It is common practice for “at will” employees, even those for important positions, to be employed on a handshake or with a simple letter outlining a few terms of the employment. However, the failure to use a formal written and detailed agreement all too often leads later on to misunderstandings and controversy.
Whether the employment is “at will” or is for a term, it is well worthwhile for the following items, among others, to be covered in reasonable detail:
- Title, reporting responsibility and duties
- base compensation
- incentive or bonus compensation, if any
- for employees to be compensated in whole or in part on the basis of commissions,the details of what is commissionable, the rate or rates of commissions, when commissions are to be paid, and if there is a draw or advance against commissions, the employee’s obligations for repayment of the draw or advance
- benefits which the employee will receive including, but not limited to, use of company credit card, any automobile leasing or automobile expense allowance,cell phone, paid vacation and sick/personal days, health insurance coverage
- where there is an employment term, statement of reasons constituting “good cause” for termination and if one is for material failure to perform, a procedure for notice and time to cure’
- where there is an employment term, a provision for termination in case of long-term disability
- where the employee is to hold a very important position, provision for the company to take out key person life insurance on the employee
- confidentiality obligations
- for technical employees, the company’s rights to inventions and improvements made by the employee
- for employees involved in sales, a reasonable post-employment restriction on competition with the company
- a provision that in case of a dispute, the parties must first engage in non-binding mediation before being able to start a law suit
- a provision that in case of a lawsuit, the law of the state where the company’s principal office is located, is to govern the interpretation and enforcement of the agreement
- a provision that in case of a lawsuit, it is to be brought only in the courts of the state in where the company’s principal office is located.