In the old days, a handshake agreement between an employer and an employee was good enough to seal the deal. But in today’s environment, doing business that way is no longer a good idea, says John Krajewski, the managing partner of Stark & Knoll Co., L.P.A.
“In handshake deals, people tend to forget over time what was agreed to, and they may have different understandings of what was agreed to. If a boss leaves, the employee may find himself with an agreement with someone who is no longer there,” says Krajewski. “I highly recommend that you have written documentation to protect both the employer and the employee.”
Smart Business spoke with Krajewski about how employment agreements can protect your business and the types of provisions that should be included.
Why should employers have certain employees sign employment agreements?
Say you have an employee who announces he’s leaving and that he’s taking the company’s largest client with him. Is there something you can do to stop this? The answer lies in whether there is an employment agreement in place.
All it takes is one time, and when employees have worked for a company for several years, they can really hurt it when they leave unexpectedly, taking employees or customers with them or taking ideas or inventions they had been working on for that employer. It is much more economical to have an employment agreement from the start, than to end up in a lawsuit when the employee leaves.
Who should an employer enter into employment agreements with?
Employment agreements could cover anyone, although they typically apply to a company’s key executives and its sales force. Salespeople need agreements because it’s easy for a competitor to come in to the marketplace and poach them, knowing they already have a backlog of customers. And an employer should have agreements with executives because they have intimate knowledge of the business and would be in a position to damage the company should they leave.
Employment agreements should be signed at hiring, because it’s much more difficult to do later in the employment relationship.
