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When should employers use an employment contract?

On Behalf of | Jan 26, 2018 | Employment Contracts

There are many things to go over when you hire a new employee: Just a few examples include terms of employment, job duties and salary. Some employers are fine with using an implied contract when hiring employees. In an implied contract, the terms of labor generally fall under state and federal law. However, many employers prefer to use a legally sound employment contract.

Unlike an implied contract, an employment contract is a signed document between an employer and employee that clearly defines the rights and responsibilities of both parties. If the signatories should have a conflict, the contract can frequently be used to resolve the issue. So, when should employers consider using employment contracts? We will go over three scenarios in which these contracts may come in handy.

1. Confidential information is involved

Many businesses have trade secrets or confidential operating processes. If an employee should leak this sensitive information, the fallout could cause serious damage. Employment contracts can include confidentiality clauses that prohibit employees from revealing confidential information.

2. It would be difficult to hire a replacement

Hiring the right talent is crucial for any successful business. What would happen if one of your company’s most skilled employees were to suddenly leave for a different job? You could be left searching for a replacement on short notice. It is possible to include language in an employment contract that would prevent an employee from leaving without giving adequate notice.

3. An employee may try to compete with you

In some instances, a former employee may try to go into business as your competitor. Many employment contracts include non-compete agreements that restrict an employee’s ability to directly compete with a former employer. These agreements are usually limited to a certain time frame and geographical area, but they can still be crucial in preventing a former employee from becoming competition. 

Creating an employment contract

Employment contracts can be short or long, simple or complicated. Either way, these contracts should be drafted by a lawyer in order to address every area of concern, protect your company’ best interests and be legally enforceable. Employers in the Denver area who wish to use employment contracts may wish to contact a Colorado-based attorney who specializes in employment law.