Legal Support for Insurance, Businesses and Individuals

3 employee contract mistakes that can lead to litigation

On Behalf of | Nov 3, 2021 | Uncategorized |

You have each of your employees sign a contract to protect your business. Your employment contract minimizes how much liability you have when hiring a new worker.

Unfortunately, not every business puts adequate consideration into their employment contracts. All too often, they may use basic documents they’ve downloaded off the internet with no customized language protecting their company.

Using boilerplate documents or just drafting a generic employment contract might mean that you accidentally commit one of the three mistakes below. Any of these mistakes might increase your odds of a contract dispute and litigation.

You include unenforceable restrictive covenants

Adding a non-compete agreement or a non-disclosure agreement to your contract can protect your business from unfair competition. However, these restrictive covenants are only enforceable when the business carefully limits their impact.

Generally, restrictive covenants that last for too long or place an undue burden on the worker by minimizing their economic opportunities won’t be enforceable in court. You may only realize that after an employee violates the agreement and you try to enforce it. It’s important to have very specific restrictive covenants in your employment contracts.

You don’t have a written policy about performance or discipline

If you don’t make it clear what you expect of your workers and how you will penalize them for failing to meet those expectations, they may feel like you have unfairly penalized them or wrongfully terminated them.

Including performance expectations and rules about performance reviews in your contract is as important as including information about the disciplinary process and how your business might terminate a worker.

You aren’t explicit about benefits, bonuses or severance pay

Even the most generic employment contract will probably talk specifically about the compensation you offer on an hourly or salary basis for the work. What it may not talk about in enough detail are the benefits and bonuses you offer to your workers.

If you fail to very explicitly explain your benefits structure and when workers qualify for bonuses, they may have unrealistic expectations that eventually turn into claims against your company. The same is true of severance pay. You may not address it because you don’t offer it, but failing to explain that in a contract might mean a worker feels like you treated them unfairly when you terminated that without any severance package.

Addressing major causes of disputes in your employment contract can reduce the likelihood that you will wind up in court over a contract dispute with a former employee.