Employment Contracts: 11 Critical Provisions for Small Businesses

BusinessteamDespite their limitations, employment contracts are widely used by participants and employees of small business corporations, mainly because they are easily prepared and provide a workable basis for establishing business relationships between the corporation and its officers and employees.  An employment contract, regardless of its duration, should contain provisions dealing with the following matters:

(1)    The title and duties of the employee, and where the duties are to be performed.

(2)    The term of the employment, including options to renew.

(3)    The amount and form of the employee’s compensation, including death, disability, retirement, and fringe benefits.

(4)    The amount of time the employee is to devote to the employment, including any restrictions on other employment during the term of the contract.

(5)    The protection of the employer’s trade secrets, confidential information, good will, and employee work product.

(6)    The limitations, if any, on the employee’s future employment upon the termination of his or her present employment (i.e., covenants not to compete against the employer, etc.).

(7)    The effect of the employee’s future disability on the contract and the standards for determining disability.websm-Small-Business-Book

(8)    The effect on the contract of the dissolution, merger, or consolidation of the corporation, and of the discontinuance of the activity or function for which the employee was engaged.

(9)    Liquidated damages in the event of breach, or severance pay if the contract is not renewed.

(10)    The handling of disputes arising under the contract.

(11)    The buying or repurchasing by the employer upon termination of the contract, of any stock in the corporation owned or acquired by the employee, and the terms thereof.

More information is available in Argyle Publishing’s the Law of Small Business Enterprises.

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