Should you have an oral or written contract?
An employment agreement can be oral or written, although the validity of an oral agreement will depend on the potential duration of the intended performance. Note, however, that some terms of an agreement may remove the at-will nature of the relationship. If this is of concern, you should seek advice of counsel before adopting any approach to hiring that might involve this risk.
Employers should take special care in making oral offers, because statements made during in the process can be construed as promises and can wind up creating enforceable obligations that the employer did not intend to be enforceable.
A written agreement should cover the following items:
- Duration and method of renewal or termination
- Employee’s duties
- Compensation and benefits: hourly or salaried; salary versus commission; fringe benefits
- Effect of disability
- Method of revolving disputes: litigation versus alternative dispute resolution
- Covenant not to compete—If an employer’s business involves giving its employees know-how and training through substantial effort and training, the employer may find it useful to include a non-competition clause in order to avoid training employees only to have them “jump ship” and work for a competitor. The effects of such clauses, however, are limited by state law.
- Non-solicitation—This clause would prohibit a former employee from “raiding” his former employer’s staff and hiring its employees for another employer.
- Non-disclosure agreement—If an employer’s business involves the creation or use of intellectual property or trade secrets, the employer should also consider having its employees sign a nondisclosure agreement to minimize the risk of disclosure of such information to competitors.
Compensation and other benefits
- Hourly employees—Federal and state laws regulate employer’s activities in setting the hours certain types of employees work and their rates of pay. This includes:
- hours worked
- minimum wages for regular and overtime hours
- the number and duration of breaks
- Exempt (salaried) employees—The wage and hour laws and regulations that apply to hourly workers do not generally apply to salaried (exempt) employees, but an employer must take care to avoid wrongly classifying an employee as exempt or treating a properly classified exempt (salaried) employee as if he or she were an hourly employee.