Employment contracts are good news/bad news things.
On the one hand, a contract could make your life easy in the coming years by guaranteeing a severance package, bonuses, stock options, perks and job security. On the other, it could screw you if you don’t do your due diligence.
Though hard figures are difficult to come by, anecdotal evidence suggests that more companies are requiring new employees to sign contracts. “I have seen more employment contracts than I used to see and probably more non-compete agreements (in these contracts),” says Kevin Troutman, an employment attorney with the Houston law firm Fisher and Phillips. He attributes the growth to the widespread use of technology.
“There are more positions out there that hold really significant responsibility and have access to confidential information,” he explains. “Companies need to protect that information and know-how.”
But employees also need to protect themselves. With that in mind, remember these points when you’re looking over a contract:
- Read the Contract Carefully: Most contracts are actually quite easy to absorb, says Troutman. “But if you don’t feel like you understand the language, ask a company representative to go through the contract with you and ask them questions,” he says. “You might need to get the agreement modified so it says what both of you agree it says.”
- Understand the Termination Clause: Sharon Stiller, an employment lawyer with the law firm Abrams Fensterman in Rochester, N.Y., says understanding the grounds for termination may be the most important thing you do. “The biggest protection an employee can have is if the employer is restricted from terminating him or her,” she said. “That’s the reason for having the contract, but (many) people don’t pay attention. Sometimes they say you can be terminated for not performing and not define what that means. ”Douglas Schade, a former employment attorney and principal consultant with the technology search division of recruitment firm Winter Wyman, adds that employees need to understand what kind of severance they have coming to them if they’re fired.
- Getting Out: Just as crucial to keeping the job is being able to walk away, Stiller says. Sometimes, employers can make life intolerable for a worker by changing their duties substantially, significantly reducing their salary or requiring a move in excess of 100 miles. That could present considerable hardship if the contract doesn’t contain an escape clause.
- Non-Compete Clause: Troutman sees more non-competes in employment contracts. He thinks that’s because courts are becoming increasingly receptive to “reasonable” approaches. Employment attorneys say you should make sure you don’t sign an agreement that could impede your ability to get work when your relationship with the company ends. “If you are bringing a book of business, make sure the agreement says you can take it with you when you leave,” says Donna Ballman, a Fort Lauderdale-based employment attorney. “Assume the worst – that you’ll be fired after a month or two. If you can’t live with stepping out of the industry for a year or two, it’s time to negotiate a better agreement before you sign. If they won’t budge and you can’t live with it, take a pass.”Adds Senen Garcia, an employment attorney in Coconut Grove, Fla., “Make sure this clause can be removed, especially if it is a low-level job. If not, ensure the restriction is limited to a specific geographical location and for a specific time frame.”
- Secure Your Own Intellectual Property Rights: Many IT developers work on a variety of projects on the side, notes Schade. It’s important to have a provision that specifies that you own the rights to projects you developed on your own time. Also, “You want to have a work-in-progress provision outside the scope of employment,” he says. “This way if you develop a billion-dollar product your former company can’t come after you.”