Employment agreements: Overview, definition, and example
What are employment agreements?
Employment agreements are legally binding contracts between an employer and an employee that outline the terms and conditions of employment. These agreements typically include details about the job role, compensation, benefits, work hours, confidentiality obligations, and termination conditions. Employment agreements are used to establish clear expectations and protect both parties’ rights.
For example, an employment agreement for a sales manager might specify their salary, commission structure, job responsibilities, and the conditions under which the agreement can be terminated.
Why are employment agreements important?
Employment agreements are important because they provide clarity and legal protection for both employers and employees. For SMBs, they help avoid misunderstandings, ensure compliance with labor laws, and establish clear expectations for job performance and workplace conduct.
A well-drafted employment agreement can also protect businesses by including provisions related to confidentiality, non-compete agreements, intellectual property, and dispute resolution, minimizing the risk of legal disputes and protecting the company’s interests.
Understanding employment agreements through an example
Imagine an SMB hires a marketing specialist. The employment agreement includes the following terms:
- A starting salary of $50,000 per year.
- Job duties, such as managing social media accounts and creating marketing campaigns.
- A confidentiality clause to protect the company’s sensitive information.
- Termination conditions, including a requirement for two weeks’ notice.
In another scenario, a startup hires a software developer under an employment agreement that specifies intellectual property ownership. The contract states that any software developed during the course of employment belongs to the company, ensuring the business retains control over its assets.
An example of an employment agreement clause
Here’s how a confidentiality clause in an employment agreement might appear:
“The Employee agrees to maintain the confidentiality of all proprietary and sensitive information obtained during the course of employment. This obligation shall survive the termination of this Agreement and remain in effect indefinitely.”
Conclusion
Employment agreements are essential tools for defining the terms of the relationship between employers and employees. For SMBs, these agreements help establish expectations, protect intellectual property, ensure compliance with labor laws, and minimize disputes. A clear and comprehensive employment agreement provides a foundation for a successful and mutually beneficial working relationship.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.