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Employment Contracts

One of the first questions that many new employers ask themselves is whether they should have their employees sign employment agreements.  In most cases, the answer that question is a resounding no.

The reason is that an employment contract generally restricts an employer’s right to terminate or to make other changes to an employee’s terms and conditions of employment.  Of course, there are exceptions to this rule.  They generally fall into the following categories:

* where an employee holds a key position within the company or organization;

* to entice an employee to leave a competitor; or

* to entice an employee to remain employed.

Generally speaking, there is no difference between an employment contract and any other contract.  That is not to say that there are not unique provisions that appear in executive employment agreements.  As an attorney, or high-level executive, you should understand that these agreements may contain very complex tax and security issues.  Likewise, unlike other traditional business deals, an employment agreement must rest on a foundation of trust between the parties.  Posturing in order to obtain the best deal may be counterproductive where the goal is to have a long-term, fruitful relationship between the parties.  This is particularly important for attorneys to recognize if they have been called in to draft an agreement after the principles have reached a deal on a handshake.

Form of the Agreement

Employment contracts need not be lengthy or complex.  In many instances, they may take the form of a simple letter.  Obviously, detailed agreements are required for certain very high-level executives who work for large corporations.  In either case, the purpose of the agreement is to formalize the parties understandings with respect to their mutual obligations.  This may be a one-page document or a 30 page document.

Common Provisions

Employment agreements do contain a certain number of generally accepted provisions, such as term of employment, compensation, and termination.

Check the employment contract section for a full listing of common provisions.

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