Drafting employment contracts is an important task that often has a long-term impact on how you relate with your employee. Since it’s usually the first officially binding document issued to a new employee, it’ll typically set the ongoing working relationship tone and inherent expectations for both parties. A well-conceived employment contract can potentially save you a lot of resources. It’s crucial to get the employment contracts right at first because it can be problematic to add or amend existing clauses in the future.
However, employment contract creation can be confusing and complicated. Making mistakes while creating employment contracts can easily lead to time-consuming and expensive disputes. Contract disputes waste essential resources, especially since they can be easily avoided. You should strive to make the employment contract as straightforward as possible to establish a common understanding with your employee and ensure misunderstandings are rare or non-existent. Here are some of the most common mistakes in drafting employment contracts and how you should avoid them:
Not Accounting For Responsibility
In an employment agreement, both parties are usually held accountable for upholding the binding terms outlined in the agreement. Consequently, it’s not only the employee who is mandated to comply with the contract terms but you’re also expected to adhere to them.
It’s crucial that you create an employment contract that fully aligns with your current business practices. Alternatively, you may update your practices to comply with the agreement terms. You may even need to adjust internal processes and policies to comply with applicable legal restrictions.
Using the Same Contract for All Employees
Typically, most companies will have different employee classification levels, such as remote, part-time, temporary, full-time, and contract workers. You cannot utilize the same employment agreement across all employee levels because each employee classification has different governing laws and regulations. Should discrepancies arise in the future, using wrong contractual terminology could lead to the agreement being nullified and the court awarding damage compensation to your employee. You’ll hence need to prepare different employee contracts for each employee classification.
Reusing contracts can often lead to critical mistakes. You may end up missing some clauses that were not presented to the initial employee, or even commit to benefits or clauses you didn’t intend to. Always have up-to-date employment contract templates with all obsolete clauses removed or new ones included. This will significantly minimize the likelihood of having additional or missed clauses.
Not Accounting For Regulations
Although employment contracts should be legally binding agreements, they cannot override federal and state laws, nor do they allow you to circumvent the rights of your employees. Each state has laws governing enforceable contractual terms. When creating your employee terms of agreement, it’s necessary to consult an attorney familiar with your state regulations.
These laws must be evaluated individually and in detail since they can often get complex. For example, there are state laws that place tough restrictions on non-compete agreements to cushion employees from hardship if they choose to resign. A contractual non-compete agreement could be overruled if it’s considered overly restrictive or unreasonable. Being conversant with the local laws and employee protections can go a long way in helping you ascertain that your contracts stay enforceable.
Not Updating Agreements
Remember that the general conditions and employment laws evolve over time. Over time, there might be changes to regulations on employee protections in your industry. These changes may often demand that you adjust the agreement clauses for the terms to remain valid. Additionally, employees tend to seek specific benefits over time. You may have to adjust some workplace terms to position your company as the ideal employer for the skilled workforce you need to thrive.
Besides that, there might also be changes in the kind of benefits employees seek. To attract top-tier employees that your business needs, you should tweak specific terms to make your company more appealing to them. It’s also crucial that you review your contracts every year to ensure they’re up to date.
Employment relationships can also shift in the future. You may need to add or remove benefits, adjust roles and even change the relationship from the original agreement. You should ensure that these changes in terms are shown in your employment contracts. Therefore, it’s important that you also make changes to your contract to keep them up-to-date.
Endnote
An ideal employment contract should remain consistent with the industry’s best practices and legal regulations. It also should be precise enough and enforceable. It’s also always advisable that you work with a legal professional to help you stay compliant with the regulations when creating employment contracts.
Having an open mind will be necessary towards helping you recognize possible pitfalls before completing a contract. This could keep you from many potential legal hardships that could cripple you years to come.