Drafting Effective Business Contracts
What general information should employment contracts include?
There are several key pieces of information employers should include in employment contracts to avoid conflict with their employees.
Texas is an at will employment state, which means that employers and employees can call off their relationship at any time and for any reason without giving advance notice. To preserve employment arrangements and to minimize disputes, many employers choose to bring on employees under a contract. In order to be effective, these contracts should include some key pieces of information.
An employment contract should cover which benefits an employee will receive as a result of working for a specific business. For example, the contract should outline if the employee is eligible to receive health and medical coverage, disability, a 401(k), life insurance, stock options and dental insurance. This section of an employment contract should also delineate how much vacation time the employee receives every year and how it is accrued over time.
There are many key points that should be covered in the compensation section of an employment contract. According to Forbes, these include some of the following:
- Whether or not the employee will receive a signing bonus after he or she accepts the new position
- What bonuses are available on either a quarterly or annual basis and how eligibility for bonuses is determined
- Whether or not the employee’s salary will increase every year after the contract is signed
Additionally, this section of an employment contract should address if the employee’s salary can be reduced if certain circumstances are present. For example, some businesses maintain the right to reduce an employee’s salary by a certain percentage if other employees who receive a similar salary also experience a reduction in pay.
All employment contracts should address what is expected from the new employee and what his or her responsibilities will be. Some of the key points to include in this section include what the employee’s job title is, what his or her responsibilities are, whether or not the employee can be demoted, where the employee is expected to work and if the employee is allowed to participate in other work-related activities.
Term and Termination
Since Texas is an at will employment state, it is extremely important for information regarding termination to be included in an employment contract. Under this section, issues relating to how long the employee is expected to remain at the company, what grounds can the company terminate the employee on, what circumstances can lead to firing and how an employee will be compensated if he or she is terminated earlier than the contract outlines need to be covered.
Employers in Texas who choose to draft employment contracts should take special care to ensure all necessary information pertaining to a new employee’s position is included in the contract. During this process, employers should seek the assistance of an employment lawyer who can provide them with guidance.