There are a variety of issues you should be aware of if and when you employee others. The basic principles of employee relations that affect your business or its future dealings should always be considered. First and foremost, employment agreements are a necessity. These Agreements are not only useful, but extremely valuable for a variety of reasons. In the broadest sense, employment agreements can help avoid costly future disputes and can provide valuable protection of your business interests.
Employment agreements typically describe with some degree of specificity the duties and responsibilities of the employee and the length of the employment relationship. These agreements also can and should specify the manner in which employees may be terminated. Detailed and comprehensive employment agreements can go a long way towards avoiding protracted litigation later. The clearer the scope of the relationship, the less likely any potential confusion or difference of opinion may arise leading to some dispute. Specificity and attention to detail in each employment relationship cannot be stressed enough. There is no better way to disarm the threat of a potential claim by one of your employees then pointing to a clearly written contractual provision to which they have agreed. These types of agreements serve as an effective deterrent.
Most importantly, a well-conceived employment agreement can protect the economic interests of your business. Consider a scenario where you have successfully operated your business for a number of years. Along the way, you hired a few key employees to help you manage your growing operation. These employees, by the nature of their responsibilities to your business, have learned your strategies, know your customers and/or have had access to other confidential and unique information. In fact, just by virtue of observing you for a number of years and learning the business first hand, they have acquired useful and valuable skills and information. Skills and information they will take with them to your detriment. This occurrence is all too common.
You can and should use confidentiality/non-disclosure provisions in your employment agreement to protect your valuable business information. Also, you should include restrictive covenants, such as non-solicitation of customers/other employees and a non-compete restriction to attempt to reasonably prevent your employees from competing with your business. These concerns and types of contractual provisions apply to both employment and independent contractor/consultant type agreements. They are important enough that I discuss each principle separately in the next section.
Every employment agreement should contemplate termination of your employees. Most states are known as “at-will” states, meaning an employee can be terminated at any time for any reason. However, some states are not at-will jurisdictions and you are only able to legally terminate that employee for what is known as “cause”. This means the employee must violate some clearly established rule or provision a made a part of his/her condition of employment with your business. Dependent upon the state, cause may or may not be defined and you will want obvious control anyways over what conduct or activities would give rise to termination of that employee.
Even if you are physically located in an at-will state, you will want a termination provision. I always recommend you put some mechanism in place for the termination of your employees that is clear and leaves no room for any misinterpretation or debate. This can help avoid bogus claims of wrongful termination, or some similar claim, made against your business. The sloppier and the looser the language, the more you open up your business to potential future claims. Trust me, the language does matter and the clearer the better.
Work Product & Intellectual Property
I touched upon the Work for Hire Doctrine in an earlier post. Generally, as stated, your employees work product is actually the work product of the employer in most if not every instance. However, you should still incorporate a work for hire provision in your written employment agreements. Specific work for hire work language is necessary for any of your independent designers. You may think this only applies to your creative works. But, you should include a work for hire provision in your independent contractor/vendor type agreements covering a broad number of items that he/she may produce directly, or incidentally, during the course of performing work for your business. This could include drawings, notes, memorandum, formulas, plans, designs and a host of other things.