An employment contract is essential to get right. This is not just an agreement that outlines the conditions of employment, it’s a legal document that protects both the employer and employee from any unforeseen circumstances down the road.
As the employer, then, it’s your job to ensure that your business interests are safeguarded, setting out clear guidelines around confidentiality, intellectual property, and non-compete clauses, where applicable. To do this, you’ll need to make sure that all the legal requirements are met, and the terms are clearly defined to avoid confusion.
Why is Legal Clarity Important?
Before we get into how you can ensure this, let’s first look at why it’s important. Across the US, a significant percentage of businesses experience lawsuits at some point, with some studies indicating that roughly 90% of all companies face a lawsuit in their lifetime.
Insurance is one of the key ways to prepare for this. Through professional errors and omissions insurance, for instance, it’s possible to protect yourself from a variety of potential lawsuits – specifically related to mistakes or omissions made in the course of providing professional services.
For example, if you’re in a professional services industry and your employee makes a mistake in their work that causes financial loss, E&O insurance can help cover the associated costs, including legal fees should the employee hold the company responsible for the error.
The other key way to prepare for it, however, is through legal clarity in your contracts. Insurance is a necessary part of running a business, without a doubt. But before you have to use it and deal with a lawsuit or claim, having legal clarity in your contracts can significantly reduce the risk of disputes arising in the first place.
How to Avoid Legal Errors
In terms of how you can get the contract right, then, it’s all about ensuring that every detail is clear and comprehensive. The first step is to consult with legal experts who can help you draft or review your contracts.
While template contracts might seem like an easy shortcut, they might not cover all the nuances of your specific business, which can be particularly damaging should a unique dispute arise. A qualified attorney can tailor the contract to your specific needs, ensuring that all potential risks are addressed and that you comply with relevant laws and regulations.
It’s also important to be clear and specific about every aspect of the contract. One of the ways employers slip up when penning a contract is by using vague or ambiguous language regarding roles, responsibilities, and deadlines, to name just a few key areas. The problem with this is that they can easily lead to confusion and disagreements down the road, as both parties may interpret the terms completely differently, so it’s essential to be clear and concise as much as possible to ensure you’re on the same page.
The Process After Completion
Once you have completed a contract and you’re happy with its contents, the next important step is to ensure that all parties fully understand and agree to the terms before signing. Take the time to review the contract with the employee, and encourage them to ask questions or seek clarification if needed. This will then ensure there are no lingering ambiguities or uncertainties about the contract’s terms.
To make sure this is always the case, it’s also up to you to regularly review and update it when required. As your business grows, of course, your operations will change and your requirements will evolve, and this means your contract might not always remain relevant. Say, for instance, your business model changes in such a way that your team has to expand.
The same contract you had at the beginning might not be appropriate for the business you have now, so to be sure you’re always legally protected, take the time to review and change whatever needs to be changed. This will then ensure your business always has the room to grow and develop, without the lingering fear of legal complications in the future.
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