It is standard practice for businesses to sign employment contracts with new hires when they accept their positions. Even though there are laws in place that govern employment arrangements, many organizations require the protection of contracts with their workers.
In theory, employment contracts reduce the risk inherent in an employment relationship. They can help employers mitigate some of their liability and protect them in the event of conflict with the worker in the future. What are some of the ways that employment contracts benefit businesses?
Clarifying the terms of the relationship
Every employment relationship involves unique considerations. Employees may negotiate for specific compensation and benefits. They may ask their employers for certain concessions, such as a promise not to require overtime on Sundays so that they can attend church service.
Employment contracts help affirm what responsibilities the business has to the worker and the expectations for the employee. Disputes about everything from severance pay to bonuses often come back to the terms included in the employment contract.
Limiting certain risky behavior
Employment contracts often include restrictive covenants. Employers include terms preventing their workers from engaging in certain activities that could harm the company. Restrictive covenants can prevent workers from competing against the business in the future, sharing private information or trying to do business with the company’s clients in the future.
The contract may also include prohibitions on communications related to the business. The contract might include social media clauses that prevent the worker from discussing the company’s operations on public platforms. Contract clauses related to mainstream media communication are common as well. Employers may require that workers decline any requests for interviews related to their employment and refer journalists instead to management or someone on the public relations team for the company.
Addressing future conflict
Employment contracts frequently include provisions for resolving disputes. Workers may have to agree to alternative dispute resolution sessions before litigating, for example.
The contracts could also include certain requirements regarding providing an employer with notice about the intention to leave the company or any complaints about the working relationship. Conflict-related contract inclusions can protect companies from expensive and embarrassing litigation and may help them preserve working relationships with key professionals.
Including the right terms in employment contracts and routinely updating them to ensure they appropriately address current economic concerns and business practices can help employers optimize their protection when onboarding new workers. Employment contracts can help lay a stable foundation for a healthy and productive working relationship while protecting a company’s competitive advantages.