Employee Contracts: Preventing Problems Down the Road

In previous articles in this series, we’ve explored client contracts and subcontractor contracts. Now it’s time to close the loop and visit contracts for employees. I submit that these are the most critical. 

Many organizations use an employee handbook to clearly spell out company policies and procedures. Small Business Notes offers a comprehensive list of the categories you can cover in a handbook. It is up to you which of these items are pertinent to your business. Your employees should also sign a document stating that they have read the handbook and have received a copy of it for future reference. 

Your employees are a representation of your company. They also have access to much, if not all, of your information. In reality, they ARE the wheels that turn your business. You want to be sure they represent you well; that they understand what is acceptable and what isn’t. 

Take the case of the Montgomery Tennessee County Sheriff’s office firing an employee for inappropriate use of the internet. According to the Leaf Chronicle story on April 3, 2009, the Sheriff dismissed Segovia for conduct unbecoming of an officer. As you can see in the story, Segovia may sue for wrongful termination. One key will be how clear the employee handbook is regarding conduct on and off duty. 

In addition to employee handbooks that go to all of the employees, non-disclosure agreements and non-compete contracts are usually given to the sales staff. These are the people who are in front of your clients and prospects. You don’t want your salespeople building relationships with your clients only to leaving and take those relationships with them to your competition. Non-disclosure agreements should also be given to anyone who is given access to your trade secrets and pricing platforms. 

You can find access to these types of contracts at FindLegalForms and NOLO. 

It’s great to be trusting. However, your responsibility to your company, your staff, your clients, and yourself is to be sure you’ve done what you can to protect what you’ve worked so hard to achieve. 

Being a business owner means being realistic and responsible. You don’t want to have that responsibility thrust upon you as the result of the lack of effective employment contracts. 

If you don’t have employment contracts right now, or are wondering if yours are adequate, answer these brief questions:

1. What are the things you want your staff to do on a daily basis (this includes attendance, attire, attitude)
2. What information, if shared with outsiders, could hurt your business? Who has access to that information?
3. How important are your clients to your success?
4. What do you expect, performance-wise, from your employees by department?
5. What types of communication/reporting do you need from your staff and how often?
6. If you were a new employee at your company, what would you want to know? 

Finally, ask yourself this – are the answers to the questions above written down in a contract, handbook, or other vehicle that is signed by the employee? 

If the answer is no, you might want to get moving on setting it up. The great thing about employment contracts is that you can implement them at any time. It will be in the best interest of everyone involved.

Editor’s Note: this is the third of a 3-part series about situations in which you need contracts in a small business.  For part one (about client contracts), read:  Death by Contract, or Lack Thereof.  For part two, read:  Subcontractors – One More Reason For A Contract.

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About the Author: Diane Helbig is a Professional Coach and the president of Seize This Day Coaching. Diane is a Contributing Editor on COSE Mindspring, a resource website for small business owners, as well as a member of the Sales Experts Panel at Top Sales Experts.

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