are additional carveouts for professionals such as doctors. Even when a non-compete falls under one of these instances, the non-compete must still be reasonable in duration and geographic reach. Also, an employer will want to make sure that it has non-frivolous arguments for any non-compete that it includes in its employment agreement.
Non-solicitation provisions allow employers to prevent employees from soliciting other employees or customers for a period of time after an employee’s employment terminates. These can be important provisions but also vary in the ability to enforce them depending on the state. In Colorado, courts have found that non-solicitation provision are valid when it comes to employees but not customers. Courts treat non-solicitation of customers similar to non-competes and are not enforceable. However, non-solicitation of employees is enforceable to the extent that the restrictions are reasonable in duration. This can be a good way for an employer to prevent an employee from coming back and enticing key employees to leave the company.
6. Confidential Information
Confidential information provisions are extremely important and can vary depending on the employer’s industry. The provisions govern what counts as confidential information, how the employee must treat confidential information, authorized uses and disclosures, duration of obligations, return of information, and an acknowledgement that unauthorized use or disclosure would harm the employer. These provisions put the employee on notice of the employer’s expectations regarding confidential information and serve to protect the employer’s confidential information which is likely valuable to the operation and success of its business.
7. Proprietary Rights
Proprietary rights provisions define what constitutes work product (things created by the employee in the course of employment) and who has rights to such work product. These provisions are more important in the tech industry or any other environments in which the employee creates things for the employer that the employer finds valuable. These sections often do not apply to work product created during the employee’s own time or outside the scope of employment.
There are other sections that your employment agreement should contain, these are examples of important sections to consider. Please reach out to Miles Williams with MW Legal Group at firstname.lastname@example.org for help with your employment agreement. View our services page to see how MW Legal Group can help your business succeed.