Are employment contracts really necessary in small businesses?

On Behalf of | Apr 6, 2018 | blog

Whether your small business needs an employment contract depends on your circumstances. Many small business owners in Ohio forgo employment contracts because they view them as being more trouble than they are worth. However, failing to take the time to determine if you need an employment contract can be costly.

When trying to determine your small business employment contract needs, there are several important factors to consider.



Should your employees sign employment contracts?

In answering that question, it may help to ask the following questions:

  • Will you expend considerable resources on training your employees?
  • Will you offer employees the chance to better themselves by paying for professional development courses or further education?
  • Will your employees be privy to confidential information such as trade secrets?
  • Do you want to make sure that anything created by employees in the course of their duties belongs to the company?
  • Do you want to clearly define your employees’ duties so there is no room for misinterpretation?
  • Does federal or Ohio law require you to use an employment contract?

If you sense that a particular employee may cause issues in the future regarding job duties or terms of employment, spelling out these details may prevent this eventuality.

What should you include in an employment contract?

If you decide that you do need employment contracts, they should contain at least some basic information. Your company may have specific needs, but the following general provisions could provide you with a place to start:

  • Is the individual an employee or an independent contractor?
  • Is he or she an exempt or non-exempt employee?
  • What are an employee’s title and duties?
  • What rate of pay and benefits will you offer?
  • What is the policy regarding vacation and sick time?
  • Under what circumstances can you terminate employment?
  • Who owns intellectual property created by an employee?
  • Do you need to address any confidentiality requirements?
  • Will you include non-compete agreements?

The answers to these questions should provide you with a foundation for your employment contracts. However, you should know that certain legal requirements may apply. In addition, a prospective employee may decide to negotiate the terms of the agreement. In either case, you may consider protecting your rights by seeking out legal resources in your area that can provide you the knowledge and assistance you need to create a lasting employment contract that will stand up to the scrutiny of a court should the need arise.