Free Simple Employment Agreement

Wage payments and commission payments to employees must comply with the requirements of the Fair Labor Standards Act, a federal law that sets forth rules regarding wages, working hours, and other employer/employee matters. For example, some types of employees must be paid at least twice per month.

In addition, many states also have laws regulating minimum wage and overtime pay. In some cases, state law is more restrictive than federal law. The Employment Agreements and the employment letters in this program do not address the requirements of minimum wage or overtime law. For additional information, contact an attorney or the local office of the "wage and hour" division of the U.S. Department of Labor (or similar state agency).

The Simple Employment Agreement offers a confidentiality paragraph that obligates the employee to protect and not disclose the employer's proprietary or confidential information.

"Confidential information" is information that is unique to a particular company. Disclosure of confidential information could harm the employer's business. The paragraph in the Simple Employment Agreement covers confidential information generally, and does not provide a list of specific items covered. The longer Employment Agreement document in this program provides the option of listing specific types of information that will be protected and should be used if the employer wishes to specifically address a certain type of information that will be protected.

The IRS has very strict guidelines concerning whether a person providing services is an employee or an independent contractor. Frequently, businesses attempt to make their associations with workers "independent contractor" relationships so that they are not obligated to provide employee benefits or to withhold employee payroll taxes. However, the IRS often views such relationships as "employer/employee" relationships in order to assess payroll taxes against the employer. In such cases it is advisable to consult a tax expert to determine whether the Employment Agreement (for employees) should be used instead of a Consulting Agreement or a Work for Hire Agreement (for independent contractors).

If one or more of the following factors apply, there is a reasonable possibility that the IRS will view the "worker/consultant/independent contractor" as an employee:

• The worker will work only for the business (the "Company") that is hiring the worker, the relationship between the worker and the Company is continuous, or the Company integrates the worker into its business operations.
  
• The worker will be paid an hourly, weekly, or monthly wage, or the worker does not bear the risk of realizing a profit or loss.
  
• The Company will control or significantly influence the worker's working hours and/or work environment, or the worker works on the Company's premises.
  
• The Company will control or significantly influence the worker's work methods, and is not merely interested in the results of the worker's services.
  
• The Company furnishes tools and equipment required by the worker to perform the services, the Company pays for business or traveling expenses, or the worker has little or no investment in his or her independent business.
  
• The Company requires that the worker must render services personally, the Company hires, supervises, or pays assistants, or the Company determines the sequence of work to be performed.
  
• The relationship of the worker to the Company includes other factors that are similar to factors that characterize the relationship of employees to employers.

This "employee/independent contractor" issue is important for more than just tax-related issues. It also impacts employer liability. Generally, an employer can be held liable for the actions of an employee that were committed during the course and within the scope of the employment relationship. On the other hand, a business is less likely to be held liable for the actions of independent contractors.

If you have additional questions about the type of relationship created, or if you have any doubt whether a worker is an employee or independent contractor, consult with your attorney for further advice.

Many employers reimburse their employees for various "out-of-pocket" expenses. For example, if the employee is required to use his or her car to conduct job duties on behalf of the employer, the employer may reimburse the employee by making a fixed "per mile" payment. Other expenses might include long distance phone calls, travel expenses, and education or seminar expenses.

Generally, it is preferable for an employer to retain maximum flexibility by making reimbursement "in accordance with Employer policies in effect from time to time". This allows the employer to change the reimbursement policy without violating the employment agreement.

1. The Simple Employment Agreement should be signed by both parties. It becomes effective as of the date inserted in the Agreement. It is not necessary that the signatures be witnessed or notarized.

2. It is advisable to sign two copies of the Agreement so that each party will have a copy with original signatures. Original copies should be kept in a fire-proof and safe location.

3. This document should not be used if the employee is covered by a collective bargaining agreement, if the employee is considered to be a consultant, or if the employee is considered to be an independent contractor.

4. A lawyer should be consulted regarding any unique issues not addressed by this program.

5. This document should be reviewed periodically to evaluate whether circumstances have changed enough to warrant changes to the Agreement.

The Simple Employment Agreement is an agreement between an employer and employee that specifies the rights and obligations of each party to the agreement. This Simple Employment Agreement covers only job duties, compensation, expense reimbursement, benefits, and confidentiality obligations. This program also provides a (longer) Employment Agreement document which includes more comprehensive coverage of these areas, and covers other areas as well, such as commission payments and non-competition agreements.

Please note the following cautions:

• If the employer expects the employee to abide by the agreement, the employer also must follow the agreement.

• Do not use this document if the employee is covered by a collective bargaining agreement (that is, an agreement negotiated between a labor union and an employer).

• Lawsuits by employees against employers with respect to employment matters are increasing. Such suits are based on employment agreements, in addition to other matters such as injuries and discrimination (for example, age, race, sex, etc.). Many aspects of these lawsuits are ambiguous and uncertain because they are based on an oral contract -- the employment terms were not made in writing. Although a written agreement will not eliminate the possibility of a lawsuit, it helps reduce the possibility because it reduces uncertainty.

• Employment laws vary from state to state and change as courts interpret the law through court decisions. This program will help clarify the employment relationship by presenting the typical issues. A lawyer should be consulted regarding any unique issues not addressed by this program.

• Employment "at will" is an important legal concept in many states and the parties should consider whether the arrangement will be "at will" or for a specified duration. The Simple Employment Agreement provides for an "at will" arrangement only. If the parties wish to specify a specific duration for the employment, the longer, more comprehensive Employment Agreement in this program should be used.

The term/termination paragraph in the Simple Employment Agreement provides for an at-will employment arrangement. "At will" employment means that either the employer or employee can terminate the employment relationship at any time, with or without notice. If the parties wish to specify a duration for the employment relationship, a more comprehensive form, such as this program's Employment Agreement, is needed. In addition to the specific duration for the employment, the Employment Agreement provides an optional non-competition provision, as well as other provisions that the parties may wish to include.

Traditionally, in the absence of a written agreement governing the duration of a person's employment, an employer or employee could terminate the employment relationship at any time, for any reason (other than a discriminatory or illegal reason) with or without notice. While many states have severely limited or restricted the employment-at-will doctrine, this doctrine is still the law in some states. In these states, employment-at-will is still presumed unless there is an agreement establishing the duration of the employment relationship. In most states, any such agreement (for a fixed duration) must be in writing if the term of the agreement exceeds one year. Thus if the employer wishes to have the option of terminating the employee at any time, it is essential that the Employment Agreement be of indefinite duration.

For more information regarding the implications of an employer's failure to clearly maintain an employee in an "at will" status, a lawyer should be consulted. A termination by an employer should be conducted under the advice of a lawyer familiar with the facts. A termination that is handled inappropriately can provide the basis for a discrimination or other employment lawsuit.

Generally, an "employee" is a person who is hired by another person or business (an "employer") for a wage or fixed payment in exchange for personal services and who does not provide the services as part of an independent business. This definition can be contrasted with an "independent contractor" who is a person or entity who, as part of an independent business, becomes obligated to provide goods and/or services for a price. For example, an expert in computer systems might provide services to several businesses as a "consultant".