How to Draft an Employment Contract

Although many employer-employee relationships are cemented with nothing more than an oral discussion and a handshake, this informal approach often leads to problems later on. In order to mitigate your legal risks when hiring an employee, draft a basic employment agreement and have each employee sign it. This is particularly important if your employees are granted access to sensitive business information that might be passed on to a competitor after your employee moves on to another position.

• 1

  Identify the employer by its legal name and Employer Identification Number. Identify the employee by her full name and social security number. State that the employer wishes to hire the employer in a particular named position, under the terms and conditions set forth in the contract.

• 2

  Describe the employee's job duties. Don't word them too narrowly, in order to preserve the employer's flexibility to reassign the employee to other duties when business necessity dictates. Word them narrowly enough, however, that the employee understands what she is responsible for.

• 3

  Set forth the employee's entire remuneration and the basis of payment. For example, the employee may be paid an hourly wage, a monthly salary or a commission. Any benefits, such as health insurance, should also be listed in detail.

• 4

  List the starting and ending dates of the employment relationship. If the employee is being hired "at will" --- meaning that he can be terminated at any time without cause --- this should be stated. Likewise, if the employee is being hired for the duration of a particular project, the project should be described in enough detail to allow anyone reading the agreement to understand how long the employee's employment is meant to last.

• 5

  State the grounds for termination, if the employee is not "at will." Grounds for termination should be worded in a manner that draws a balance between vague language and overly specific language. "Moral turpitude," for example, allows an employer too much flexibility; yet it is impossible for any employment contract to specifically list every act that might justify termination.

• 6

  Insert confidentiality and non-compete clauses, if the employee will be granted access to the employer's business secrets. A confidentiality clause prevents the employee from divulging company secrets, while a non-compete clause prevents the employee from working for the employer's competitors in the immediate vicinity for a specified time after the termination of employment. The contract should state that these clauses "survive the term of this contract" for a specified time, such as one year.