Two big movies in recent months have much in common: they’re fictionalized accounts of real events, they’re written and directed by top Hollywood players, and they’re doing quite well at the box office. But Wall Street: Money Never Sleeps and The Social Network have one more important thing in common: they both reveal just how much the law plays a role in any given business. In fact, if you’re going to start or enter any business relationship, you’ll need to work through legal issues on a regular basis, especially in the realm of employment law. To help you avoid the more dramatic and litigious route, start with the right documents. We talked to Aaron Agenbroad, an attorney at Jones Day, to come up with three documents commonly used by employers in big and small businesses alike.
Employee Handbooks ensure that both the employer and the employee are aware of their obligations and rights upon entering an employment relationship. A good Employee Handbook should include information on a diverse range of topics such as hours and wages, vacation and overtime, family and medical leaves, and the company code of conduct. To find out what specific information should go into your employee handbook, you may want to start your research on the Internet. Sites such as Rocket Lawyer’s Free Legal Help Articles can give you plenty of information on commonly asked employment questions. It’s equally important to know the rules and regulations in your company’s jurisdiction, so consult city, state and federal employment sites such as the Department of Labor, as well as disability and discrimination sites. Find a lawyer to review your Employee Handbook to make sure it complies with all necessary regulations. Once your employee Handbook is finalized, employees should be required to sign a statement to the effect that they’ve read and understood its contents.
Not all new hires need to sign an Employment Agreement, but it’s a good idea to have in writing some sort of written acknowledgement of terms and conditions. An offer letter will usually work just fine for at-will employees, but Employment Agreements are appropriate for higher-level employees (e.g., in the C-suite). Employment Agreements change the employment dynamic from at-will to contractual, meaning that both the employer and the employee are locked into the relationship, with certain guarantees and obligations.
Sometimes, employers will hire contractors or consultants rather than employees, and it’s important to have these Contractor Agreements or Consulting Agreements in place as a way to ensure that the job is done as requested. Additionally, workers must be correctly categorized as employees or contractors so that taxes can be filed accordingly.
Successful businesses have an edge over their competitors: better product, better service, better customer loyalty, or even better branding. Confidentiality Agreements and Non-Disclosure Agreements ensure that the secrets behind your company’s edge aren’t revealed. These agreements prevent employees, contractors and partnered businesses from using or disclosing proprietary company information without the company’s consent. If your business is based around inventions and innovations, you can also keep control of your intellectual property by having your employees assign their patent rights to the company.
The purpose of all of these documents is to provide proof, and thereby limit your liability. Unlike in Wall Street or The Social Network, success doesn’t mean suing, or even winning a case— it means never having to go to court in the first place.