You may have one of the best employees at your workplace and you may trust them with all your heart, but what happens if things go sour at work and that employee becomes disgruntled? What if they sue you, or, take your clients to a competitor they now work for? Establishing properly prepared workplace agreements becomes a legally binding contract in the state of Texas and should be one of the first things any small business owner does.
These workplace agreements help establish the guideposts for the employer-employee relationship, the employee’s role with the company, and can work at avoiding any misunderstandings concerning certain thorny areas such as going to work for a competitor, “stealing” company assets – people or knowledge , or simply how the parties agree to resolve any disputes should something go wrong in the future.
Here is my take on the top ten workplace agreements or clauses that any business, large or small, should have in order to foster a healthy work environment:
1. Employment Agreement
If you are like most Texas employers your initial reaction to this one is – what? I thought we are a right to work state and I don’t want to screw that up by having a contract. While that is an understandable initial reaction, don’t let this misconception deter you from creating a document that can do more good for your business long-term, than harm. A well-crafted agreement between an employer and employee will address such issues as an employee’s duties, their wages, what is expected of employees, leave policies, and any other benefits that may exist. Stating these things in a clear and concise language at the beginning of the relationship, and updating it as necessary, goes a long way towards minimizing any claims of unfair treatment or bias down the road. Further, when drafted correctly, these types of agreements will preserve the right-to-work nature of the relationship. Given the recent affirmations of the interaction between leave policies, worker’s compensation claims, leave under the Family Medical Leave Act, and claims of retaliatory discharge, failing to have an agreement that at least addresses the leave policies of a company, is like failing to get a flu shot – not that expensive to do and worth it to prevent unnecessary and expensive claims. Finally, this agreement can also address the issues of drug testing, or pre-work and return-to-work physical exams. Again, an ounce of prevention that is significantly cheaper than the potential cure.
Stating these things in a clear and concise language at the beginning of the relationship, and updating it as necessary, goes a long way towards minimizing any claims of unfair treatment or bias down the road. Further, when drafted correctly, these types of workplace agreements will preserve the right-to-work nature of the relationship. Given the recent affirmations of the interaction between leave policies, worker’s compensation claims, leave under the Family Medical Leave Act, and claims of retaliatory discharge, failing to have an agreement that at least addresses the leave policies of a company, is like failing to get a flu shot – not that expensive to do and worth it to prevent unnecessary and expensive claims. Finally, these types of workplace agreements can also address the issues of drug testing, or pre-work and return-to-work physical exams. Again, an ounce of prevention that is significantly cheaper than the potential cure.
2. Independent Contractor Agreement
The initial reaction to this one by some folks may be – wait, I thought that this was about employment agreements, anyone knows that an independent contractor is NOT an employee. Yes, you are correct. However, failing to document the nature of the relationship between your company and an independent contract can prove costly. While the issue of who may or may not qualify as an independent contractor was addressed in this previous blog post What Do You Mean That My Independent Contractor is Now an Employee? this document will address the key terms of the relationship, and can play a valuable role in helping prove that your neighbor down the street cleaning your company’s office is really an independent contractor and not an employee.
3. Big Brother is Watching – or Right to Monitor Agreement
In today’s digital age, businesses are becoming ever more reliant upon the internet, cloud services, email, and “big data” than ever before. Added to this is the proliferation of smartphones, tablets and wearable technology, which has caused more and more businesses to adopt BYOD, bring your own device – not bring your own drink, policies. Unfortunately, the ease of obtaining and using this information for the benefit of the company, carries with it the same ease of using this information to harm the company, or even annoy fellow employees by asking everyone to buy Girl Scout Cookies or Boy Scout Popcorn. A way to minimize the misuse of a company’s electronic data, internet connections or email – is it really misuse of the company’s internet to binge watch old episodes of The Office? – is to have in place a clearly spelled out policy concerning the use and monitoring of company provided resources/devices. The last thing you need is for your company’s internet connection to be slowed down during an important webinar because someone wants to watch the Safety Training episode of the Office.
These next three, Non-Compete Agreements, Confidentiality Agreement and Non-Solicitation Agreement can be taken together or separately. Further, they were discussed in more detail on this past blog post On the Matter of Departing Employees.
4. Non-Compete Agreement
While competition is as American as apple pie and baseball, we don’t like cheaters. You worked hard to build your business, and you should be able to protect your investment, even when that investment involved training someone to become the next Babe Ruth of internet marketing. A properly drafted non-compete clause will restrict an employee from accepting a job with a competitor of your company, thereby minimizing any economic harm to you. However, because we do like competition, it is important to make sure that any such restriction on competition be carefully drafted in workplace agreements so as to not run afoul of the law.
5. Confidentiality Agreement
We all have secrets. Whether it be in our private lives, or in our business lives, keeping stuff secret is almost as second nature as a two-year-old saying “mine.” The problem with keeping stuff a secret in the business world is that folks eventually leave and go elsewhere. This type of agreement/clause is designed to keep an employee from disclosing information about your company to a competitor or other third-party. The best example of how this type of clause works is simply by looking at Coca-Cola. It’s been around a long time, but anyone that goes to work for them signs a Confidentiality Agreement and the formula behind Coca-Cola has remained a secret from the public for over 100 years.
6. Non-Solicitation Workplace Agreements
The third related agreement or clause involves non-solicitation. These clauses will cover not just the non-solicitation of customers, but also employees. Again, while we like competition, we don’t like folks trying to gain an unfair advantage. You worked hard to train your employees, and while working for you, they a) learned a lot about how you do business, and b) learned a lot about who you do business with. Some years back a very senior business executive told me that the key to being successful in any business is relationships. A well drafted non-solicitation clause will prevent an employee who resigns or is terminated from soliciting your employees and/or clients to join them either at a competitors or in that person’s new start-up which just so happens to compete with you.
7. Relocation Agreement
Sometimes, good help is hard to find locally. In today’s tight labor market, the best option may live some distance off, but you really want their expertise. Or, you may decide to expand your business by setting up an operation in another area and really want your number one assistant to lead things on the ground in that new city. In either case, it is important to have an agreement that addresses the how and when of an employee’s relocation. By addressing what is and is not expected from both the company and the person that is moving, you can head off a lot of headaches, and ensure that your employee does not suffer any unnecessary tax consequences that a move may create.
8. Disciplinary Acknowledgement
Unfortunately, we sometimes face the unpleasant task of disciplining an employee. In those times, I cannot stress the importance of properly documenting what occurred, what policy was violated or why the behavior was unacceptable, what corrective steps are required – even if it is simply to refrain from such conduct in the future, and what will occur with any future violations of the same or different nature. Having a comprehensive document that the employee acknowledges, or if they refuse to sign one that two witnesses can attest that the employee was made aware of the document but refused to sign, can be a huge benefit should that employee try to bring suit based upon their termination, or seek unemployment benefits that could end up being charged against your account.
9. Arbitration Agreement
An ever increasing way to resolve disputes with employees is to require arbitration as opposed to allowing them to seek a remedy in court. Arbitration can offer several benefits when compared with pursuing an action in court, such as the time it takes to resolve the dispute, and the potential for cost savings, to name but two. From an employer’s perspective, it can also help keep employee discontent from the eyes of the public, something that can be important for image conscious businesses. However, because of the multitude of federal and state regulations in today’s workplace, it is important that a company not try to overreach when seeking such an arrangement for fear of the clause being stricken. Litigation is very expensive and incredibly time-consuming for employers. With this agreement, the employee understands that any employment dispute must be taken before a mutually selected arbitrator instead of taking the issue to court, and depending upon how the clause is written, the parties can know that someone who is extremely familiar with employment matters will make the decision as opposed to an elected or appointed judge that may not understand the ins and outs of employment law.
10. Separation Agreement
Finally, all good things, and even bad things come to an end. When that time comes, and it will come at some point, having an agreement that sets forth the terms and conditions of an employee’s separation of employment from your company are important. Not only can such an agreement address such issues as severance pay, unemployment claims, the extension/termination of benefits, it can also include language where an employee agrees to waive all claims that they may have against your company that could be used later as grounds for a lawsuit. Furthermore, such agreements provide a mechanism to remind everyone of their obligations under previously signed agreements, such as non-solicitation, confidentiality, and non-compete clauses that you had them sign when they started. I highly encourage the use of such agreements in as many cases as possible, regardless if the employee is resigning or being laid off because of economic reasons. The acknowledgment of previously signed restrictions can be worth the extra time and expense should something unforeseen occur.
We all know that most disputes occur because of a lack of communication. Having written workplace agreements in place outlining various aspects of the employer-employee relationship goes a long way towards this end. While writing your own employment agreements is still better than not having one; an improperly crafted document can prove disastrous for you and your business. It is better for all parties involved if a legal counsel helps you establish anything that may be used in a court of law. As such, be extremely mindful of what you are planning to do in this highly regulated area before jumping off the end of the pier without assessing what may, or may not be, there.