Using Employment Contracts is Not Taboo They are Vital to Small Business Success

To keep a competitive edge, there are certain valuable assets that your IT company needs to protect at all costs

. One of the most critical is your relationship with your employees. That's why many companies now make employment contracts a standard part of their interviewing and hiring processes for all levels of employees, from executives to entry-level workers.

Employee contracts give you a way to legally protect your company's trade secrets, but perhaps just as important, contracts are the first step toward building trust with a new hire. By starting off a new business relationship with a level of openness and clarity that goes beyond a verbal agreement, you can set expectations in a way that grows understanding and reduces the possibility of conflict down the line.

There are two types of employment-related agreements that are most commonly used when new W2 employees are brought on board: the employment contract and the mutual non-disclosure agreement.

The Employment Contract

One of the most important roles of employment contracts is to establish your relationship with your new employee as "employment at will," which reduces the chance that your employee can later claim he suffered unfair termination. These types of agreements can also protect your intellectual property rights and confidential information, and often include "non-compete" and "non-hire" language designed to prohibit your employee from taking your clients or employees with them when they move on.

In an employment agreement, you can help prevent future misunderstandings by specifying everything from compensation, benefits and job duties to your policy for expenses, termination, arbitration and more. By putting these important considerations in writing, you can build trust with your employee from day one.

The Mutual Non-Disclosure Agreement

If you're concerned about keeping sensitive information private, you may wish to have your new employee also sign a mutual non-disclosure agreement or employee confidentiality agreement. This type of agreement sets conditions for the disclosure and use of confidential information and materials, calling upon your employee to keep specific information private. You can specify any type of information as "confidential," but standard non-disclosure agreements may cover your business's finances, proprietary strategies, and patent applications, for example.

Such agreements also specify remedies you'll use in the event that your employee should violate the terms of the agreement. The intent, of course, is to discourage the employee from disclosing specific confidential information, thereby precluding costly legal action.

You can also use a mutual nondisclosure agreement during the interview process, or with potential business partners, clients, or subcontractors in any situation in which you need to share sensitive information.

General Guidelines for Employment-Related Contracts

Regardless of which type of agreement you're using, keep the following tips in mind:

Make your contract forms as detailed as possible to reduce or eliminate any chance of misunderstandings.

Consider having an attorney review your contracts. While standard contract templates often work just fine, it may be wise to have your agreements reviewed by a professional to be sure they include all the clauses and amendments your business needs.

Be sure that both you and your employee sign the agreements before you share information related to your business's finances, strategies, or intellectual property.

Meet with your employee to go over the agreements. This emphasizes the importance of abiding by the terms of the contract and gives the employee an opportunity to get answers to any questions.

Using Employment Contracts is Not Taboo They are Vital to Small Business Success

By: Jim Cochran

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