What Kind Of Employer Should Use An Employment Contract?

Written employment contracts are essential legal documents that outline the terms and conditions of a working relationship between an employer and an employee. Written employment contracts define the rights and obligations of both parties, and help employers save money in case of termination and prevent disputes.

Who ought to use employment contracts?

All employers can benefit from using an employment contract, but certain types of employers may benefit even more than most. For example:

1. Employers who hire employees on a fixed-time basis, such as temporary or seasonal workers, can use a written employment contract to establish an early termination clause. This can protect the employer from being liable for paying the remaining balance of the contract if the employee is terminated early.
2. Employers who operate in regulated industries, such as finance and law, can use an employment contract to help ensure that their employees must always comply with regulatory requirements.
3. Employers in sophisticated industries, such as technology, can use an employment contract to protect their trade secrets and intellectual property. Employment contracts can include clauses that protect the employer’s confidential information and IP.
4. Employers who pay their employees incentive compensation, such as commissions and bonuses, can use an employment contract to formalize these financial plans and establish rules for payment in case of termination.
5. Employers who engage in B2B sales can prevent their employees from soliciting their customers during or after employment by including a non-solicitation restrictive covenant in their employment contracts.

In conclusion, employment contracts are a valuable tool for defining the terms of the working relationship and protecting the interests of the employer. While certain types of employers may benefit more from certain clauses in an employment contract as discussed above, all employers can benefit from the more common terms and conditions included in employment contracts generally, such as a termination clause, which can help lessen the amount of severance an employer owes an employee upon termination, among others.