TELG Principals Publish Article for Bureau of National Affairs, Inc.

Friday, September 30th, 2011 | Rules and Procedures, The Employment Law Group | No Comments

The Employment Law Group’s © Managing Principal Scott Oswald and Principal Attorney Adam Augustine Carter published an article for the Bureau of National Affairs, Inc. titled Drafting and Negotiating Executive Employment Agreements. This article discusses the importance of employment agreements for employees of all levels and discusses in detail key provisions for employment contracts.

Messrs. Oswald and Carter state in the article:

In the District of Columbia, Maryland, and Virginia, if employers do not offer their employees a definite term of employment, the presumption is that, absent a clear expression of the intent to form a contract of employment for a fixed period of time, ‘the parties have in mind merely the ordinary business contract for a continuing employment, terminable at the will of either party.’ Under the at-will doctrine, an employer can terminate an employee at any time and for any reason or no reason at all, so long as the employee is not terminated for an unlawful reason.

Moreover, a written agreement can “prevent misunderstandings between the parties as to employee’s duties and responsibilities, criteria for earning bonuses, and eligibility for promotions and/or transfers.” Having the employment agreement in writing benefits both the employer and the employee and often leads to the best outcome for both parties. Overall, employment agreements help avoid employment disputes, statute of frauds claims, Fair Labor Standards Act claims, and discrimination claims. Finally, “employment agreements can also prevent misunderstandings between the parities as to employees’ duties and responsibilities, criteria for earning bonuses, and eligibility for promotions and/or transfers.”

The key provisions outlined in this article highlight the following points that should be included in employment contracts:

1. Offer and Acceptance of Employment: To make certain that courts interpret an employment agreement as a contract, at the beginning of the agreement, the employer should include a short section discussing the purpose of the contract…and a section wherein the employee acknowledges that he or she accepts the employer’s offer of employment.
2. Position for Which Employer Hires Employee: To avoid confusion and contention over an employee’s position, duties and responsibilities, the employer should clearly state the employee’s title and should clearly delineate the employee’s main responsibility… [But] should leave room for flexibility and change.
3. Length of Contract, Compensation, Benefits, and Bonuses: Other key terms of an employment agreement are provisions that state the length of the contract as well as the employee’s compensation and benefits.
4. Noncompete/Nonsolicit Provisions: To prevent employees from taking their talents and employer’s trade secrets to competitors, a growing number of employers are requiring employees to sign noncompete agreements… [However,] in realizing that noncompetes are agreements in restraint of trade, courts critically examine and narrowly construe non-compete agreements. Thus, a broad-form agreement that is not narrowly tailored to serve the employer’s business interest is likely unenforceable
5. Confidentiality Provisions: Confidentiality provisions in employment agreements should not be used to silence employees or to require that employees report fraud internally prior to going to any outside entity to obtain assistance. In negotiating an employment agreement, the parties should clearly define what information is and is not confidential and should carve out exceptions for the good faith reporting of fraud or violations of law to outside entities.
6. Lapse of Contract: As the employment agreement should be for a definite term, the parties should also address criteria for extending the period of the contract and what should occur if the contract expires but the employee remains employed with the company.
7. Entire Agreement: Both parties must be sure to include a provision stating that the employment agreement represents and contains the entire agreement. Otherwise, the parties could be subject to litigation over whether the parties included or intended to include other provisions in the employment agreement.

Employment agreements not only protect employers and employees in the long run, but they also provide an opportunity to negotiate severance provisions before the employment relationship has soured. Provisions within the agreement are best negotiated at the outset of the employment relationship rather than during employment.