Byron Carlson Petri & Kalb, LLC | attorneys at law

3 important terms for employment contracts when hiring

On Behalf of | Oct 23, 2024 | Business & Commercial Law

Every new employee is an opportunity for a company to improve its operations. They are also a potential source of liability. Workers can make mistakes when manufacturing products or may treat each other poorly. Their behavior can damage a company’s reputation. They can also become dissatisfied with their employment and decide to take legal action against the company.

Employment contracts are crucial for the protection of a business when it acquires new talent. Organizations that integrate the right details into employment contracts can minimize the risk of legal complications stemming from hiring decisions. Prioritizing the following can help create more effective and protective employment contracts.

Clear expectations for employees

Employment contracts often outline the basics of what the organization expects from the employee. Providing a basic description of the job and how the company may measure success in that role is important. After all, workers can’t meet performance metrics unless they are aware of how the company may evaluate their work.

Standards for pay, benefits and severance

Unspoken expectations can go both ways. Employees sometimes take jobs expecting incentive pay or bonuses. They may assume they have a right to severance pay if they lose their job unexpectedly. It is therefore critical for companies to provide very clear explications for the base compensation and benefits provided, as well as any supplemental pay the company may offer. Rules for bonuses, commissions and severance pay are also important inclusions. Clear standards help eliminate the risk of wage claims or lawsuits when a company decides to terminate an employment arrangement.

Standards for dispute resolution

Employees have become more wary of binding, mandatory arbitration clauses. Workers may refuse contracts where they have no forms of recourse available in a dispute with their employers. However, companies can potentially still require alternative dispute resolution, like mediation. Dispute resolution clauses that do not insist on binding arbitration are often more acceptable to workers and can offer protection to the company.

Contracts need to offer something of valuable consideration to both parties and clarify the obligations that each party has to the other. Creating custom employment contracts for different roles and even for specific new hires can be a smart decision. Organizations with thorough contracts grapple with less risk when hiring and terminating employees.

Categories

Archives