What You Need to Know Before You Sign That Employment Agreement!
Imagine this scenario: You have been offered a position that is a dream job, right in your chosen field with excellent compensation and benefits, maybe some stock options. You and your future employer have agreed to sign an Employment Agreement as a precondition. Don't panic! Keep calm and read on.
An employment contract is the business equivalent of a prenuptial agreement and just about as uncomfortable to ask for. How will you know what items should be included in the contract, or if some important element is missing? All of this can be very anxiety-making.
Of course the wisest course of action would be to review it with a lawyer. But if you decide to go it alone, here are some basic guidelines as to what you should look for in the agreement.
NEEDS: Provisions That Absolutely Should Be Part of Your Employment Contract
- Parties. The parties (both employer and employee) must be clearly and correctly identified by name.
- Nature of the Relationship. Is the relationship between the parties described as being an employment relationship, i.e. that of an employer and employee? If not, you could be designated as an independent contractor and that would make you responsible for paying your own payroll taxes, worker's compensation and other required remittances.
- Job Description. The agreement should clearly define the position and the duties and responsibilities that you will be expected to take on.
- Scope of Position. The agreement must set out whether the position is full time or part time, permanent or temporary.
- Start Date. The start date for the position should be stated and if the employment period is for a fixed period of time, the end date should also be stated.
- Compensation. The starting salary and all other compensation must be clearly stated: base salary, any commissions, bonuses and other remuneration - how much (fixed amounts or percentages) for each type of compensation, and the pay periods for each.
- Benefits. What type of benefits will you be eligible for? When do they kick in and what is the accrual? Are the benefits taxable?
- Time Off. The agreement must be clear on vacation time and holidays. It should address how and when you will be compensated for holidays that you worked and for vacation time that you accrued but did not take.
- Termination of Employment. What are the provisions for termination? During and after probation, minimum / maximum notice by the employer with and without cause; minimum / maximum notice by employee; what would constitute just cause for dismissal.
- Offer and Acceptance. Lastly, the agreement must state that the employer offers you employment on those terms, and must include a statement that by signing the agreement, you accept employment on those terms.
WANTS: Additional Provisions That May be Negotiating Points
The list below contains just some of the types of additional provisions that may be included in the Employment Agreement. Some of these may actually be required by law in your area. Check the current labor laws to find out which of these provisions are statutory and would therefore apply to you.
- Performance standards that the employee must meet.
- Qualifications required for advancement, bonuses or other extra compensation.
- The reporting relationship - to whom do you report, and how often or under what circumstances?
- Limits on the employee's authority (e.g. purchasing, order approvals, etc).
- Performance reviews - how often are they conducted, what is the procedure?
- Travel and vehicle allowances, reimbursement for other expenses.
- Moving expenses if the employee has to relocate for the job.
- Is there a probation period? If so, how long is it, what are the expectations, and what are the consequences for not meeting expectations?
- Salary increases - how often, how much, what factors determine the amount?
- Sick days, personal days, maternity leave, bereavement leave.
- Provisions for disability or long-term illness.
- Confidentiality, non-solicitation of customers, suppliers and other staff, non-competition provisions.
- Ownership of inventions or innovations made by the employee during the employment period.
- Severance pay.
Keep in mind that while items like the company's stock options plan or medical benefits package should be described in the Employment Agreement, it is unlikely that these issues would be negotiable. Your best advice is to review the Employment Agreement with a lawyer. He/She will be able to tell you if it's in our best interests to sign it as is or if there's anything extra that you should be asking for. You can also have your lawyer negotiate those extras with the employer.