Employment agreements are contracts that lay out the terms and conditions of an employment relationship. Establishing a clear, written, and legally binding employment agreement with the support of an employment agreement lawyer can significantly reduce the chances of misunderstandings, workplace disputes, and other conflicts that may otherwise be costly, time-consuming, and unduly stressful. The foregoing said, it may well be that an employer’s best option is to refrain from implementing an employment agreement. This is typically a situationally dependent analysis.

Four Employment Agreement Pitfalls

If you’re an employer, you may be considering drafting an employment agreement independently and downloading an online template. But before you do so, there are at least four potential pitfalls you should know about and how to avoid them. Often, employers end up in litigation and expending tens to hundreds of thousands of dollars in legal fees due to attempted cost savings of “DIY” contracts on the front end when hiring an attorney would have been the better choice in hindsight.

1. Using outdated or non-compliant forms

A common mistake employers make when drafting employment agreements is reusing old agreements. Since the law changes constantly, using contracts prepared years ago runs the risk that the terms and conditions no longer comply with current laws. This vulnerability exposes employers to serious legal risks and negates the point of having a written employment contract in the first place.

Employers must ensure that all employment agreement clauses comply with current and applicable employment laws. Otherwise, specific provisions or the entire contract may be void and legally unenforceable.

2. Failing to protect vital business interests

One key reason employers write employment agreements is to protect their business interests. Although employment contracts define the employment relationship between the employer and employees, including the terms of employment, length of employment, and compensation benefits, they also contain clauses that safeguard the company and protect the employer’s goodwill. For example, such contracts often include non-compete clauses and confidentiality provisions that address intellectual property and other sensitive company information.

Improperly drafted employment agreements in which an employer fails to adequately address the company’s business interests could seriously harm the company and prevent the employer from bringing a lawsuit against an employee for loss of profits and other damages.

3. Being too vague or too restrictive

An employment contract must be clear. Employers may be tempted to think that including ambiguous terms in an agreement will work in their favor. However, courts frequently interpret such terms in favor of the party subject to the contract rather than the one who drafted it. As a result, if a legal case ensues, a court could find that a contract is not enforceable and rule against the employer’s interest if the agreement is too vague.

Additionally, employment contracts must be enforceable. One of the main reasons courts find employment agreements unenforceable is because they place too many restrictions on the employee. For example, employers often draft non-compete clauses restricting employees from working with competitors too broadly. Employers should consider what protections they need before including employment restrictions in a contract. Employers should also consider justifying why the restrictions make sense for their specific business.

4. Failing to obtain legal advice

Even if you know people who have drafted their own employment agreements with no apparent resulting issues, each business is unique, and all employees are different. There is also no way to predict what may come up in the future.

Additionally, employment agreements often contain several critical and complex components. Although employment contracts may appear similar from business to business, having an experienced employment agreement lawyer help you draft a document tailored to your business and suited to your needs can avoid the common mistakes often seen when employers attempt to draw up their own legal instruments.

Don’t go it alone in setting up vital employment agreements for your business

Employees are essential to every business, and negotiating employment agreements can be a delicate process that employers should not take lightly. Employers must take careful measures to ensure that they have clear and enforceable employment contracts and that these agreements comply with all applicable laws and regulations. Often, deciding not to enter an employment agreement at all may be the wisest decision. Employers should consider the unique facts of each employment situation.

Enlisting the assistance of an employment agreement lawyer with knowledge of employment law and experience with drafting employment contracts can put business owners at ease, ensure the smooth functioning of company operations, and ward off potential legal battles in the future.

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