Employment Contracts

If you decide you need a written employment contract, make sure to review it carefully with a lawyer's help.

In some situations, handshake agreements may actually work to the benefit of an employee. Many of the terms that would be part of the contract are documented in paychecks and company employment manuals. These manuals typically outline things such as vacations, paid holidays and sick leave. And there are laws designed to make sure employees are paid for overtime and protected from discrimination on the job.

But there are still times when it's critical to get your employment contract in writing, especially if you have a unique job or if you're going out on a limb by accepting a job - for instance, if a competing company is recruiting you.

In addition to obvious issues like salary and employee benefits, you'll want the contract to cover specifics such as:

• Signing Bonus. Your contract should set out how and when any signing bonus will be paid, as well as whether you're required to remain in the job for a certain period to keep the bonus.
• Stock or Ownership. If you're being offered stock options or other ownership interests, you'll want to tack down the terms, including the vesting period, your purchase price and opportunities for additional grants.
• Relocation Expenses. Nail down specifics on how your new employer will reimburse you and whether you're required to stay at the job for a certain period to keep your relocation reimbursement.
• Expense Allowance. An expense allowance can be better than paying expenses out of pocket and then getting reimbursed, because expense allowances may be tax exempt.
• Term. Most employers prefer "at will" employment, in which either the employee or the employer can end the employment relationship at any time. But some written employment contracts guarantee employment for a certain length of time. This assures the employee the job's around for at least that long, and the employer can end the relationship after that by simply declining to renegotiate the contract.
• Termination. Termination clauses provide an employee with some protection in the event of a layoff or firing, spelling out details such as severance pay and purchase periods for stock options.
• Noncompete Clauses. Employment contracts often include agreements that bar employees from competing with their former employers for a certain period after they leave the company.
• Indemnification. If a competitor hires you, your new employer may want you to sign an agreement that protects them from any non-competition or proprietary rights agreements you had with your old employer.
• Arbitration. Employers sometimes propose arbitration because it allows for a dispute to be decided by a neutral third party rather than by a jury. Arbitration also tends to be a quicker way to resolve disputes.
• Attorney's Fees. An "attorney's fees" clause can be a double-edged sword. Employers tend to be afraid of them because if an employee sues and wins, the employer has to pay for the lawyers on both sides. But, by the same token, an employee could also end up on the hook for all the attorneys' fees if he or she loses.
• Integration. Keep an eye out for a provision that says your contract constitutes the entire agreement of the parties. Although it's standard language, it could have far-reaching effects, since any oral understandings or other agreements that aren't incorporated into the written document may not be enforceable.

The bottom line is, if you choose to negotiate a written employment contract, make sure to review it with an attorney prior to signing it.